RALEIGH – As Republicans prepare to take control of the North Carolina General Assembly for the first time in more than a century, there may be a lot of talk about amending the state constitution.

For years, Democratic leaders blocked several proposed amendments from consideration, including eminent domain reform, a marriage amendment, and a cap on annual spending growth. Some of the amendments had bipartisan support. Some deserve it. Now they may gain more traction.

My own preference would be to start with something else – an amendment to restore the original meaning of the provisions of the state constitution governing public debt. They enshrine in law the principle that public debts should, except in a few specific instances (scroll down to Sections 3 & 4), be incurred only if voters approved them in a referendum. The specified exceptions generally involved the replacement of old debts with new ones (thus keeping overall indebtedness under control) or in critical emergencies.

But since 2000, the state of North Carolina has issued hundreds of millions of dollars in state debt without a vote of the people. Many localities have begun evading the referendum requirement, as well. The main evasion technique is called a certificate of participation, or COP.

COPs are issued under the pretense that they don’t extend the full faith and credit of the state to repaying the debt. Instead, bondholders are said to be receiving the right to share in the revenue from a financed project – even if the “revenue” involved is nothing more than generally applied taxes. In practice, there is little distinction between a COP and a general obligation bond. Both use tax money to pay off bondholders. And few expect any state or locality to let a COP go into default.

But under the legal fiction that COPs are not general taxpayer obligations, North Carolina governments have issued hundreds of millions of dollars worth of COPs without a vote of the people. And thanks to a constitutional amendment that did pass, albeit by the questionable means of misleading ballot language, localities now have another device, called tax increment financing (TIF), which allow them to issue debt without seeking the required public consensus.

I’m not sure why politicians would ever subject public debt to a referendum again as long as these evasion techniques remain in effect. That’s why I think the General Assembly should draft a new constitutional amendment to crack down on these abuses of the public fisc.

The amendment ought to restore the original intent of the state constitution’s debt limitations by specifying that any new government debts that will be repaid by government revenues, regardless of legal form, will be considered general obligations and require approval in a referendum.

North Carolina hasn’t gotten itself into as much trouble with government indebtedness as other jurisdictions have. But we are only now using the kinds of debt instruments, such as COPs and TIFs, that other governments have been using for a long time. Now is the time to head the problem off before it grows daunting.

Keep in mind that North Carolina already has a large unfunded liability in the state employee health plan, plus concerns about the adequacy of funding in the state’s pension plan. The state may not have as much general-obligation debt as some of our peers, but current liabilities will cost the taxpayers dearly in the coming years. They have the right to be consulted directly, in the form of referenda, before their elected representatives obligate them any additional debt service.

I strongly favor a taxpayer protection amendment that would limit annual growth of state spending to a combination of inflation and population growth. In theory, it would make sense to include debt limitation in such an amendment. Since some liberal ideologues and spending lobbies will fight tooth and nail against a spending cap, however, I think that a separate amendment cracking down on COP and TIF abuse would be wise.

I’d like to see which state lawmakers come out against the right of North Carolina voters to decide the fate of bond packages.

Hood is president of the John Locke Foundation.