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nce again, state leaders have added to our state’s rapidly increasing debt without approval from those who will be forced to pay it back – the taxpayers. The recently approved FY2008-09 State Budget authorizes more than $850 million in new debt largely for University of North Carolina (UNC) construction projects and new prison space. None of this debt will be subject to voter approval, continuing our state government’s unaccountable spending spree.
Who Are The Real “Predators”?
Over the last several years, our elected officials have maxed out the taxpayers’ credit card, and don’t seem intent on slowing down anytime soon. In fact, North Carolina’s state debt has doubled since 2000, and the state’s debt per family of four has jumped from $1,300 to $3,000. But unlike dealing with a credit card company, North Carolina citizens can’t contest these charges.
Source: North Carolina Comprehensive Annual Financial Report for 2007 © ANGELA DOMINGUEZ , ANDILLUSTRATIONS.COM
Debt Financing Methods
Here’s how it works: When state government wants to pay for “capital projects” (new buildings on college campuses, new prisons, etc.), it can choose either the pay-as-yougo method or it can sell bonds to raise the necessary funds. In other words, the state can pay cash or take out a loan to cover the cost. If bonds are sold to fund capital projects, state government debt is increased and taxpayers are responsible for repaying the money owed to the bondholders (plus interest). Over the last eight years, state egislators have grown leaders in North Carolina have rather fond of financing largely shifted capital projects by away from the fiscally responsible selling bonds and letting method of pay-asfuture generations you-go financing. Legislators have figure out how to pay grown rather fond back the debt of financing capital projects by selling bonds, and letting future generations figure out how to pay back the debt. Two types of bonds are typically issued by state government. “General Obligation” bonds must be approved by voters, while “special indebtedness” bonds (such as Certificates of Participation – COPs) allow lawmakers to escape any such accountability.
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STATE DEBT PER CAPITA 2000-2007
While condemning “predatory” practices on the part of mortgage lenders whose borrowers actually agreed to the loan, our elected officials have gone on a multi-billion dollar borrowing binge – without so much as the courtesy of asking permission of those who must repay it. As Senate Minority Leader Phil Berger (R– Rockingham) said in the August 2008 Carolina Journal, “We’ve heard a lot of talk about how consumers have gotten in trouble through practices that are employed by www.nccivitas.org
predatory lenders. I like to refer to the borrowing that’s taking place in this budget as predatory borrowing.”
Lawmakers Ignoring the Voice of the People
Recent surveys indicate that North Carolina voters strongly favor voting on state debt at the ballot box. The Civitas Institute’s May 2008 DecisionMaker poll reveals that 77 percent of voters think the General Assembly should not be allowed to borrow money without voter approval. Despite such overwhelming public opposition, not one penny of state-authorized debt was submitted to the voters for their approval since 2000. During that time, more than $3.2 billion in new state debt – plus interest – has been authorized. By contrast, in the prior fall 2008 • CIVITAS REVIEW •
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