Can bonds for roads bridge state’s budget hole?
OKLAHOMA CITY — Lawmakers are considering a huge bond measure to help close a $1.3 billion budget hole.
The bond funding would pay for road and bridge projects in the budget year starting July 1. This would free up revenue that legislators then could apply to reducing the biggest shortfall in state history.
If lawmakers can’t close a good portion of the hole, severe cuts would be needed, and the public likely would notice major reductions in state services, including public safety, health and common education.
Rep. Earl Sears, chairman of the House Appropriations and Budget Committee, said working groups of representatives are looking at various proposals for dealing with budget problems, including use of bonds.
Instead of providing hundreds of millions of dollars in “off-the-top” funding for transportation infrastructure, the money would come through bond financing, essentially borrowing from bond purchasers.
“Money off the top that goes to the state transportation eight-year plan is about $500 million, and money that comes off the top and goes to county government and their seven funds for roads and bridges is about $470 million.
“There you got a billion dollars, absolutely,” Sears said. “That’s why we are looking at that particular proposal.”
There is strong support from business interests in keeping road funding intact, and this would be one way to do that.
“That is a very viable option that we could do,” said Sears, R-Bartlesville. “It comes down to members, do they want to vote on a bond proposal.”
Transportation funding is an appropriate use for bond money, state Treasurer Ken Miller said.
“I believe the Legislature should give serious consideration to using bond financing for transportation projects, similar to what was done during the last recession,” he said.
“Long-term projects, such as road building, are well-suited for bond financing and provide a responsible way to allow current revenue to be used for current operating expenses.”
There has been a lot of discussion about modifying tax credits to bring more revenue into the budget, but that is more of a long-term solution that wouldn’t solve current problems, Sears said.
Other avenues for filling the budget hole include using Rainy Day Fund money, closing some sales tax exemptions, placing sales tax on additional services and adding a $1.50 tax to the cost of a pack of cigarettes.
State Bond Advisor Jim Joseph said Oklahoma is among 10 states with the lowest bond debt and has much unused bonding capacity.
It would cost the state about $7.2 million yearly to service the debt on $100 million in 20-year bonds.
“Over time you pay the interest,” he said. “But in today’s market, there are very low interest rates, and it is a pretty favorable time to borrow.”
Also, current state debt service of $259.4 million a year is to decline to $182 million by 2020 as bonds mature and come off the books.
One concern with the proposal is that it would be only a one-time solution to what may be a multiyear problem of budget holes, Finance Secretary Preston L. Doerflinger said.