Leader Blues

Tuesday, September 27, 2005

EDITORIAL >> Be sure to read the fine print

Could government ever be so idyllic as Gov. Huckabee described it this week when he announced a special election Dec. 13 to reauthorize $825 million of debt for higher education and highways?
“It’s not asking taxpayers to make any more investments; it’s not asking them to cough up any more money,” Huckabee said at a news conference at the Governor’s Mansion. “. . . Frankly, there shouldn’t be any controversy about it.”

If there ever was one, here surely was the free lunch. Hundreds of miles of refurbished Interstate highways regularly for as long as we all shall live and $150 million of new buildings and equipment at state colleges and universities, and none of it will cost you the taxpayer a red cent.

The coalition of supporters do not plan to spend much on advertising to persuade voters because the program is so obviously swell that people will need no persuasion. They will march eagerly to the polls to vote for both bond propositions. At least that much — voters’ likely approval — seems evident.
The economic forces that are capable of arousing public skepticism are backing the proposals. The transportation and contracting industries, the higher education lobby and the financial industry are lined up behind the plan and were there to nod their approval of the governor’s announcement.
Nearly everyone, and certainly that would include us, wants to see improvements in higher education and the road system.

But Arkansas’ historic fiscal policy is undergoing dramatic change, and it needs serious and frank discussion before that change occurs. We ought to have expected a more candid recitation of what the bond votes will mean than the rosy and risk-free scenario that Gov. Huckabee and the supporters outlined.
Voters will be asked to reauthorize $250 million in college savings bonds that have been marketed since the state began issuing the notes for colleges and universities some 15 years ago.

People can buy the bonds and at their maturity they will have money for their kids’ tuition, or a new car.
The proceeds of the bonds give colleges and universities money for construction. The state will issue $250 million in bonds, which will retire $100 million of existing bonds and give the schools the other $150 million.

At the same time, voters will be asked to give the state Highway Commission permanent authority to issue highway bonds whenever it chooses from now on as long as the cumulative debt does not exceed $575 million, the ceiling on bonds established when the state undertook its current Interstate rebuilding program in 1999.

While it is true, as the governor observed, that the current taxes will continue to service the bonds, it is a trifle misleading to imply that they will not cost anything.

Without the fresh bond issues, all those current taxes that are now diverted to pay interest to investors would be used for other purposes — the public schools, for example, and improvement to the primary and secondary roads of the state and cities and counties. Some $25 million a year now is taken from the state’s general revenues to pay bondholders.

That would revert to the schools, colleges, prisons and indigent health care when the bonds are repaid.
In about eight years, if highway bonds are not reauthorized, some $100 million a year will be available to work on crumbling primary and secondary highways, roads and streets. Those are no small considerations for the taxpayer, particularly rural dwellers who do not see much of the Interstates.

Voters may want to think about other priorities. The state is under a mandate to bring its moribund public schools up to date, including school buildings that are judged to be about the worst in the country. A legislative study concluded that $2 billion needed to be spent on school buildings. Yet the state will be saying on Dec. 13 that colleges and highways are the priority, not the public schools. Go to any college town in Arkansas and compare the facilities at the institution with the school buildings in the outlying communities.

The state has a $150 million surplus and expects another $200 million over the current biennium.
It is spending a sizable portion of that money on sleazy pork-barrel projects. All of that one-time money could soundly be spent on any or all of these capital needs: public schools, colleges and highways.
Had the legislature and governor been of the mind, all the fine ideas of the college presidents could have been financed from those monies and avoided the new debt that Huckabee now so earnestly pleads for voters to create.

We should take a particularly skeptical attitude about the governor’s plan to give the state highway commissioners a permanent line of credit of $575 million.

That would be a radical reversal of traditional Arkansas fiscal policy were it not for the constitutional amendment adopted last year that allows the state bond agency to have what amounts to a permanent line of credit to help big manufacturers that might set up business in the state.

Since 1934, Arkansas’ public policy has been to avoid debt. Orval Faubus at the peak of his power could not persuade voters to embrace highway and higher education debt. For a couple of decades after the McMath highway bonds were retired in the 1960s, Arkansas was essentially debt-free.

It was a policy that did not serve the state particularly well because a poor state needs to invest. Arkansas may be well served by these proposals, but we first need an honest debate about it with all hands on the table.