Morning CallTyler Cralle

MORNING CALL: Bond, Education Bond

Republicans seem to be having a change a heart about a possible 2 billion dollar education bond.

In 2017, lawmakers tried and failed to pass a 1.9 billion dollar bond that would help the k-12 education system.

When teachers marched on Raleigh this summer they demanded an education bond for school construction.  Republicans at the time rejected this idea.  However, with bipartisan in the air in Raleigh, the GOP may be having a change of heart.

According to the News & Observer, House Speaker Tim Moore announced last week that he plans to support a $1.9 billion education bond next year. If it passes, it would be on the ballot in 2020 for voters to decide on.

According to Governor Roy Cooper’s spokesman, Cooper is on board with the idea.

The N&O reports that this would benefit school districts of all sizes but especially rural ones, “Public schools in low-income counties would get extra funding and wouldn’t have to provide matching funds from their own budgets to receive the money, while wealthier counties would be expected to provide matching funds.”

If North Carolina moves forward with this they would not be alone.  The Wall Street Journal reports that the booming economy has filled many state coffers and lead to a borrowing explosion, “In all, state and local construction spending was up 9.7% in October from a year earlier to an annual rate of $288 billion, still shy of the $296 billion pace reached in March 2009.  Borrowing is supporting the pickup. State and local governments issued $228.45 billion in bonds for new projects in the 10 months through October, a 19% increase from the same period a year earlier…”

Supporters argue that pent-up demand for infrastructure improvements might also keep the upturn going into 2019.  This might be true but let’s not forget what infrastructure spending really is. Government spending.  Sean Ross at Investopedia explains, “To the extent that infrastructure projects are financed through immediate taxes, the private economy immediately shrinks by at least a corresponding amount. If they are financed through government bonds, then current capital markets experience crowding-out effects and other financial assets become more or less expensive than they otherwise should be. Later on, when those government bonds are paid back through higher taxes or higher inflation, the private economy loses again.”

It’s important not to forget as we debate this 2 billion dollar education bind that state lawmakers passed another 2 billion dollar education bond just 2 years ago.  While that money was appropriated for college projects its important to keep track of our current debt obligations before incurring more.

“If the other states  jumped off a bridge would we do it too?”

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