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Tuesday, March 25, 2014

News Of Historic State Borrowing Takes a Back Seat To Election Year Tax Cuts

While Walker's signing of the tax cut bill is splattered over the state's establishment news headlines, you'd have to look deep into your larger state newspapers, a Wisconsin blog or an out-of-state publication to find these seemingly deliberately obscured, but important pieces of information.

Picked up the first story at the Democurmudgeon and found the second searching Bloomberg News.

Bloomberg Excerpt: (3/19/2014)
Titled: Wisconsin Plans Biggest Transport Borrowing for Highways

Wisconsin is set to issue as much as $393.6 million of revenue bonds today in its biggest transportation borrowing ever.

The debt is backed by vehicle registration fees, according to bond documents. The transaction includes $270 million of securities to finance highway projects and $41 million to refund debt. Officials may also sell $82.7 million to refinance bonds maturing further out, putting the proceeds in escrow until the debt can be repaid, Kevin Taylor, the state’s capital finance director, said in an interview.

If the state issues the entire amount, it would be the largest transportation-revenue borrowing ever for Wisconsin, Taylor said.

Is that right? The biggest transportation borrowing ever?! I'd call that historic.

Of interest here is the context detailing what the borrowing note is backed by - vehicle registration fees. The borrowing isn't backed by the "surplus" because the surplus doesn't exist. It's a projection and the state needs the cash right now, so the surplus isn't mentioned.

And another, different story ten days earlier...

Bloomberg News Excerpt: (3/10/2014)
Titled: Wisconsin to Sell Debt as Tax Take Produces $1 Billion Surplus

Wisconsin will sell $294.8 million in general-obligation refunding bonds this week in a negotiated sale as the state projects a budget surplus of almost $1 billion.

The surplus was mentioned in this story, but only as a boasting point. "Wisconsin Readying To Borrow Millions Despite Reports of Surplus" would have been a far more accurate title.

It's almost as if the writer was told to accentuate the so-called billion dollar surplus and re-invent the $294.8 million figure as a positive "sell" action and not the borrowing note that it is. Either that or Bloomberg just regurgitated Walker campaign talking points. You got to wonder if Bloomberg News is in the tank for Walker by using the state's empty "surplus" as a carrot to sell bonds.

In budgeting terms, when government "sells" debt, it's borrowing by selling bonds (promissory notes, etc.) that pays interest to the buyer (lender). This increases long-term debt. When government "buys" debt, it means paying down debt or buying those bonds back. This lowers long-term debt.

So, in just the past two weeks, Wisconsin is getting ready to borrow $688.4 million. But ...but...but the surplus ...the ...the tax cuts.

Sounds like more of that old shuck and jive.

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