Cash or charge for roads?

Should state highway funding for repair, maintenance, and construction of our highways be paid for in cash? Or, should Nebraska issue bonds for a portion of our highway funding needs? This was the question put before us in this 2014 Session in the form of a bill, LB1092, introduced by Sen. Dubas. Though the bill died on final reading, I would like to discuss this important topic this week as we seek to adequately fund our needed transportation infrastructure into the future, because bonding for roads will most likely come up again in the future, if not next session.

Legislative Bill 1092 as originally introduced this last January, would have authorized the Department of Roads to issue up to $400 million in bonds, with additional requirements that limited the annual debt service to $30 million over 19 years and required twenty-five percent of the bonds to go towards finishing our expressway needs.

The bill was amended. The total authorization of potential bonding was reduced to $200 million with requirements that limit the interest rate to a fix rate not to exceed five percent. The amended version still required twenty-five percent go to the expressway system and not go beyond 19 years, ending July 1, 2033.

As I previously noted, LB1092 failed to pass on Final Reading (the third round of debate). There were two votes on Final Reading, because the bill included an emergency clause requiring a 33 vote majority, which was not reached with only 28 votes. It was voted on again without the emergency clause, receiving 27 votes; three votes short of the 30 votes needed.

Obviously, the amendment made the bill a fairly modest proposal compared to the level at which other states have used bonding for road transportation funding, but I still felt that Nebraska using bonding to fund a portion of our roads was not the best route to take, and I could not in good conscience support the bill.

Here are some of the reasons why I voted the way I did. I believe the "pay-as-we-go" with designated funding sources as a policy for our state has made our lean revenue times less difficult to deal with. We don't have to decide between education and roads. This principal has served us well. It allows the legislature to have more flexibility in the appropriation process by not tying our hands with large debt obligations. Funding our roads with debt is not the Nebraska way, and will most likely weaken our fiscal stability at some point in the future.

There is also a lot of uncertainty in our economy. The biggest hits from Obamacare on businesses have yet to happen and have arbitrarily been delayed until after the November election. This puts uncertainty into how our economy will react to the full implementation of the rest of the law. It's my opinion, that the economy could worsen considerably when Obamacare is fully implemented, and affect our revenue as a state negatively far into the future, if not repealed. This would create very difficult decisions for future Legislatures to deal with.

Finally, I think there is a larger problem on the national level that creates potential serious consequences for our state if we were to fund state roads with bonding. Our nation is $17.5 trillion in debt. Current federal spending is completely unsustainable, and if it continues unhindered, it could lead to a terrible collapse of our economy. The flood of new money by the federal government, which devalues the dollar and decreases its purchasing power affects every entity and person. Such devaluation of the dollar, significantly reduces the buying power of the State's General Fund and Cash Reserve Fund.

Our national debt and weak dollar are serious negatives to our economy and its stability. It is my opinion that going into debt for roads is unwise, especially at this time of economic weakness, even though interest rates are currently historically low.

If you have any questions or comments, contact my office. Mark R. Christensen, PO Box 94604, Lincoln, NE 68509, 402-471-2805 or mchristensen@leg.ne.gov.