New Debt in FY 2008-09
Brian Balfour | May 6, 2008
Conference Committee Budget Ignores Public Opinion, Further Escalates an Already Rapidly Increasing State Debt, and Burdens Future Budgets
The Civitas Institute’s May 2008 DecisionMaker poll shows that 77 percent of voters think the General Assembly should not be allowed to borrow money without voter approval.
- In spite of such public opposition, the FY 2009 Conference Committee Budget proposal authorizes $857 million in new “special obligation” debt – none of it approved by voters.
- Not one penny of new state debt has been approved by North Carolina citizens in eight years. Roughly $2.4 billion in debt has been authorized since 2000, all without voter approval – the proposed budget would bring that total to over $3.2 billion.
- By contrast, only $140 million in non-voter approved debt had been authorized for the 15 years combined prior to 2000.
- This continues a reckless habit of expanding the state’s debt while ignoring the very people who will be forced to pay back the debt – taxpayers.
- State debt per capita has already shot up a dramatic 140 percent from 2000 to 2007 (see chart below).
- Debt service in the FY 2009 Conference Committee Budget will be more than two and a half times FY 2001-02 levels.
- Total state debt has already doubled in just a five year period – rising 99 percent from FY 2001-02 to FY 2006-07.
- Continued reliance on COPs costs taxpayers more, threatens the state’s bond rating. According to the State Treasurer’s 2008 Debt Affordability Study:
- “Special indebtedness (COPs) …typically carries a higher interest rate (than General Obligation bonds), which increases the cost of projects so financed.”
- “including all authorized but unissued debt, the percentage of non-G.O. debt is projected to increase well beyond the medians for ‘triple A’ states and exceed the median for ‘double A’ states as well.” In other words, the state’s bond rating will be downgraded if lawmakers continue to rely on COPs – a major indicator of fiscal irresponsibility
- Capital spending binge to place stress on future budgets
- More than $1.2 billion in future obligations is included in the capital budget – the amount deemed necessary to complete the projects being financed largely with planning funds in this year’s budget.
- Pledging such large amounts in capital projects will tie the hands of future budget-makers, either crowding out other priorities or forcing unpopular tax increases.
