Eighty-two bucks a month. For nearly a decade, that was the price I paid for the student loans that funded my bachelor’s degree. My education wasn’t completely self-financed. My parents helped out, and I had a scholarship. But as I mailed in my final student loan payment, I remembered how fast and easy it was to sign up for the loans.
Too fast and too easy. But I was taught to live up to my end of a deal, even when I regret it. After gleefully tossing out my empty payment book, I vowed to start my 30s by being very careful about new debt.
That’s exactly what the General Assembly did for North Carolina when it passed Senate Bill 129 in June. Signed by Gov. Pat McCrory, the change in law reins in the state’s bad financial habit of taking on long-term debt without voter scrutiny and approval.
S.B. 129 forces decision makers to be more prudent by scaling back the use of “special indebtedness” vehicles. These instruments don’t require voters to say yes, as is the case with traditional general obligation bonds. That’s made special indebtedness — particularly certificates of participation — very popular over the past decade or more.
As the John Locke Foundation’s Sarah Curry discussed in an April report, special indebtedness accounts for more than 40 percent of the state’s outstanding debt.
Think of that. More than four of every 10 dollars of state debt has been assumed without a vigorous public debate and endorsement at the ballot box. That’s akin to a wife signing for a mortgage without giving her husband a say in the long-term obligation to which she is committing him. If we can see obvious problems with the personal scenario, we should be able to recognize obvious problems with heavy reliance on “special indebtedness.”
Legislators did see it. They deserve our thanks for facing the fact that when debt is too easy to assume, it will pile up quickly. Thanks to S.B. 129, there is renewed emphasis on officials making their case to voters about a project’s need and parameters. If a proposal doesn’t pass muster, then so be it. Voters have the right to decide that not all projects are high-priority and to realize that dollars spent servicing debt are dollars not available to fund higher-priority, nearer-term needs.
I learned that lesson when I discovered just out of college that I was stuck with my old four-cylinder hatchback. I could live with the tiny size and faded paint, but the car conked out while idling with the air conditioning on. That’s no small issue during 110 degree-plus Phoenix summers. But, because my student loan payments were so high, there was no room in my budget for a car payment. To my embarrassment, I was forced to become expert at speeding up and slowing down to avoid idling. I could have avoided it all if, years earlier, I’d said no to the offer of more cash every semester.
I should have followed the path of Rebekah Bell, who recently detailed for the Wall Street Journal how she earned a degree without going into debt. Counselors told her it was impossible, but she proved the naysayers wrong. Bell’s advice includes seeking scholarships, living frugally, working like crazy at something you like, taking classes online, and going to school close to home.
Bell’s advice will fall mostly on deaf ears, for self-reliance is out of vogue in 2013. These days, many students and parents believe a “free” college education is their “right.” They don’t seem to care who’s really footing the bill for that “free” degree — as long as it’s not them.
We’ve seen the same attitude bring down Detroit. Generations of elected officials kept borrowing, kept promising, and kept kicking the debt can down the road, presuming and hoping that someone else ultimately would pay the bill. Last month the can hit the dead end in the road, and the once mighty City of Detroit filed for bankruptcy.
The General Assembly saved North Carolina from that fate. Like Rebekah Bell, they, and the governor, chose long-term financial responsibility over near-term easy money by putting the brakes on the use of the credit card.
Congratulations, and thank you.
Donna Martinez (@freemktmartinez) co-hosts Carolina Journal Radio and blogs at “Right Angles.”