Editorial

Bond debt used to 'balance' state budget

Monday, April 21, 2003

The amount of debt Missouri is using to "balance" its annual budgets is getting heady. The attitude among too many state officials seems to be that a quick fix is best.

Undeniably, there's a serious financial problem. Missouri government and programs grew and grew during the years the state was flush with cash. Then came the economic recession, and the revenue began falling far short of spending demands. Cuts were made, particularly in higher education and social programs.

And now comes the incursion of more debt.

The latest examples were seen just last week. A bill dealing with unemployment benefits and sponsored by state Sen. John Louden of Ballwin, Mo., included a provision to sell up to $100 million in bonds to keep the state's unemployment-insurance system solvent.

Initially, state leaders considered borrowing from the federal government, which requires states to avoid any disruption in benefits to the unemployed. But Louden said borrowing from private lenders would mean the state could repay the money at a far lower interest rate than the federal government's 6 percent. Either way, Missouri taxpayers would repay the bonds over 10 years through higher unemployment taxes.

In the same week, Missouri sold $387 million in revenue bonds to be paid off over 25 years. Endorsed by Gov. Bob Holden and previously approved by the Republican-led legislature, the sale will shore up the budget for the current fiscal year, which ends June 30, to the tune of $150 million. Another $185 million is to be used in the budget for fiscal year 2004, which begins July 1. The final $52 million will go toward initial interest payments and other sale costs.

These two measures are in addition to the much larger bond issue passed in 2000 to fund state roads. Those $2.25 billion of bonds were authorized to be sold over six years to speed up existing road projects. They were to be retired in 10 to 20 years, depending on the best deals cut for the state.

Last year, the state authorized the sale of up to $600 million in bonds against the state's settlement with Big Tobacco.

Borrowing money against future taxes without revenue increases specifically tied to the spending doesn't balance a budget. It only creates a growing financial burden for taxpayers of the future. And it makes it harder each year to come up with a balanced state budget.

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