JEFFERSON CITY - If two state lawmakers have their way in the next legislative session, Missouri voters will eventually be asked to approve the largest state bond issue in thirty years.
Two legislators want to use bonds to pay for improvements and new construction at facilities like the College of Engineering at the University of Missouri in Columbia.
Rep. Chris Kelly, D-Columbia, said the current low-interest rate environment, low construction costs and an ability to create jobs make a bond issue an attractive option for Missouri. Kelly said the state recently refinanced some debt at 0.7 percent, and if the state issues bonds now while the economy is still weak, it can take advantage of rates below 1 percent.
Kelly and Sen. Kurt Schaefer, R-Columbia, are working on a nearly $1 billion bonding bill for the next session that would put the largest bond issue in state history before voters if it were passed.
A Fifth State Fund
Kelly and Schaefer, both members of the Joint Committee on Capital Improvements, intend for the bonds to make improvements at the state's college campuses, mental health facilities, the state Capitol building and some other general infrastructure.
"The state of Missouri has a huge backlog in terms of capital maintenance needs and repair needs," Kelly said. "We haven't done anything in that area in a long time."
Kelly cited a few examples of where borrowed money could be put to use in the University of Missouri System, such as the College of Engineering on the system's flagship campus, the Sadler Building at the St. Louis campus and Missouri State University's science building. Kelly also said more than $200 million worth of work needs to be done on the Fulton State Hospital, which was built in 1851 and was the first public mental health facility west of the Mississippi River.
Schaefer and Kelly's venture will be named the Fifth State Building Bond and would be an amendment to the constitution like its predecessors. If it were to pass, it would be the first state bond issue put before voters since the 1994 Fourth State Building Fund, which issued $250 million worth to improve prisons and college campuses.
The proposed bond issue would be the largest since the Third State Building Fund in 1982, when the state issued $600 million to make improvements in a variety of sectors. Missouri will finish paying off the principal and interest of the Third State Building Fund in the 2013 fiscal year.
Schaefer said the timing is right for the state to use bonds to start projects that it would need to undertake no matter what.
"These projects that would be funded by this bonding are projects that the state is going to do anyway," Schaefer said. "A lot of them have been neglected now for going on two decades."
Several indicators have convinced Kelly and Schaefer that now is the time. The national government has continued to promulgate its intentions of maintaining a zero-interest environment for now, which means low borrowing costs for governments. The 10-year treasury yield remains below 2 percent.
Kelly also said state highway bids continue to come in lower than expected, as hungry contractors look for projects. A bond issue would also create the impetus for new government jobs. Kelly said he anticipates it would create thousands of jobs.
Kelly said projects funded by state borrowing will leave the government jobs behind when they are finished, but the state will have private sector jobs and a meaningful product in the end.
"Something is there when we are done — a new highway, a new engineering school, a new nursing school," Kelly said. "And all of those things will contribute substantially to the economy over a long period of time."
The idea of a bond issue to make improvements is nothing new to Kelly or Schaefer. Kelly said this is the fifth consecutive session he will push a bonding bill.
In 2009, Kelly proposed an $700 million higher education bond issue to make improvements on campuses. It passed the House but was filibustered in the Senate. Kelly and Schaefer also worked together to create a joint resolution in 2010 to issue bonds, but that bill never made it out of the House.
Kelly and Schaefer said they will have the bipartisan support necessary this time.
"In the preliminary conversations I've had with fellow legislators, I think there's quite a bit of support for it," Schaefer said.
However, a familiar opponent has emerged. Sen. Jason Crowell, R-Cape Girardeau, said while the state has a backlog of deferred maintenance, funding should come from the state's general revenue stream as opposed to borrowed money.
Crowell, who is leaving the General Assembly due to term limits, said lawmakers would rather borrow money than fix issues in state spending, like tax credits and pensions. The state doled out 8 percent of its expenditure on tax credits alone in the last fiscal year.
"Why in the world would we open up a new credit card when we give out $700 million in tax credits?" Crowell said. "They want to steal from my grandchildren to pay for debt."
Crowell, who led the Senate filibuster in 2009, said Senate Republicans have opposed bonding bills in the past, but he is unsure of what the GOP attitude will be toward borrowing of this magnitude in the next session under the leadership of Sen. Tom Dempsey, R- St.Charles County, the current Republican floor leader and prospective President Pro Tem.
Sen. Rob Schaaf, R-St.Joseph, who voted against the 2009 effort, said he is unsure if issuing bonds is a good idea considering the state's public debt. Unlike Crowell, Schaaf will be returning to the legislature for the 2013 legislative session.
Kelly said he has done his homework and determined a bond issue would not hurt the state's AAA credit rating.
"I've talked to people in major Missouri banks in their investment departments and they all agree, that even at $2 billion (in bonds) we wouldn't put any burden on our credit rating at all," Kelly said.
Schaefer said capital improvements will be a major theme in the next legislative session, and a new post-election climate in the legislature may allow for passage this time.
On the Ballot
If the legislature were to pass a bonding bill, it would go to a vote of the people. Kelly said he would like to pass a bill as soon as possible in the upcoming legislative session.
"My dream scenario would be to pass it in time to put it on the April ballot," Kelly said. "The advantage of that is that the legislature could appropriate the projects in this legislative year."
If the bond issue were to appear on the April ballot, 57 percent of voters would need to approve it for the state to begin issuing general obligation bonds.
Missouri voters have passed a bond each time the legislature asked them for approval.