University Building Plan Increases State Debt 16 Percent
By Goldwater Institute: Byron Schlomach (05/15/08)
Late night infomercials introduce consumers to great deals they can't possibly pass up. "For only $19.99, you can get this incredible Ginsu knife. But if you call now, you get two, and this special bonus gift, for no extra charge!" Most of us pass up these deals because we recognize that they are too good to be true. An idea the legislature is considering to borrow money for new buildings is like that.
We're told that for a mere $1.4 billion of borrowed money, the state of Arizona gets shiny new university buildings, old university buildings get remodeled, a medical school is built, and hundreds of construction jobs are created, along with lots of space for more university employees.
But, buyer beware. The plan would increase the state's indebtedness by 16 percent. The borrowed funds will be paid back with interest, to the tune of $80 million per year over 25 years.
Arizona already has one of the highest per-capita debt ratios in the country. And debt-service payments, adjusted for inflation, have increased 209 percent since 2000. Paying for government with debt, which is paid back with interest, forces taxpayers to pay more for government goods and services than they otherwise would. As debt consumes an ever larger proportion of revenue, the available funds for other government priorities shrinks.
In 2002, when he first became president of Arizona State University, Michael Crow said that he "would like to see ASU develop a reputation for its entrepreneurial boldness." The University of Michigan offers an example to follow. By 2006 it had completed a $1.8 billion building renovation program, mostly with private sources. This seems a reasonable alternative to coming, hat in hand, to a state already strapped for resources.
Dr. Byron Schlomach is the Director of the Center for Economic Prosperity at the Goldwater Institute.
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