By Thomas Scovill
On November 6, voters will decide whether to turn a bond measure approved by voters in the year 2000 into a perpetual line of credit of $750 million.
In 2000, voters approved Amendment 666 and gave the state authority to borrow up to $750 million to provide incentives for businesses to move to or expand in Alabama. Since then the state has sold $720 million worth of the bonds authorized by this amendment. Now only $30 million can be sold before the authorized limit is reached. In the meantime, the state has paid down some of the principal and interest rates have fallen. The outstanding principal is now about $590 million.
The payments for these bonds come from the oil and gas royalties paid to the Alabama Capital Improvement Trust Fund which gets 28 percent of the oil and gas royalties paid to the state. In 2011 this was $34.5 million. This distribution was not changed by the vote on September 18 which reduced the distribution to the Alabama Trust Fund to only 33 percent of the oil and gas royalties.
The use of revenues provided by Amendment 666 bonds is controlled by The Amendment 666 Bond Commission which is composed of the governor and his director of finance and commissioner of revenue, and the chairmen of the legislature’s senate and house general fund committees. Projects are proposed to the commission by the Alabama Development Office (ADO) whose director is appointed by the governor.
Constitutional Amendment 2 would allow the state to continue to sell bonds under the provisions of Amendment 666 as long as the aggregate outstanding principal does not exceed $750 million. This means as the principal is paid down the state can sell new bonds as long as the outstanding debt stays below $750 million. This is a new way to authorize the assumption of debt by our state government.
There is not a lot of difference between government borrowing and government taxes. One requires the other and government borrowing always has to be sustained by government taxes on the citizens. Borrowing leads to higher taxes. Unconstrained borrowing leads to unconstrained growth in taxes. This is why taking on more debt requires approval by the voters.
Constitutional Amendment 2 is a scheme by our Republican leaders to avoid the stigma of calling for an increase in the debt of our state by disguising it as a perpetual line of credit, i.e., the state can borrow and pay on the balance as long as the total owed is below the credit limit.
I am disappointed that the sponsor of the amendment has not responded to my request to describe the projects funded by Amendment 666 bonds.
“Vote once, borrow forever” is a Republican led end run around the voters that should trouble all of us.
I urge you to vote NO on Constitutional Amendment 2.