Utah Foundation Cautions on Growth of State Debt

Utah Foundation Cautions on Growth of State Debt

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SALT LAKE CITY (AP) -- The state's debt has grown sharply since 1990, mostly to finance Interstate 15 reconstruction, but such growth cannot continue indefinitely, the Utah Foundation said.

The foundation said Tuesday that the state's general obligation debt grew from $367 million in 1990 to $1.7 billion in 2003.

It said the percentage of the state's budget needed to repay debt has gone from 1.48 percent of total state spending to 2.82 percent.

Since Utah's first bond in 1912 to help build the state Capitol, legislators have been reluctant to go into debt. Then in 1998, lawmakers approved a $660 million bond to rebuild 15 miles of Interstate 15.

"The state has been so thrifty in the past, keeping debt obligations at 25-30 percent (of the bond limit) until 1998," said Stephen Kroes, executive director of the foundation. "Then it jumped to two-thirds."

Kroes said the Legislature's past decision to bond was acceptable given low interest rates and growing infrastructure needs, especially since the bonds were used for long-term projects that benefit future generations.

But he said that the state cannot afford another large debt increase like it had in 1998 if it wants to keep its AAA bond rating. Only five other states hold an AAA bond rating from both Moody's and Standard & Poor. The bond rating enables the state to borrow money at lower interest rates.

Kroes said Utah still has room to bond for smaller, worthwhile projects as long as the bond is not just papering over budget shortfalls.

"Utah has a unique history of avoiding public debt and paying for many projects with cash, which is reflective of Utahns fiscally conservative political preferences," Kroes said. "However, the next few years will determine whether there has been a change in those preferences or if the recent increase in debt loads is a temporary phenomenon caused by unusual needs and tight budgets."

The Utah Foundation is a nonprofit, nonadvocacy group organized in 1945 by Utah businesses and community leaders.

(Copyright 2003 by The Associated Press. All Rights Reserved.)

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