Bond boost

Whenever families must make major purchases, they usually rely on credit cards or bank loans. The nation's credit system has contributed to the high standard of living most Americans enjoy.

But borrowing means having to pay back loans plus interest. The United States has the highest consumer-debt ratios in the world. Millions of Americans struggle to make their paychecks stretch far enough to pay monthly bills plus keep up with credit payments. Indeed, many of them resort to creating more debt just to keep up.

The federal government has used debt to fund its costly and expanding programs for years. Individuals with money to invest benefit from federal borrowing by reaping the returns of steady and stable interest payments backed by the government.

Other levels of government also rely on debt, usually in the form of bonds, to pay for major projects. That's how schools get built and how cities expand facilities to provide essential services.

State governments, like Missouri, also rely on bonded indebtedness since they are constitutionally prohibited from spending more than they can generate in revenue each year. California voters recently approved a $15 billion bond plan to cover the gaps in its budget. In total, state and local governments created $358 billion of bond debt in 2002 and $380 billion in 2003 -- the two years most affected by the recent economic slump.

Currently, Missouri has a total of $2.5 billion in bonded indebtedness. Annual payments from general revenue on that debt for the new fiscal year starting July 1 would be $221.7 million.

Now the Senate proposal to authorize more bonds for life-science facilities at the University of Missouri's four campuses (state Sen. Peter Kinder originally proposed $190.4 million) has expanded to a $350 million bond plan that would include capital improvements at other universities, including Southeast Missouri State University. If approved, the state would have to come up with another $25 million (depending on interest rates when the bonds are sold) starting in fiscal year 2008.

The benefits of bond financing should, in the best of circumstances, outweigh the financial burden of repaying the bonds. Traditionally, bonds allow more timely improvements and help boost the economy through construction spending, especially the jobs that have to be filled when major projects are built.

But governments must be wary of relying on debt to pay for year-to-year operating expenses. With budget requests and available revenue being what they are, there might be a temptation to go into debt to pay the bills of state operations.

Just as families cannot rely on more and more debt to keep household finances afloat, state government must make sure its bonded indebtedness is both necessary and affordable.

Missouri needs an economic jump start right now. Proponents of the $350 million bond issue for higher education believe their proposal will do just that. If legislators are convinced the bond issue isn't masking operating shortfalls, then the plan makes sense.