Arrow-right Camera
The Spokesman-Review Newspaper

The Spokesman-Review Newspaper The Spokesman-Review

Spokane, Washington  Est. May 19, 1883
Rain 36° Rain
News >  Pacific NW

Experts urge caution in boosting state debt

Associated Press

BOISE — Some analysts and industry leaders say Idaho legislators must use caution if they opt to sell bonds to pay for building construction, water-rights purchases and transportation projects to avoid hurting the state’s reputation for fiscal frugality.

“The state is just like you: As a person or a business owner, there are times, when the judicious use of debt is good,” said Cheryl Cook, who owns and runs C2 Financial Inc. in Salt Lake City and advises Idaho on its financial management. “If you’re using it prudently, it’s the greatest tool in the world. If you’re using it poorly, it’s terrible.”

The state currently has the second-lowest taxpayer supported debt in the nation at just $83 per person. And Idaho’s constitution forbids most long-term borrowing of more than a year.

But the state Legislature, which convened Monday, is expected to begin considering ways to pay for about $20 million in improvements to its Capitol Annex in Boise, resolving a water dispute in eastern Idaho that could cost up to $135 million, and funding million-dollar road projects such as improvements to U.S. Highway 95.

This comes at a time when legislators are predicting a tight budget starting in two years amid sluggish economic growth and following the expected end to a temporary 1 percent sales-tax increase.

Some states, including California, have borrowed too much and have been punished by investors and financial analysts with lower credit ratings and higher interest payments.

Idaho, by contrast, almost always has paid for projects and programs from within its yearly means.

“I tend to think government is better off funding things by fiscal year,” said Stephen Slivinski, director of budget analysis at the Cato Institute in Washington, D.C., a libertarian think tank. “That way, it’s easier for taxpayers to visualize and understand the cost of government. It costs what the yearly budget requires.”

Compared to Idaho, only Nebraska’s $38 per-person debt is less.

The top three states — Connecticut, Massachusetts and Hawaii — have more than $3,000 in debt for each person in the state. States, like people, get credit ratings, and the worst of the 50 is California, which saw its credit rating drop close to the so-called “junk level,” which debt investors consider risky.

Once the rating gets below a certain grade, the investments are considered speculative, and the interest rates go up for any new loans. This next year, California will pay almost three times Idaho’s entire general fund budget of $2 billion, just on the year’s payments on its more than $50 billion in debt.

Analysts and industry said there wasn’t much chance of a similar crisis in Idaho. It recently had its credit rating raised by Moody’s Investors Services.

The Spokesman-Review Newspaper

Local journalism is essential.

Give directly to The Spokesman-Review's Northwest Passages community forums series -- which helps to offset the costs of several reporter and editor positions at the newspaper -- by using the easy options below. Gifts processed in this system are not tax deductible, but are predominately used to help meet the local financial requirements needed to receive national matching-grant funds.

Active Person

Subscribe now to get breaking news alerts in your email inbox

Get breaking news delivered to your inbox as it happens.