Editorial: Legislative debt spree
How much debt should the state be able to take on without voter approval?
In North Carolina, that’s approaching a $1 billion-plus question. The $21.4 billion budget awaiting action by the governor authorizes $857 million in new debt over the next four years, the highest amount ever approved in a single session without a public vote. That’s in addition to $940 million in debt already on the books without benefit of voter approval. Legislators are able do this thanks to a 1991 court opinion that greatly expanded the ability of N.C. governments to authorize certain types of “special indebtedness” borrowing without a referendum.
When it comes to what’s worthy of special borrowing, legislators’ definition differs from the original intent, which was to provide a mechanism for governments to respond more quickly to pressing needs. Among other things, the debt will add new prison beds and finance state university projects to help accommodate more students. It’s hard to dispute that easing prison crowding and expanding college facilities for a rapidly growing student body are pressing needs ó but are they really more pressing now than last year or the year before? More pressing than transportation improvements, including replacement of the I-85 bridge at the Yadkin River? Apparently so, since legislators won’t do the heavy lifting on road work until next year, when they’re likely to seek voter approval of a highway bond.
Proponents of the boost in “special indebtedness borrowing” argue that it will save money to launch these capital projects as soon as possible, before steel, concrete and transportation costs rise even higher. They also say that it will enable the state to take advantage of lower interest rates while channeling business toward N.C. contractors wrestling with the slowdown in the building industry. And supposedly it won’t jeopardize our triple-A bond rating.
Even if the legislators’ crystal ball proves true regarding future commodity prices and debt service costs, that doesn’t justify bypassing the citizens of North Carolina. This action leaves the distinct impression that legislators weren’t simply trying to save time with the “special indebtedness” mechanism, but were reluctant to ask voters to approve more debt because the current economic climate doesn’t favor such expansive new spending. Many citizens are having to downsize their own budgets and avoid new debt because of rising gas prices and other cost-of-living escalations. Amid continuing economic uncertainty, the general public doesn’t have as rosy a view as lawmakers in Raleigh, who appear little constrained by the fact that state tax collections missed estimates by $63 million in June and July.
Even if these were boom times, and revenues were rolling in beyond expectations, this debt decision would be troubling. A bond referendum requires elected officials to make their best case for major capital outlays. The referendum process may be slow and cumbersome, but it encourages fiscal accountability and forces public officials to prioritize projects. Most importantly, it gives taxpayers a voice and a vote in the final decision ó something they were denied in this latest borrowing spree.