Census figures show states went on borrowing tear in 1990s
Monday, July 26, 2004
TOPEKA, Kan. -- Kansans once enjoyed the distinction of being the Americans least burdened by state borrowing, owing less than $200 in bonds per resident. Most states had at least five times as much debt per person.
But starting in the 1990s, state lawmakers in both parties took advantage of low interest rates to go on a spending bender. They issued bonds to finance better highways and bridges, repairs on state university campuses and even a restoration of the state Capitol.
The phenomenon wasn't unique to Kansas. Other states also turned heavily to borrowing -- indeed, total state debt nationwide nearly doubled over a decade and the binge didn't let up when the economy turned sour a few years ago. Lawmakers found it was easier to borrow money than raise taxes.
The numbers here were dramatic. Kansas' bonds per resident ballooned by 333 percent from 1992 to 2002, more than any other state's, according to U.S. Census Bureau figures analyzed by The Associated Press. Kansas' per capita borrowing grew more than twice as fast as Texas', which had the second-highest rate of bond growth per person.
And Kansas continues to float more bonds. The State Budget Division now calculates that, at the end of the current fiscal year next June 30, the state will have $3.71 billion in bonds to pay off.
While that's still relatively low in comparison to many other places, if Kansas' population keeps rising at its current rate, it works out to $1,352 per person. That's enough to buy an up-to-date laptop or desktop computer for every man, woman and child in the state. It's almost enough to enroll full-time for a semester at Emporia State University.
"You just have to start wondering at what point Kansans need to be concerned," State Treasurer Lynn Jenkins said. "We may be getting there."
One legislator, Sen. Henry Helgerson, compared the state to a family that has used its full limit on one credit card and is getting ready to max out another. "It's a financial time bomb that's probably going to catch up with us sometime in the next four or five years," he said.
In recent months, borrowing has received the most attention in California, where voters in March approved a plan to issue $15 billion in bonds to help solve that state's ongoing budget problems.
While Kansas' borrowing has been on a much smaller scale, it is in some ways just as noteworthy, given the state's history.
According to the census, at the end of its 1992 fiscal year, Kansas had less than $486 million in bonds to pay off, about $195 for every resident. By 2002, according to the census, Kansas' debt had risen to $2.29 billion, and its per capita figure to $844. Both Tennessee and Arizona had lower figures.
Bart Hildreth, a public finance professor at Wichita State University, called the increase a "warning flag." He is a former board member for the Kansas Development Finance Authority, which issues bonds for most state agencies.
Hildreth is not sure how much of a financial problem Kansas' burgeoning debt represents yet. He is, in fact, doing research on how much the state might be able to issue in bonds before causing a crisis, either by jeopardizing its credit ratings or finding itself so strapped to make bond payments that it would have to consider cutting social services, aid to schools or its work force.
"It's something we should watch," he said. "As individuals, we've got so much borrowing capacity. If you buy that plasma TV, you may not be able to borrow the money you need to buy a car to get to work."
Helgerson, the state senator, sees a problem. While most bonds are backed by special revenues -- motor fuels taxes for highway bonds, for example -- the state plans to use general revenues to pay off some of them.
For example, state officials decided earlier this year to issue $500 million in bonds to shore up the long-term health of the pension fund for government workers and teachers. The first payment on those bonds, $10 million, is in fiscal 2006, but the annual amount rises to $37 million in fiscal 2009.
Helgerson said those funds could instead be available for other programs. "It does have financial consequences for our children," he said, "and their children."
On the Net:
Census Bureau: http://www.census.gov
State Budget Division: http://da.state.ks.us/budget/