Bonds have been the talk of the General Assembly in recent weeks.
First we had the $500 million bond section attached to the end of the recent House budget bill. It came as a surprise to many of us and after considerable debate about the vetting process and validity of each project, the bond section was removed before the final budget vote. The House leadership made the right choice.
Now we have another bond bill arising from the murky depths of the Senate. Unlike the House version, it was not a surprise. Instead, after criticizing the House budgeting process, Sen. Hugh Leatherman announced it publicly in the Senate as you can see here. He went on to invite his fellow Senators and state agencies to add projects to the list . . . yes, the potential list. It closely resembles the House version that died as you can see on an evolving 2015 Senate Bond List.
As an aside, bond is just another word for debt. Governments usually issue bonds for long-term projects like highways or buildings. If your government issues bonds to pay for ongoing expenses, then run for your fiscal life as a big tax hike is likely looming behind you.
Bonds are not necessarily bad. Issuing debt for capital improvements makes sense for specific projects especially when interest rates are low. Like all public expenditures of taxes (in this case – interest, issuance costs and the commitment of future tax revenue) care must be taken that the project is needed, the process is transparent and the total outstanding debt remains low. Remember, our debt level has a direct impact on our state credit rating.
For lawmakers, bonds also come with a vetting process. This process was not followed in the House and the Senate appears to have ignored it also.
Title 2 Chapter 47 of the South Carolina code of laws specifies the process in which state bonds should be approved through the Joint Bond Review Committee. The curious may look here to read the entire chapter.
The code specifies that the JBRC establish funding priorities for bonds and report the priorities to the General Assembly –
SECTION 2-47-35. Establishment of funding priorities.
Section effective until July 1, 2015. See, also, section effective July 1, 2015.
No project authorized in whole or in part for capital improvement bond funding under the provisions of Act 1377 of 1968, as amended, may be implemented until funds can be made available and until the Joint Bond Review Committee, in consultation with the Budget and Control Board, establishes priorities for the funding of the projects. The Joint Bond Review Committee shall report its priorities to the members of the General Assembly within thirty days of the establishment of the funding priorities.
HISTORY: 1986 Act No. 547, § 3.
The code goes on to specify what information must be submitted to the JBRC when a bond is requested –
SECTION 2-47-40. Information to be furnished by agencies and institutions.
Section effective until July 1, 2015. See, also, section effective July 1, 2015.
To assist the State Budget and Control Board (the Board) and the Joint Bond Review Committee (the Committee) in carrying out their respective responsibilities, any agency or institution requesting or receiving funds from any source for use in the financing of any permanent improvement project, as a minimum, shall provide to the Board, in such form and at such times as the Board, after review by the Committee, may prescribe: (a) a complete description of the proposed project; (b) a statement of justification for the proposed project; (c) a statement of the purposes and intended uses of the proposed project; (d) the estimated total cost of the proposed project; (e) an estimate of the additional future annual operating costs associated with the proposed project; (f) a statement of the expected impact of the proposed project on the five-year operating plan of the agency or institution proposing the project; (g) a proposed plan of financing the project, specifically identifying funds proposed from sources other than capital improvement bond authorizations; and (h) the specification of the priority of each project among those proposed.
All institutions of higher learning shall submit permanent improvement project proposal and justification statements to the Board through the Commission on Higher Education which shall forward all such statements and all supporting documentation received to the Board together with its comments and recommendations. The recommendations of the Commission on Higher Education, among other things, shall include all of the permanent improvement projects requested by the several institutions listed in the order of priority deemed appropriate by the Commission on Higher Education without regard to the sources of funds proposed for the financing of the projects requested.
The Board shall forward a copy of each project proposal and justification statement and supporting documentation received together with the Board’s recommendations on such projects to the Committee for its review and action. The recommendations of the Commission on Higher Education shall be included in the materials forwarded to the Committee by the Board.
No provision in this section or elsewhere in this chapter, shall be construed to limit in any manner the prerogatives of the Committee and the General Assembly with regard to recommending or authorizing permanent improvement projects and the funding such projects may require.
The above paragraph notwithstanding, nowhere does the code establish the “fill the trough and yell sooey” method that we saw in the above linked video.
Of course, in the old days, that is how they did it. Maybe we should not care about the priorities of the state or whether the debt will be used as intended.
Maybe we should just hold our noses and vote for it as one newspaper editor recently advised me that I should have done with the road funding bill. We could also cover our mouths, ears, eyes . . .
I cannot suspend my disbelief long enough to not ask questions.