At least two bills are now pending in the Senate seeking to take a total of $649 million out of the rainy day fund, virtually emptying the fund.
Both measures reflect Republicans’ preference to use available cash when funding projects, rather than resort to borrowing.
Sen. Jack Harper, R-4, has proposed to appropriate $199 million to the School Facilities Board for the construction of new schools.
That money would come from the Budget Stabilization Fund, according to his bill, S1159. The rainy day fund is theoretically for use during emergencies and economic downturns.
Harper’s bill followed a proposal by Sen. Robert Burns, R-9, to give $450 million to the Statewide Transportation Acceleration Needs (STAN Account), also tapping the rainy day fund.
There is virtually no disagreement on the need to spend more for transportation and education, based on interviews with state lawmakers. But the majority caucus in the Senate is likely to oppose measures by Gov. Janet Napolitano to raise money to build more schools and highways through borrowing.
Napolitano has proposed a $10.4 billion budget for fiscal year 2008, a 6.9 percent increase over the current budget.
She has recommended extending the maturity of highway bonds from 20 to 30 years, a move meant to generate $400 million.
Her budget proposal also included $407.7 million to build 29 elementary and middle schools, and seven high schools through lease-to-own financing.
The governor is opposed to spending the rainy day fund unless there is an emergency or the state experiences a sharp economic downturn.
“We are setting as a priority… a pay as you go policy,” Burns said in a recent interview.
“You know, government borrowing is a lot different from private borrowing. In private borrowing, the person who borrows has to be responsible to make sure that the payments are made and the debt is paid off. In government borrowing — for example, where the government proposes an extension of the debt on the highway funding for another 10 years over what we currently have — (those who borrow are) going to be long gone. Somebody else is going to have to make sure that that payment gets made,” he said.
“The other part of this that’s missing so far… is that the extension of the bonding from to 20 to 30 years is going to be an extremely expensive proposition based on interest costs. The refinancing costs are not cheap either,” he said, adding it would be cheaper to dip into the rainy day fund now.
Sen. Thayer Verschoor, R-22, said the governor’s efforts to borrow money would be “tough to get through here.”
“The Legislature has worked hard over the years to move away from borrowing. I think it’s going to be problematic to shift back to that direction,” he added.
Also on the issue of borrowing or paying-as-you go, Sen. Amanda Aguirre, D-24, lauded the governor’s agenda to raise the salaries of teachers and to expand children’s health care.
“I’m (also) very much working with her and her office addressing the issue of the lack of physicians in rural areas, and that’s a big deal for me because I’ve seen the need,” she said.
But Aguirre said she still has to look closely into the mechanisms proposed to generate funds.
“The mechanisms to do it, I’m still not 100 percent convinced,” she said, adding that the debate has always centered on borrowing or paying as you go.
“I would like to pay some of them as we go. I don’t like a lot of debt in our state. I’m a little concern about that very aggressive move, but certainly that’s a need that we need to address,” she said.