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Burns proposes new controls on state borrowing, debt repayment

Senate President Bob Burns said he will propose a ballot measure to cap the state’s ability to take on new debt.

First, he wants to remove the debt limitation in the Arizona Constitution, which is $350,000.

That limit has been in place since the state’s founding in 1912.

The proposal backed by Burns would allow Arizona to borrow money on two conditions. One, the total debt cannot exceed 5 percent of the net assessed property value in the state. This applies regardless of when a debt is incurred.

Two, would allow the Legislature, beginning in 2012, to identify a revenue source other than the state’s general fund to pay for the debt and for debt servicing.

This approach is similar to requiring a dedicated revenue stream for voter-approved spending.

Additionally, the measure would require voter approval for all bonds and other financial obligations of the state.

Finally, the measure applies to any state obligation regardless of the revenue source or money pledged for its payment, which includes general obligation bonds, revenue bonds, certificates of participation and long-term and short-term obligations

The legislation will come in the form of a striker to SCR1060. Sen. Russell Pearce, chairman of the Appropriations Committee, is planning to offer the amendment during a hearing of his committee on March 5.

Burns has repeatedly expressed caution against the state’s growing debt levels.

“We got to put a lid on the amount of debt that we are creating,” Burns said.

Coming up with a precise definition of “debt” is part of the difficulty in coming up with legislation to limit the state’s ability to borrow money.

The state Constitution already prohibits the state from taking on debt of more than $350,000. It states: “The state may contract debts to supply the casual deficits or failures in revenues, or to meet expenses not otherwise provided for; but the aggregate amount of such debts, direct and contingent, whether contracted by virtue of one or more laws, or at different periods of time, shall never exceed the sum of three hundred and fifty thousand dollars.”

But the Goldwater Institute said politicians have come up with creative “debt-hiding schemes” to skirt the Constitution’s debt limit clause. One way that’s done is to label borrowing as something other than state debt.

The courts have narrowed the definition of debt in ways that have allowed the state to borrow much more than $350,000, which must have seemed like quite a bit of money when the state was founded almost 100 years ago.

On Feb. 23, Burns sent out a letter cautioning against Arizona’s growing debt. The state’s appetite for borrowing means debt servicing becomes a “bigger priority than paying for any of the state’s numerous other priorities,” Burns wrote.

For fiscal year 2009, debt servicing stood at nearly $700 million, according to the Legislature’s budget research unit.

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