Living within our means: Contrasting differences between Alabama families and the state
by The Anniston Star Editorial Board
Jan 17, 2012 | 12654 views |  0 comments | 10 10 recommendations | email to a friend | print
Welcome to the disconnect between the insistence that governments mimic wise families by “living within their means” and the reality of what families actually do.

Families do live on what they earn; however, this involves living within anticipated income. When families need something expensive — a house, for example — or want something like a new car, they mortgage their anticipated income to get it.

Governments do the same thing. They borrow and anticipate the income to pay back the loan. When governments miscalculate and incur more debt than their income can cover, the result can be catastrophic — as it is for a family that, for example, buys more house than it can afford.

When this happens, governments and families must either cut expenses so there will be enough money to pay what is owed, generate more income to pay the debt, or go broke and default on the loan.

Alabama’s government should be immune from this dilemma because the state Constitution requires a balanced budget. Alabama must live within its means.

Nice as that sounds, it is all but impossible to do. So Alabama doesn’t. Big-ticket items come up from time to time, and the money is simply not in the budget to cover them.

Thus, the state borrows against anticipated income.

That is what Gov. Robert Bentley is proposing by selling $2 billion in state bonds to help pay for needed repairs on state roads and bridges.

In essence, Bentley wants to borrow $2 billion and promise to pay it back, with interest, within a given time. It’s deficit-spending by another name. It’s also living within our means, just like a family.

However, here is the rub. With the state’s method of raising revenue, a system that creates budgetary shortfalls, under-funded agencies and frequent proration, what sort of interest rate (and collateral) must Alabama offer to assure lenders that their investment is worth the risk?

What plans does Montgomery have for generating revenue to pay this debt, considering that the state already has trouble paying for education, law enforcement and such? The fact that Alabama has put off repairing roads and bridges points to how, under the current tax code, we haven’t had the money to address infrastructure needs. Will Alabama have the resources to pay this debt, or will the state have to cut other programs in order to meet obligations to creditors?

Selling bonds can be a responsible way for a state to get around balanced-budget requirements and raise money for big projects. But that’s only if the state’s financial resources are managed in a way that produces income to pay off debts and still carry out duties to its residents.

Alabama’s record of raising and managing revenue does not give us much confidence.

As the discussion over a bond issue goes on, it is worthwhile to note that if our congressional delegation had gotten behind President Obama’s job-creation plan that included federal spending to help states with infrastructure projects, Alabama might not have to sell bonds to repair its roads.

One wonders, when was the last time the governor sat down with Alabama’s senators and representatives and discussed how federal government might help Alabama’s needs?
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