In all the talk of how to spend the state surplus, one area has been mysteriously missing from the discussion – debt.
According to the State Office of Management and Budget’s Management’s Discussion and Analysis for fiscal year ending June 30th, 2006: “The State’s total debt (bonds and notes payable) increased during the fiscal year to $1.64 billion, an increase of $100 million, or 6.4%, which represents the net difference between new issuances and payments and refundings of outstanding debt. During the year the State issued $404 million in bonds and $637 million in notes.”
Now you may ask yourself “but I thought the state was running a surplus in excess of $500 million?” It does not take a former accountant from Enron to figure out what is going on here. In fact, any recent college graduate with an average of $18,000 in debt can tell you exactly what is going on here – credit flipping.
Far too many Americans make the ends meet by paying off one credit card with another, so it is not a surprise that governments that are strapped for cash would do the same thing. Certainly our government, federal, state and local, should not get into the same practice.
Back to the surplus – if the state issued $100 million in new bonds and $304 million in bonds that renew old debt, how can anyone with a shred of intellectual honesty claim that there is really a surplus?
The only reason there is a surplus is because a large chunk of debt was rolled over and new debt was created. This is akin to someone taking a cash advance on one credit card, making the minimum payment on another card, and keeping the rest of the cash and claiming a surplus.
There is no surplus. The state has a total debt of over $1.7 billion, with $400 million of that being renewed or incurred in 2006. It is all a numbers game played by accountants and politicians wanting to spin some political advantage.
It was wrong for Enron to play these number games – it left many employees jobless, and many investors broke – our own state must not play these games with the future financial security of the state.