Despite Debt Fears, Voters OK Most State Bond Measures


Voters across the country delivered a mixed verdict Tuesday on the question of whether state governments are piling up too much debt in a fragile economy.

In the clearest sign that Americans view state borrowing as a beneficial financing tool for long-term projects, Colorado voters soundly rejected a constitutional amendment that would have limited state and local governments from issuing debt altogether. 

Other election results suggested voters were quite discerning when it comes to state officials asking them for permission to issue state debt.  Washington State voters rejected a $505 million statewide bond issue for improvements to public schools while Alaskans approved the largest education borrowing program since Alaska became a state in 1959. New Mexico voters approved three bond issues for Pre-K  and K-12 education facilities, senior citizen centers and libraries but narrowly turned down a bond issue for projects at state colleges and universities.

The split outcome may reflect individual state differences instead of a broad national pattern, some analysts say. Washington State, for example, is experiencing a deep voter backlash towards spending and borrowing; voters there also defeated a ballot measure that would have created the state's first income tax. "It all goes back to the cliché, 'all politics is local,'" says Gene Rose, communications director for the National Conference of State Legislatures in Denver. "These measures were viewed in that perspective. People look at how it affects them directly in their state."

Debt was a partial factor in the outcome of at least three statewide races. In Iowa, Republican Terry Branstad beat incumbent Governor Chet Culver in part by accusing the Democrat of running up the state's debt load with a $1.7 billion infrastructure program. In Oregon, incumbent Democratic treasurer Ted Wheeler was reelected weeks after calling for a halt to general fund borrowing until the state's finances improve. In the Connecticut treasurer's race, incumbent Democrat Denise Nappier was reelected despite criticism from her GOP opponent, Jeff Wright, that Nappier was one of the state officials responsible for Connecticut borrowing about $2 billion over the past two years to plug budget gaps.

Growing scrutiny

Usually, debt is an obscure piece of state finances. But with the federal budget deficit growing, the economic stimulus ending and states increasing their bond sales since 2000, borrowing is coming under more scrutiny than normal. This summer, California officials were so nervous about polls showing that voters would reject a critically needed $11 billion water improvement bond measure that they pulled it off the ballot until 2012.

Washington State officials may be wishing they did the same thing. The proposal that voters rejected on Tuesday would have allowed the state to exceed the debt limit in the state constitution in order to pay for energy-saving repairs and renovation of pipes, heating and cooling systems, windows and lighting at aging public schools. 

But in other states, voters were more willing to borrow in order to pay for specific projects:

  • In Rhode Island, voters approved an $84.7 million bond issue to keep alive the state road and bridge program. It was one of three infrastructure bond issues approved.
  • In Maine, voters approved a $20 million bond issue to increase access to dental care and invest in land conservation, state parks and waterfront preservation.
  • Alaska voters approved a job-creating ballot measure authorizing the state to borrow nearly $400 million for 13 education-related projects throughout the state. The Legislature asked voters to decide the issue after lawmakers split over the cost of the bonds, about $30 million over 20 years.
  • The $175 million bond issue in New Mexico will finance a variety of improvements at senior citizen facilities, Pre-K and K-12 schools and libraries.
  • In Oregon, voters approved a ballot measure allowing the state to refinance bonds at a lower interest rate, saving over $35 million.

Relief in Colorado

The Colorado measure scared political, business and education leaders who worried it would have crippled the state's economy.

Had it passed, Colorado businesses could have been hit with a $700 million tax increase because the state no longer would have qualified for a discount rate on federal unemployment taxes. Denver school district officials said they would not have been able to issue bonds for about 10 years. Bond attorneys predicted months of legal challenges to clarify the meaning of the borrowing ban.

A group calling itself Colorado Tax Reform supported the measure, known as Amendment 61. They sought to connect Colorado's debt with the federal budget deficit, which they blamed for causing the recession and Wall Street financial collapse.

Unlike the federal government, states must balance their budgets and many have constitutional limits on the amount they can borrow. Moody's Investors Service, a credit rating agency that analyzes state debt, considers Colorado one of the most responsible states when it comes to borrowing policies. Moody's ranks Colorado 45 th among states in net tax supported debt, meaning that Colorado carries among the smallest debt loads of all the states.

Voters got it. "There was an understanding by the public that if this measure was approved there would be a greater expense to other programs in the state," Rose says.

Perhaps there was no better example of how state borrowing seeped into 2010 campaigns than the Iowa governor's race. Branstad's campaign had the best TV commercial on debt. To the tune of a 1961 classic sung by Jimmy Dean, "Big Bad John," a narrator says, "Big debt. That's all we get from old Governor Chet. Big debt-big bad debt." Branstad beat Culver by 10 points.


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