RALEIGH – Given population growth, demand for better-educated workers and a mounting maintenance backlog, construction needs for education in North Carolina are enormous.
And bonds are the most reliable way to start addressing those needs.
So far this year, state leaders have made three competing proposals to build education capacity:
- The state House approved a plan for a voter referendum on $1.9 billion in bonds, with $1.5 billion going to public schools and $200 million each to public universities and community colleges.1
- Gov. Roy Cooper’s proposed budget includes a proposal for a referendum on $3.9 billion in bonds, with $2 billion for K-12 schools and $500 million each for state universities and community colleges.2
- And the NC Senate approved a pay-as-you-go plan that would devote 4 percent of state revenue to school construction needs. Senate leaders say it would generate $2 billion each for K-12 public schools, public universities and community colleges over nine years and avoid $1 billion in interest costs.3
Given fluctuations in state revenues, though, that promise might be hard to keep through the next recession. One legislature can’t obligate the next. Using a dedicated portion of revenues for capital needs could divert funds from other priorities such as K-12 teacher salaries and classroom supplies.
And politicians’ actions don’t always live up to their words.
A case study: For years, state legislators have said they would provide funds for repairs and renovations of state university buildings.
Yet, while the General Assembly has provided an average of $30.8 million a year over the past 10 years and $45.4 million over the last 26 years,4 the universities’ maintenance backlog has ballooned to $3.8-$4.4 billion, according to UNC System estimates.5
Some universities have even stopped reporting repair and renovation needs because they see no point.6
Using the example of a couple using a mortgage to buy a house, NC State University economics professor Michael Walden recently pointed out the advantages of using debt:
“These projects last many decades and will be used by multiple generations of state residents. Borrowing the money to construct the projects now allows current and future generations to both use the projects as well as pay for them,” Walden wrote.7
North Carolina has a tradition of responsibly using debt – it is one of few states with a coveted AAA bond rating from all major rating agencies, in fact.
“Having these ‘AAA’ ratings ensures that we can borrow money at the lowest possible rates, which results in the state having more buying power,” says State Treasurer Dale Folwell.8
It seems clear, then, that we should stick with bonds as a tried and true mechanism to pay for public education improvements.
3https://www.wral.com/senate-rolls-out-school-construction-plan/18157903/; https://www.fayobserver.com/news/20190130/borrow-or-pay-as-you-go-two-plans-floated-for-nc-school-construction; https://www.newsobserver.com/news/politics-government/article226534995.html.
4https://www.northcarolina.edu/apps/bog/doc.php?id=61721&code=bog, p. 71.
5Ibid, p. 70.