When Pennsylvania voters head to the polls on November 4, 2008, they will also be asked to vote “YES” or “NO” on a ballot measure which would allow the state to incur an additional $400 million in debt for water and sewer projects.
The question reads:
Water and Sewer Improvements Bond Referendum: Do you favor the incurring of indebtedness by the Commonwealth of $400,000,000 for grants and loans to municipalities and public utilities for the cost of all labor, materials, necessary operational machinery and equipment, lands, property, rights and easements, plans and specifications, surveys, estimates of costs and revenues, prefeasibility studies, engineering and legal services and all other expenses necessary or incident to the acquisition, construction, improvement, expansion, extension, repair or rehabilitation of all or part of drinking water system, storm water, nonpoint source projects, nutrient credits and wastewater treatment system projects?
In July 2008, the Pennsylvania General Assembly passed and Governor Ed Rendell signed legislation placing a statewide ballot question before the voters on November 4, 2008. If the voters approve the measure, the state would issue $400 million in new bonded debt for drinking water and wastewater treatment systems.
The ballot question is the result of a federal clean-water-needs survey that estimated $18 billion was needed to upgrade sewer and water systems throughout Pennsylvania over the next 10-15 years. If the referendum passes, the Pennsylvania Infrastructure Investment Authority (PENNVEST) would issue grants of up to $200 million over three years. The remainder will be given as loans to municipalities or municipal authorities.
Taxpayers will pay an estimated $621 million in principal and interest over a 20 year period. The annual taxpayer cost will be approximately $31 million after all the debt is issued ($11.2 million and $23.1 million in 2009-10 and 2010-11, respectively). For the average family of four, this translates into $130 in new debt which will be paid back with General Fund revenues (i.e. state income, sales, and business taxes) at a rate of approximately $10 per year.
WHY IS THIS ON THE BALLOT?
In the last 10 years, there have been four statewide ballot measures asking for voter approval to increase the state’s bonded indebtedness. All of these questions were approved by the voters. The most recent debt referendums were the $20 million bond issue to compensate Persian Gulf veterans in 2006 and the $625 Growing Greener II referendum in 2005.
Functionally, there is little difference between legislators approving new bonded debt and putting debt questions before the public. Indeed, legislators could have just as easily approved the $400 million in new debt without voter approval. However, forcing voters to decide the fate of their water and sewer systems allows them to shift responsibility and take political cover.
Increasing the taxpayers’ debt burden has not been a problem in Harrisburg. In July 2008, lawmakers passed over $3 billion in new borrowing:
- $572 million in 2008-09 for Buildings and Structures, Furnishings and Equipment, Transportation Assistance as part of the state capital budget.
- $365 million in 2008-09 for Bridge Repair, Rail Freight, and Aviation as part of the state capital budget to be paid from the Motor License Fund.
- $800 million over two years for “PA H20” for funding sewer, dam, and water projects. The $400 million bond facing voters will be in addition to the PA H20 program.
- $500 million over two years for the new Energy Independence Fund. Termed a “hedge fund for politicians,” this borrowing can be used to award grants to companies politically selected by the Governor and state lawmakers.
- $800 million over four years for Redevelopment Assistance Capital Projects. This program earmarks new debt for lawmakers pet projects, including $45 million for a soccer stadium in Chester, $35 million for a baseball stadium in Lackawanna County, $250 million for a cargo airport in Hazle Township, $12.5 million for a 200-room lodge in Tioga County, and other pork barrel projects.
Citizens should rightly wonder why they are not given the opportunity to vote “YES” or “NO” on bonded debt for corporate welfare and pork barrel projects, and are only asked about bonds for municipal water and sewer projects—a generally accepted responsibility of government.
CURRENT STATE & LOCAL DEBT
The question facing voters is less about whether Pennsylvania needs additional funding for water and sewer infrastructure—that appears to be undisputed—but whether the state should use existing revenue or issue new debt to pay for it.
Pennsylvania taxpayers already owe over $110 billion in state and local government debt, or almost $9,000 per person ($36,000 for a family of four), even before the most recently enacted borrowing. Last fiscal year, taxpayers paid $935 million in interest on state debt alone.
|Pennsylvania State and Local Government Debt|
|Debtor||Debt Outstanding||As of:||Per Capita|
|Total State||$36,675,811,000||Dec. 2007||$2,950|
|State Agencies and Authorities||$28,160,300,000||Dec. 2007||$2,265|
|Total Local||$73,920,320,000||FY 2005-06||$5,946|
|School Districts||$22,574,468,132||FY 2005-06||$1,816|
|County/Municipal Debt (Est)||$51,345,851,868||$4,130|
Pennsylvania is currently facing a state budget deficit, as collections have come up short in recent months, that some lawmakers believe will reach $2 billion or more. Voters must decide if, during this budget crunch, Pennsylvania can afford another spending program or if legislators should use already existing debt and revenues to pay for these infrastructure improvements.
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