HAVING established their dislike for using bond issues to pay for repair and upkeep of state infrastructure, Republican lawmakers are taking new steps to drive home the point.
A bill by state Sen. Josh Brecheen, R-Coalgate, would allow the people to vote on whether to amend the Oklahoma Constitution to place a ceiling on how much the state could spend each year on debt service payments — limiting the amount of bonds the state could sell. “Many of us would possibly change our minds on issuance of new debt if we knew there was some limit,” Brecheen told the Senate Committee on Appropriations.
On the other side of the Capitol, House Speaker T.W. Shannon has authored a bill that, as approved by the House Appropriations and Budget Committee, would require that the state's bond payments not exceed 28 percent of the Board of Equalization certification each year.
Shannon, R-Lawton, joined a large majority of House Republicans who last year voted down a proposal for a bond issue to repair the Capitol. Their mantra has been that adding debt is a bad thing for governments to do, and they point to Washington, D.C., as Exhibit A. Indeed in a news release about his bill, Shannon noted, “We've seen what unchecked spending has done in Washington, D.C., and Oklahoma will not go down that path.”
Amen to that! But what opponents of bond issues fail (or perhaps simply refuse) to realize is that the comparison is apples to oranges. Washington is spending money it doesn't have. State Treasurer Ken Miller has noted that paying off the federal debt would require $1.07 for every dollar generated by the U.S. economy in a year. Conversely, Oklahoma's annual payments on principal and interest of state bonds comes to about 4 cents of every dollar from the general revenue fund.
Our tax-supported debt stands at roughly $2 billion. In five years it will be $1.4 billion; five years after that it will be just $87.5 million. We're on schedule to be debt free in 30 years, which is great. Except that if we continue to reject bond issues, state buildings and other infrastructure will continue to deteriorate. The Capitol has become a cause celebre, and with good reason — the place needs an overhaul, and now — but we also need a new medical examiner's office and new digs for the Corporation Commission, to name just a few. These repairs must be made.
Bond issues offer the most responsible way to get the work done, because they allow the state to borrow money that it can afford to pay back and to get its hands on the money quickly, at very low interest rates. This is a prudent way to conduct the state's business.
“When you get a credit card, there is a credit limit,” Shannon said in championing his proposal. “We will not force our children to carry the burden of out-of-control debt.”
That's laudable, but Oklahoma doesn't have out-of-control debt (see above). The credit rating agencies say the same when meeting with state leaders every year.
Brecheen's bill would let voters decide whether to cap the state's annual debt service payments at 4.5 percent of the state's average general revenue from the previous five years. The state's bond adviser, Jim Joseph, says such a limit would still allow the state to safely issue $500 million more in bonds.
But then, Joseph has said many times that the state could borrow as much as $300 million for new bond issues without affecting its credit rating. Like the advice from the rating agencies, Joseph's counsel has fallen on deaf ears.