Senate looks to slow debt not approved by voters

By Scott Mooneyham | May 03, 2013

RALEIGH -- About two decades ago, the North Carolina Supreme Court told local governments that they could borrow money without voter approval, using something called certificates of participation.

Roughly a decade later, state lawmakers decided that they could also duck voters to borrow money for building projects. The state's first foray into non-voter approved borrowing was made to build the new state psychiatric hospital at Butner.

Plenty of reasons exist to believe that building a new psychiatric hospital was a sound expense of state tax dollars.

The worthiness of the expense doesn't change the fact that the court decision was always a bit suspect.

The state constitution plainly says that the General Assembly shall not, with a few exceptions involving emergencies, borrow money without voter approval. Similar language exists involving local government.

The legal end-around was made possible because of constitutional language saying that voter approval comes into play when a debt is "secured by a pledge of the faith and credit of the State." The courts decided that the certificates of participation didn't really obligate the state's taxpayers, as if taxpayers wouldn't be forced to repay the money.

Not surprisingly, once lawmakers had stuck a toe into the non-voter approved debt pool, a toe became a foot, and then a leg, and then another leg.

After decades of voters deciding when the state would embark on major building programs for schools, universities, roads and prisons, it has now been 13 years since state legislators asked voters to approve state borrowing.

State borrowing still rose pretty significantly at the start of the last decade, doubling in about five years.

It has not jumped so dramatically in recent years. In 2005, the state had taken on about $5.5 billion in debt supported by payments from its general operating fund. This year, the amount stands at about $6.5 billion.

On a per-capita basis, debt has risen from $645 per resident in 2005 to $815 in 2013. That figure still puts North Carolina state government among the lowest borrowers in the country.

Even so, you need to squint real hard to believe that the writers of the state constitution ever believed that a big chunk of that debt could be accumulated without voter approval.

The state Senate recently took a strong step toward reversing the trend, passing legislation that would allow no more than 25 percent of General Fund-supported debt to be of the non-voter approved variety.

Right now, about 40 percent of the $6.5 billion was approved without going to voters. If the state House and Gov. Pat McCrory go along with the bill, that 40-percent figure means that it will be a while before state lawmakers are allowed to jump in the certificates of participation pool again.

And what a change will await state leaders.

They may actually have to show something called leadership and sell the people on the legitimate needs of North Carolina.