Why Mississippi needs guidelines for its borrowing

State Treasurer Lynn Fitch
State Treasurer Lynn Fitch SUN HERALD

Last year, the State Bond Commission approved guidelines for what kind of projects should be put on the taxpayer — that is, your — credit card. We did this out of concern that Mississippi’s bond indebtedness has increased $1.3 billion in the past 10 years.

And, out of concern that every Mississippi man, woman, and child has a current debt burden of $1,707, plus an additional $1.1 billion of debt already hanging over their heads.

And, out of concern that debt service, which is simply paying back the money we’ve already borrowed, plus interest, has become the third largest item in our state budget.

The guidelines are meant to be a kind of yardstick by which all parties, including those requesting bond money and the legislators authorizing it, can prioritize projects and keep rising debt under control.

The new rules approved by the State Bond Commission borrowed on rules and even statutes in place in other states. Some of them merely restated IRS laws. Again, the idea was to set guidelines for how we issue debt — debt that all Mississippi taxpayers for the next 20 years will be obligated to pay off. Here are those rules:

1. When issuing debt for private activity, there should be evidence of economic benefit, “including economic development, job creation, or other improvement of the public welfare.”

2. The project debt shouldn’t outlive the project asset. We shouldn’t obligate taxpayers to pay principal and interest on flowers or landscaping for 20 years.

3. Debt should not be applied to projects already completed. We shouldn’t be issuing debt and paying principal and interest to reimburse for a project already done.

4. Debt should not be a substitute for regular budgeting. We shouldn’t pay interest for salaries and regular, recurring budget items.

5. Entities that get bond proceeds should have to submit information to the Bond Commission to ensure it’s for a specific project and not just generally adding to the entity’s budget.

The Bond Commission also stated in these rules it may consider whether there is more than simply a very local benefit to the funding and whether there are other state programs — such as those that include a vetting process and oversight that leads to strategic spending of your money — that are better funding sources.

The Legislature passes a bond bill each year. The one exception in recent memory was in 2012 when the Legislature didn’t pass one. The bond bill includes, in part, money for our universities and community colleges as well as Mississippi Development Authority and various other state programs.

Those funds are distributed to projects that have gone through a vetting process that prioritizes based on need and return for the state. This is a very strategic way of spending to ensure the taxpayers who foot the bill get the best bang for the bucks.

The bond bills also often include other projects that don’t go through any vetting process. The money is distributed to the entity identified by the Legislature and the state requires quarterly reports to monitor that the funds are being used as the bond bill said they would be used. The $308 million bond bill in 2016 included more than 50 of these projects.

The State Bond Commission serves as a sort of check and balance in the bonding process. It could’ve been established as simply an administrative rubber stamp, taking the bond bill as authorized by the Legislature and going through the process of issuing the bonds. But, instead, it was established with three statewide elected officials, all accountable to the people at the ballot box.

There are a lot of very worthy, exciting projects out there that could be great assets to a community or a region of the state, or even all of Mississippi. We just don’t have the money for all of them right now. We need to be just as strategic in the way we borrow money for these projects as we are when we pay for them outright, seeking the best return for every taxpayer dollar and prioritizing projects. It’s what you do for your family budget, and it’s what the state should do on your behalf.

Mississippi has a higher debt burden than most other states. It’s a point made by national rating agencies each time they review the condition of our finances. And, with lagging revenues, stagnant population growth, and the nation’s highest poverty rate, we need to be extra-careful about simply shifting our funding desires from payment through the annual budget process to payment with 20 years of interest on the taxpayers’ credit card.

The bills always come due, and we’re already having trouble paying them.