GARVEE bonds should require public vote

A Spectrum, by Merle Jensen

The Frontiersman has published pro and con Spectrum articles written by Sen. Lyda Green [R-Mat-Su] and Department Of Transportation Commissioner Joe Perkins regarding how we should pursue issuing GARVEE bonds to accelerate needed capital projects around the state. Essentially these are financial instruments that borrow money to be paid back by anticipated future federal government revenues. Many questions have been raised over the authorizing legislative bill (HB 191) that needs to be addressed by the Alaska Senate before this financial structuring should be used.

HB 191 was first introduced in the House addressing $56 million in construction costs. By the time the House referred it to the Senate on April 28, 2001, it had blossomed to funding $380 million in construction costs and estimated total lease payments of $593 million. And it isn't out of the Senate yet.

Our constitution requires citizen approval prior to our representatives incurring public debt. Such provision recognized that future financial obligations are being placed on Alaska's residents long after the money has been expended. And perhaps it also recognized the difficulty those elected to represent us in Juneau have in restraining themselves when it comes to "bringing home the bacon" especially in election years.

The Alaska Attorney General has apparently made a decision that this huge (and quickly expanding) I.O.U. need not go to the people for a vote. However, we should not be caught up in legal technicalities that allows our policy-makers to borrow from the future to pay for the present without approval from those who may have to pick up the tab later.

Perkins points out a vote is not needed because the state's good faith and credit is not pledged to repay the debt. But the Department of Revenue's fiscal notes that address the affects HB 191 has on state revenues points out that, "The bonds will carry the moral obligation pledge of the general fund and the payment of debt service will be expected regardless whether investment earnings or federal revenues are realized." Though he is bullish on future federal revenues paying off this debt, no one has a crystal ball on how many federal dollars will be available during the next 15 years.

Alaska definitely faces a fiscal policy challenge in the near future. It's highly unlikely that oil cartels and future natural gas production will fulfill our future financial needs. That impact will be felt by all of us in the form of reduced dividend checks, higher licensing fees, various taxes and lower paying jobs. Is this the time to borrow from the future without approval of those who may end up being impacted by the debt? Shouldn't the people make that choice?

Another area not addressed in the Frontiersman by Perkins is the budgetary and operational impact on DOT. With the current deficit problem looming, the Legislature is cutting budgets and continues to look at trying to reduce operational costs. In expanding the capital construction budget using Garvee bonds, how will this affect other DOT operations and ongoing capital projects? According to the legislative online summary of bill information, DOT hasn't filed a fiscal impact analysis on its operations regarding HB 191.

We have all experienced glare ice this winter on many state-maintained highways. My daughter rolled her vehicle on the Old Glenn due to ice and rut conditions. The Frontiersman recently pointed out that highway accidents are up 30 percent to 40 percent over the same time period from last year. Does this mean DOT should be putting more effort into road maintenance rather than into planning and monitoring new construction projects?

Green's comment that programmed projects that support bond issues are not always built is also valid. During the days when Alaska was less flush with money, we used voter-approved general obligation bonds to finance capital construction. In some cases the voter ballot only included a vague description of a category of projects that would be constructed with the bond proceeds. Due to the fact that current legislative actions cannot legally bind future legislative decision-making, certain original projects that supported the bond amount voted on were never built. This reinforces the need for a public vote on a ballot detailing out the individual projects and authorizing specific amounts to be spent. Maybe with this approach we would be assured that the Old Glenn would be rebuilt.

Another concern that has been expressed is the potential of over-heating the industry's economy by accelerating the state construction budget. Until the Legislature resolves a somewhat gloomy financial future with a stable fiscal policy, should we be accelerating construction projects within the next few years and hope for better times ahead? Or should a more cautious approach be taken to ensure steady employment over the long-term rather than create a possible post construction vacuum after the party is over? With the economy weakening in the Lower 48, and considering the marginal local hire progress that has been made by our government during the last 10 years, would many construction jobs be filled with union transplants from other states?

Alaska is in desperate need of new road construction and expansion. The Senate and governor should consider both the short-term and long-term affects of accelerating Alaska's construction cycle before allowing HB 191 to become law. At a minimum, those of us who may be affected by it deserve the right to cast our vote of approval.

Wasilla resident Merle Jensen is a retired deputy legislative auditor.