ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Monday, March 11, 1996 TAG: 9603110076
SECTION: EDITORIAL PAGE: A4 EDITION: METRO
NOT TO panic: Virginia is neither Orange County, Calif., on the precipice of bankruptcy, nor the federal government, where debt default has recently seemed a real possibility. But state government, no less than the average American consumer, needs to pause occasionally to make sure it isn't getting too deep in hock.
Paul Timmreck, a respected financial adviser to three Democratic governors of Virginia before he became Republican Gov. George Allen's secretary of finance, has responsibly cautioned the General Assembly to go slow in running up more debts. His thanks for this has been a rebuff from some legislators, who apparently regard him as a spoilsport.
Nobody's suggesting that Virginia revert to rigid pay-as-you-go policies of the past. For capital projects with useful lives as long as or longer than the payback period, bonds can be not only appropriate but preferable. Timm-reck is correct, however, in noting there are limits to how many more IOUs the state can issue without risking its AAA credit rating. That rating, the highest possible and shared by Virginia with only four other states, means favorable interest rates when the commonwealth issues new debt.
Currently, Virginia's tax-supported, outstanding debt totals $2.4 billion. Since 1989, $3.4 billion in debt has been authorized. (Not all the authorized debt has been contracted.) This includes the $613 million in general-obligation bonds approved by voters in 1992 for education, parks and mental-health facilities - the largest such bond issue in the state's history.
The voters' '92 decision was wise. Virginia had fallen behind in its capital-improvements program, and was in sound fiscal position to borrow to catch up. In no small measure, it was Timmreck who helped secure that position. He also helped Virginia win Financial World magazine's ranking, for two years in a row, as the best fiscally managed state in the nation.
Timmreck, moreover, is not the first to warn that the state risks becoming too dependent on debt. When he was chairman of the Senate Finance Committee, former state Sen. Hunter Andrews often did likewise.
Virginia is still in excellent financial shape. It has not gone on borrowing binges; it has proved itself capable of using debt wisely. But the state's excellent fiscal reputation is not guaranteed in perpetuity, and occasional reminders of the fact are worthwhile.
Indeed, Timmreck would be falling down on the job if he didn't do so. Keeping in mind the lack of such a guarantee is itself a kind of guarantee.
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