In Debt up to Our Ears

by State Representative David W. Floyd

January 17, 2007

Last week at the High Grove Grocery meeting Mr. W.R. King asked me a question about Kentucky’s debt. He asked “What is our total bonded indebtedness?” I didn’t know so I said I’d find out and get back. Well, I found out and it’s one of the few times in my life that a piece of news shocked me. You might ponder that question a little bit: how deeply would you guess that have we let ourselves go into debt?

Kentucky’s debt is in the form of bonds. A bond is just a promise to pay back money that is borrowed, with interest paid on the borrowed amount. Kentucky and other government entities sell bonds to private investors or investor groups, then use the cash.

Our oldest active bonds are from 1985. The outstanding balance on our debt just from 1985 is over two billion dollars and we’ve added more with every budget passed since then. I’ll tell you the total from all the years in a minute. First, allow me to repeat what I wrote a year ago about bonds.

“Politicians learned a while back that the people would just as soon not pay much in taxes. It used to be that if we wanted to build a major project, we’d have to ask the taxpayers for a tax increase to pay for it. Almost always, the People say ‘no thank you’ to a tax increase. So what happens now when big projects are needed and there isn’t enough money to pay for them? We bond. 

“When you hear about bonds just think borrowing. Kentucky is borrowing to build college buildings, roads, water lines, sewer projects, etc...

“Kentucky’s debt is growing with this [2007-2008] budget, and our percent of borrowing will be at its highest ever... Two billion dollars is about what we bonded through the last budget, and we propose to do it again in this budget. We will be paying on those bonds for a long time.”

As I said, we’ve added to our bonded indebtedness in every budget since 1985. The current total bonded indebtedness for Kentucky is over seventy-eight (78) billion dollars. As Paul Harvey would say, that’s Billion with a B. And if all bonds that we in the General Assembly authorized through June 2008 are issued then it will raise that total bonded indebtedness to more than ninety-one (91) billion dollars. It’s worse when you see all the zeroes: $91,000,000,000.

For perspective, the Canadian prime minister has pledged to reduce his country’s bonded indebtedness by 3 billion per year. If Kentucky could do the same it would still take us 30 years to get the debt down to zero, not including interest.

I have a lot to learn about how things work in government but forgive me if I think that this is just way too much debt. I know that every state does this and in Kentucky we still have a decent credit rating. I’m sure that we need to think of these bonds as investments in Kentucky’s future. There has to be some good news in there somewhere.

It may be that not all of these bonds are paid for with income tax revenue. For example, some of these bonds may have been sold to build university buildings, in which case the bonds could be paid back by private donations. I don’t know yet; I’ll try to find out and report back to you. In the meantime I’ll post each year’s debt on my website (www.davidWfloyd.com).

We had a good time at Judy Crepps’ Woodlawn Grocery Store on Saturday, and this Saturday the coffee starts pouring at 10:00 at the Boston Food Mart. Hearing from you is the best part of my job, so if you can’t make it to Boston then call me at home or leave a message at 800-372-7181. I’m here to help.