Commentary
Michigan Pays Off Debt from the 80s
New administration may borrow more
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The new Whitmer administration will work on a new budget shortly after being installed into office. Its staffers should find that it will reap the benefits of the Snyder administration’s insistence that the state pay down its long-term debts. Those benefits ought to be appreciated as the new administration may face temptations to kick the costs of today’s government onto future taxpayers.
In 1988 voters agreed to let the state borrow $660 million for state park improvements and environmental cleanup, with the general taxpayer responsible for paying the debt. The funds have been spent since then, but the debt remained until this year. The state will pay another $22.9 million on the bonds this fiscal year. After that, it will finally be free of the burden 31 years after it was approved.
When this and other general debt payments are tallied, the state will spend $27.6 million less on bonds in the upcoming fiscal year, and $45.6 million less four years from now, according to the latest state treasurer’s report.
The state also borrowed money to pay for projects to be paid off with transportation revenues, which gave the state more road work at the time it bonded, at the expense of current and future road fixes. This debt is down, too, from $2.5 billion in 2009 to $1.4 billion in 2017. Debt payments here dropped by $38.5 million over the period.
This positive fiscal development will do less for the state budget than economic growth, which is projected to increase state revenues by $1.7 billion over the next three years, but it is another reason why lawmakers have more tax money to budget year after year.
The incoming governor ran on a platform that called for more money for schools, health care, business subsidies and the roads. Growth, less debt, and the other positive budget trends may not provide enough to accomplish all of those goals. Given a Legislature reluctant to raise taxes, she may be tempted to borrow to accomplish her agenda.
That would be a mistake. This kind of debt gives us more spending today at the expense of tomorrow’s taxpayers, and with added interest. If the state needs to spend money for the new governor’s priorities, it can largely get the same by dedicating already-existing revenue without having to pay bondholders extra in interest.
Politicians are often encouraged to spend now and pay for it later. Gov. Rick Snyder fought that temptation. Residents will find out whether Gov. Gretchen Whitmer will do so as well soon.
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Michigan Pays Off Debt from the 80s
New administration may borrow more
The new Whitmer administration will work on a new budget shortly after being installed into office. Its staffers should find that it will reap the benefits of the Snyder administration’s insistence that the state pay down its long-term debts. Those benefits ought to be appreciated as the new administration may face temptations to kick the costs of today’s government onto future taxpayers.
In 1988 voters agreed to let the state borrow $660 million for state park improvements and environmental cleanup, with the general taxpayer responsible for paying the debt. The funds have been spent since then, but the debt remained until this year. The state will pay another $22.9 million on the bonds this fiscal year. After that, it will finally be free of the burden 31 years after it was approved.
When this and other general debt payments are tallied, the state will spend $27.6 million less on bonds in the upcoming fiscal year, and $45.6 million less four years from now, according to the latest state treasurer’s report.
The state also borrowed money to pay for projects to be paid off with transportation revenues, which gave the state more road work at the time it bonded, at the expense of current and future road fixes. This debt is down, too, from $2.5 billion in 2009 to $1.4 billion in 2017. Debt payments here dropped by $38.5 million over the period.
This positive fiscal development will do less for the state budget than economic growth, which is projected to increase state revenues by $1.7 billion over the next three years, but it is another reason why lawmakers have more tax money to budget year after year.
The incoming governor ran on a platform that called for more money for schools, health care, business subsidies and the roads. Growth, less debt, and the other positive budget trends may not provide enough to accomplish all of those goals. Given a Legislature reluctant to raise taxes, she may be tempted to borrow to accomplish her agenda.
That would be a mistake. This kind of debt gives us more spending today at the expense of tomorrow’s taxpayers, and with added interest. If the state needs to spend money for the new governor’s priorities, it can largely get the same by dedicating already-existing revenue without having to pay bondholders extra in interest.
Politicians are often encouraged to spend now and pay for it later. Gov. Rick Snyder fought that temptation. Residents will find out whether Gov. Gretchen Whitmer will do so as well soon.
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.
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