Guest Blog (Cal Hobson): Bonds. State Bonds.

Cal Hobson served in the Oklahoma Legislature from 1978-2006, including one term as Senate President Pro Tempore. This is an edited version of an article that first appeared in the Oklahoma Observer.

In my opinion, when Gov. Mary Fallin’s ill-advised effort to further erode Oklahoma’s very modest tax base failed this past session that was a good thing. However, it also meant any serious consideration of issuing bonds to address just a small part of the cost to fix, repair or enhance our state’s infrastructure went down the drain with it.

Talk about throwing out the baby with the bathwater. Rarely done, always wrong. It didn’t have to be. We’ll explore why.

First, though, what are these things we call bonds? How much do we have? What have they paid for in the past? And, most importantly, why they have played such a critical – and get this – conservative role in Oklahoma’s progress so far and why they must  be used in the future?

At the state level the bonding debt as of December 2011 was $2.2 billion, about $220 million in what’s known as general obligation bonds and the remaining $2 billion in revenue bonds. It’s the revenue bond side of the ledger that gets the attention of those at the Capitol, and rightly so.

Revenue bonds are usually funded through a direct appropriation over a number of years by the Legislature – just think house payment – but some are self supporting. Examples of the latter are expansions at three major Oklahoma tire or technology companies – Michelin, Goodyear, and Hitachi. Great jobs created, no cost to the state or taxpayer. What a deal!

Turning now to what the remaining $2 billion in revenue bond debt has paid for in the past and continues to pay for today is almost exclusively in three areas: [1] higher education; [2] the state highway system; and [3] state facilities, either in new construction or expansions and repairs. There are minor allocations in other areas with an example being for county health facilities in rural Oklahoma.

Unfortunately there is the rare – extremely rare – misuse of bonds that should not have been issued in the first place and failed. The current Auditor and Inspector, Gary Jones, is hot on their trail and will come to his conclusions and actions will or won’t be taken. But in the overall scheme of things Oklahoma’s bonding program is a model for the nation, and has proven to be in bond issue after bond issue over many decades.

Since bonds bombed out in the recently concluded legislative session, what is the result of that?

All bad news unfortunately. Projects, when and if built, such as repairing the beautiful but falling down state Capitol, will only cost more. The proposed new medical examiner’s facility was also a victim of inaction in the Legislature.

No, Oklahoma doesn’t HAVE to make these investments and you don’t have put on a new roof on your valuable home. Just let the rain in. Interest rates won’t always stay at historic lows so we will pay more in the future to issue bonds.

Unfortunately more baloney will be babbled that we don’t need to fix our infrastructure. Opponents will say all we need is a smaller, leaner state government when, of course, that’s what we have now – to the extreme. It’s one thing to be conservative. It’s another to just be stupid.

So what to do in the 2013 session? In general there will be three groups of legislators populating it. Democrats; moderate Republicans; and hardline Republicans, to whom the word ‘bond’ is  a four-letter vulgarity.

If history is any guide, few in the third category will bother to read the excellent, detailed and readily available reports generated by our superb Bond Oversight Commission. The material explains in layman’s language where, when, why, what and how every bond penny has been spent and will be spent. Especially for new members of the Legislature, please take the time to understand this critical funding mechanism that helps make Oklahoma a better place for all of our families.

All you have to do is read and understand the information. If you’ll do that and are still opposed to a major bond issue in the 2013 session, fair enough.

But also be adult enough, after examining in detail the projects that have been built in YOUR district, to just not accept any more. That’s REAL conservative leadership. It’s also crazy.

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