According to the online Oxford Dictionary, the word means, “Not able to be maintained at the current rate or level.”
With Washington’s national debt at $14 trillion and budget deficits that now top the $1 trillion mark annually, some are using the U-word to define the situation.
Closer to home, some folks are now beginning to look with concern on the steady rise of long-term obligations committed to by city and county governments, special service districts and school boards. Although no deficits are involved, critics are wondering about a long-term squeeze on local taxpayers.
According to a report released recently by state Treasurer Curtis Loftis, political subdivisions collectively have racked up $10.39 billion in debt in the form of general obligation bonds financed from tax receipts or income-generating revenue bonds.
What has caught some state lawmakers’ attention, along with the double-digit billion bottom line, have been the requests by some smaller school districts to borrow money not for capital improvement projects, but to cover day-to-day expenses.
“Shocking” was how one Upstate senator described the situation.
The state’s school districts account for nearly half of the debt, approximately $5 billion.
“I’ve got a personal conviction about opposing all kinds of debt. That’s how I was raised, state Sen. Kevin Bryant, R-Anderson, said in a recent interview with The Greenville News.
“If you’re going to borrow for a capital project to build something, that’s better than borrowing to run your day-to-day operations,” Bryant said in the article. “That’s totally different and irresponsible.”
Another Republican senator, Spartanburg’s Lee Bright, said a day of reckoning will “eventually…catch up” and Sen. Shane Massey, R-Edgefield, worried that “you start to wonder if we’re not overextending ourselves,” according to The News.
Local government officials say that despite the financial hit caused by the Great Recession, they’re are operating well within their means. Greenville, for example, recently had its bond rating raised to the max, at AAA.
School officials, faced with declining state aid, suggest borrowing to pay the light bill isn’t their preference, but having little or no taxing authority, for some districts it’s the only option.
Debbie Elmore, spokesperson for the South Carolina Association of School Boards, points out that most of the districts’ debt is based on borrowing against the legally allowed 8 percent of each district’s assessed real property valuations.
“The larger numbers come from referenda passed in recent years,” she says, citing examples of a one-cent sales tax approved in Charleston to generate $450 million over six years and a $336 million Lexington District 1 bond issue.
“It’s locally approved debt” that has been planned for and can be managed, Elmore says.
But there are troubling signs, mostly impacting small districts in the state’s poorer, rural areas.
These, Elmore says are recent, connected to the economic downturn that has hit hard at state revenue, triggering decreases in aid on which these districts are more dependent than larger, richer ones.
“Basically, they find themselves hurt by mid-year budget cuts – there have been six in the last three years and three of them were last year alone,” she said. “They could withstand one or two, but with this they’re dipping into dangerously low reserves.”
Several districts, Florence 4 and others in Hampton and Colleton counties have sought borrowing authority, but the legislation was vetoed by Gov. Nikki Haley. On paper, Elmore said, Florence 4 would be bankrupt.
While an economic upturn would help, Elmore says, a revamping of the way the state funds education should be a top priority, moving to a system that takes size, wealth (or lack of it) and demographics into consideration.
Sen. Larry Martin, R-Pickens, is less concerned than some of his colleagues, because, he says, “bonded indebtedness is still within constitutional limits. The 8 percent standard without a voter referendum has been the standard for measuring what public debt should be for 40 years.
“It never was projected as a high level,” Martin says.
Reba Campbell, deputy executive director of the S.C. Municipal Association, says the Treasurer’s report doesn’t reflect “how much is too much” because needs are determined locally by growth and infrastructure requirements. Nor, she says, does it show which entities’ taxpayers voted to exceed the 8 percent threshold.
Greenville, the state’s largest school district owes a modest $23.1 million, a paltry sum compared to those in Richland ($863 million), Lexington and York ($511 million each) and Berkeley ($428 million.
Add an asterisk to Greenville, though. Its $1 billion lease-purchase program is off the books. The legislature banned the practice in 2006 after several other districts started similar programs.
Most of the money owed by school districts – $4.38 billion out of the $5 billion total – is in general obligation bonds that are retired with tax money, the balance is in revenue bonds.
The remaining local debt is split this way: cities and towns, $2.4 billion; counties, $2 billion; special service districts, such as for fire protection and water service, $953 million.
Greenville County, South Carolina’s most populous, ranks sixth among the 46 counties with $91.4 million in debt, with two-thirds in general obligation bonds, according to the state Treasurer’s Office. Fast-growing Horry topped the list at $450 million, followed by Charleston, $291.2 million; Beaufort, $263.8; Dorchester, $151 million; and Richland, $102 million.
Greenville County’s six municipalities owe a combined $228.5 million, sufficient for fourth place. The city of Greenville’s debt is $98.5 million and Greer’s is close behind at $92 million. After them, come Simpsonville, $16.3 million; Fountain Inn, $9.5 million; Mauldin, $7.5 million; and Travelers Rest, $4.4 million.
The 13 special service districts in Greenville owe $39 million, far behind Spartanburg ($207 million), Berkeley ($199 million) and Lexington ($150 million).