RALEIGH — With surprisingly little debate — no, make that “with unsurprisingly little debate” — the North Carolina Senate last week voted to add $520 million in debt for state land purchases to the $240 million they approved last month for two medical projects on UNC campuses. Neither bond issue would require a public vote, as they do not formally pledge the taxing authority of the state to pay off the bonds. Of course, bond buyers and just about everyone knows that the state won’t let them go into default, so this will in effect be a pledge of taxing authority.
Now, two House committees have convened to examine the issue of North Carolina’s rising debt levels and needs. Their conclusion? The Senate didn’t go far enough. The panels voted for a $337 million version of the UNC debt that added projects at UNC-Charlotte, Elizabeth City State University, and UNC-Asheville.
If you were going to be in the debt-expansion business, the bill first approved by the House Finance Committee Tuesday had both pluses and minuses. The main plus is that it tried to offset additional cost to taxpayers by tapping portions of the state’s proceeds from the national tobacco settlement. Republicans in the Senate sought to do the same thing on that chamber’s version, though they identified the correct half of the settlement — those dollars flowing to a political slush fund called the Golden LEAF Foundation — with which to pay off the bonds. The Finance bill took the money from the half that goes to smoking prevention, health care, and tobacco growers.
When the House Appropriations Committee took up the bill later Tuesday, they struck out the provision paying for the debt from the wrong side of the tobacco settlement. Good. Then they voted to pay off the debt with general revenues. That means your tax dollars. Bad.
On the negative side, both panels, following the lead of House Speaker Jim Black, felt compelled to add other campuses to the projects at UNC-CH and East Carolina that the Senate approved. This increased the cost. Not that it matters — it won’t cost anything, politically speaking. It’s just debt.
As the Locke Foundation observed in a recent briefing paper, North Carolina legislators have been reckless about the state’s debt load for the better part of a decade. Most of the bonds issued since 1996 — for school construction, for water and other infrastructure, and for college and university projects — have been submitted to the public in a referendum. But voters have been assured repeatedly by lawmakers and other supporters that voting for the bonds wouldn’t result in tax increases.
Lawmakers seem never to have been serious about keeping this promise. Just months after the $3.1 billion UNC and community college bond passed in November 2000, lawmakers and Gov. Mike Easley were passing the first in a series of tax increases. The fiscal impact of these hikes was about $500 million in 2001-02 and then more than $1 billion in 2002-03, 2003-04, and 2004-05. As much as a third of cost of these tax increases (it varies depending on the year) was associated with financing the aforementioned bond issues.
Now, with voters probably muttering the lyrics of a certain Who song under their breath, state legislators aren’t willing to ask for another round of debt. They’ll just add it on themselves. After all, it won’t cost anything, not right now, and it won’t raise your taxes.
Promise.
Hood is president of the John Locke Foundation and publisher of Carolina Journal.