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 Borrowing money a terrible, horrible, no good, very bad idea
by Tom Campbell
May 26, 2010
In the throes of The Great Recession, when state budget writers are desperately trying to find 800 million dollars in spending cuts in next year’s budget, the leadership of our state Senate is proposing to borrow half a billion dollars for building repairs and new construction. This is a fiscally irresponsible proposal for a number of reasons.
The recession is far from over. Many economists are predicting it might be 2013 before state revenues return to 2007 pre-recession levels. Even as legislators are “cutting meat from the bone” in the budget that begins July 1, a larger worry is the commonly acknowledged sinkhole that appears to be looming in next year’s state budget, a deficit predicted to be as large as three billion dollars. And no one even dares think about what is going to happen when 2014 health care reforms result in as many as half a million more people flooding onto state Medicaid rolls. North Carolina’s financial condition is far from healthy.
State Treasurer Janet Cowell has cautioned against debt service payments that exceed more than 4 percent of the state budget. Currently at 600 million dollars a year, the percentage would increase to more than 4.25 percent if the legislature approves this half billion dollars in borrowings. Even without this new debt the percentage would reach 3.99 percent in 2012. Fiscal responsibility mandates no new debt.
This proposal is yet another example of avoiding the Constitutional codicil for voters to approve debt. Our leaders have grown accustomed to ignoring this provision, inserted into our Constitution for the very reason that our founders didn’t want public officials running up large debts without our permission. If this proposal is such a good idea why aren’t Senate leaders willing to put it to a vote of the people?
It is true that interest rates are extremely attractive and construction costs are lower than seen in recent years. It is equally true that we must repair and maintain current state-owned buildings, and it would be nice to spend the 260 million dollars proposed for engineering facilities at NC A&T and NC State Universities, but to borrow half a billion dollars at this time can be likened to someone who has maxed out all credit cards and cannot pay the monthly mortgage but wants to borrow to purchase a new car because cars are on sale and interest rates are low. Fuzzy-headed logic like this helped land our nation and our people in the current financial crisis.
But suppose our state wanted to borrow 450 million dollars. Would these projects be our highest priority? We think not. Can Senate leaders justify borrowing half a billion dollars at the same time they are laying off teachers and other state employees and cutting mental health and other state services? We’re betting state employees, teachers and the public will provide lawmakers with answers to these questions.
Our legislature has plenty of big issues to consider and doesn’t need to waste time and money borrowing half a billion dollars. To paraphrase a popular children’s book this proposal is a terrible, horrible, no good, very bad idea. It needs to be promptly dismissed. |
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