Senate Bill 1378 was approved yesterday by the Senate Finance Committee, and is on the calendar for the Senate floor today. Amazingly, this bill would authorize more than $450 million in additional state debt without getting voter approval. In light of the fiscal tsunami of deficits, debt and unfunded liabilities facing North Carolina state government, one must wonder about the fiscal prudence of adding even more to the state’s debt burden.
Defenders of the bill say this is a good time to “invest” in such projects because interest rates are low and construction companies are desperate for the work. But if lawmakers are so interested in attaining the best interest rate, why are they approving Certificates of Participation – which carry a higher interest rate than General Obligation bonds?
Furthermore, we heard the story about government projects helping the state’s construction industry before. Remember when Gov. Easley fast-tracked nearly $750 million in state government capital improvement projects back in January 2009? The Governor’s office promised that these projects would produce nearly 26,000 new jobs. How did that work out? Since Jan. of 2009, North Carolina has lost 38,000 construction jobs, a contraction of 18 percent.
There are other reasons to question the wisdom of issuing more non-voter approved state debt:
- Issuing debt without the consent of voters is simply wrong, and violates the spirit of the state constitution. After all, it is the taxpayers who will have to pay back the debt. Indeed, an overwhelming 77% of voters believe the NC General Assembly should not be allowed to issue state debt without voter approval.
- Issuing more debt would violate the State Treasurer’s recommendations, and continuing to rely on non-voter approved debt may hurt the state’s credit rating.
- More than $4.1 billion in debt has been authorized since 2000 for UNC capital projects alone. With $4.1 billion, the State could have paid the salary and benefits of roughly 7,000 school teachers for an entire decade.
- Adding in repair & renovation expenditures along with capital improvement appropriations and debt for other state buildings, North Carolina has authorized roughly $8 billion since 2000 for state building construction and maintenance.
North Carolina state and local governments are already drowning in debt – why would state lawmakers want to make matters worse?