Why S.C.’s Deeper in Debt Than They Say
THE HOUSE IS DEBATING A $497 BOND PACKAGE. IT’S TERRIBLE IDEA, FOR LOTS OF REASONS. NOW TAKE A LOOK AT WHAT LAWMAKERS WANT TO SPEND THE MONEY ON.
This week the House will consider a nearly half-billion dollar Capital Improvement Bond bill. The proposal is being considered as Part III of the General Appropriations Act.
The bond bill has been problematic from the beginning: it was introduced, debated, and passed in the final meeting of the Ways and Means Committee’s budget deliberations; public input was literally zero. Leaders in the House, particularly on the Ways and Means Committee, have contended that it’s a good time to borrow money for a variety of capital projects because interest rates are low. They’ve argued furthermore that this $497 million borrowing plan wouldn’t add significantly to the state’s debt because the state has paid off most of the debt it was previously carrying.
In other words: We should borrow a half-billion dollars – to be paid back by taxpayers, with interest – mainly because we can.
But leave aside the argument on debt for a moment, and consider what lawmakers want to put us in debt for:
- $60 million for Commerce to spend on non-specified economic development infrastructure.
- Nearly $100 million for various workforce training programs and infrastructure programs at several colleges throughout the state, some of which we know is aimed at specific private-sector businesses.
- Roughly $45 million for several state agencies to cover deferred maintenance costs – upkeep to state-owned property that has been put off for one reason or another
- More than $100 million for colleges and universities to spend on new construction.
- $10 million for the “repurpose of a pool” at the College of Charleston.
What’s more interesting than the projects that are included in the bond bill are those that aren’t included. No part of the bond package would be spent, for example, on repairing the state’s decaying roads and bridge – the roads and bridges lawmakers claim they’re determined to repair this year. There are, however, a number of special road/infrastructure projects included, but these have to do with new projects, not maintenance of existing infrastructure. For example:
- $2.8 million for a “Loop Road Completion” at York Technical College.
- $1.26 million for “New River Campus Road Improvements” at Technical College of the Lowcountry.
- $1 million for the “Robert Bell Parkway Pedestrian Bridge” at USC Aiken.
The Policy Council does not advocate the common practice of borrowing money to pay for core functions of government like building and maintaining roads. Still, it seems remarkable that, in a year in which lawmakers are bewailing an alleged $40 billion shortfall at the state Department of Transportation, not a dime of this half-billion-dollar package would go to road maintenance.
It’s strange, too, that lawmakers are willing to consider a tax increase on everyone, even the poorest South Carolinians, in order to pay for road maintenance – and yet they’re willing at the same time to send taxpayers into debt for reasons that have nothing to do with road maintenance.
The claim that this bond package wouldn’t increase state debt because the state has paid off a significant portion of debt already is grossly misleading. According to the 2014 State Debt Report released by the Treasurer, the state’s general obligation bond debt has fallen from just over $1 billion in 2012 to roughly $527.1 million in 2013 (the most recent fiscal year for which data is available). A reduction in the state’s general obligation bond debt is certainly a good thing, but over $500 million isn’t what most people would consider insignificant.
But even these numbers don’t capture the totality of the state’s fiscal liability. A report by State Budget Solutions estimates the state’s outstanding debt at $71.1 billion when outstanding unemployment trust fund loans, debt, and pension liabilities are included.
$53.16 billion of this $71.1 billion is unfunded public pension liabilities. $9.92 billion of that figure includes the following non-general obligation bonds:
- State Transportation Infrastructure Bank (STIB): $1.9 billion.
- Revenue Bonds and Notes for institutions of higher learning: $828.4 million.
- State Ports Authority: $172.2 million.
- State Education Assistance Authority: $62.3 million.
- MUSC Hospital: $373.4 million.
- Public Service Authority: $5.6 billion.
- State Housing Finance and Development Authority: $651 million.
- Educational Facilities Authority: $302.9 million.
- Heritage Trust: $12.3 million.
- Lease Revenue: $12.2 million.
Yes, interest rates are low. But bear in mind: If this bond proposal passes, each South Carolina resident will owe $15,000 toward the state’s debt.
All of this, incidentally, has to do with state debt. There’s local debt, too. The 2013 Local Debt Report released by the state Treasurer’s Office estimates the local debt at $10.74 billion. It breaks out as follows:
- Total County Debt: $1.87 billion.
- Total Municipality Debt: $2.66 billion.
- Total School District Debt: $5.24 billion.
- Total Special Purpose District Debt: $966.1 million.
Remember, too, that both the governor’s budget and the Ways and Means budget currently being debated increase appropriations to the State Transportation Infrastructure Bank by $105 million over last year. This could translate into over $1 billion in new debt, separate and apart from Part III (the bond bill).
Lawmakers, then, are only mentioning a fraction of the state’s total debt when they claim that this bond proposal won’t increase the state’s liabilities. It will – by a lot. Lawmakers’ goal should be an entirely debt-free state. Why? Because it’s not their money.