State treasurer wants to refinance state's current debt
PHOENIX -- State Treasurer Dean Martin wants to refinance the state's $4.5 billion in debt to generate immediate cash as an alternative to the sales tax hike being pushed by Gov. Jan Brewer.
Martin, who hopes to oust Brewer in the Republican primary, said Thursday the maneuver could generate $802 million in cash this coming fiscal year and another $352 million for lawmakers to spend the following year. That's based on paying off everything the state owes over 20 years.
And Martin figured the state could generate $2.7 billion up front if it extends the payments out over 30 years. That's close to the approximately $3 billion the temporary sales tax hike would raise over the next three years.
The trade-off is that the $450 million in current debt service would remain at that annual level for the life of the plan rather than being paid down as now scheduled. But Martin said the total interest paid would be only $1.5 billion more.
Martin's plan was unveiled slightly a month after he formally announced his bid for governor. But he denied that the plan -- and the timing -- was political, saying he has been working on the idea for months but did not have the financial data until now.
The plan would require voter approval in November because of how it is structured.
Technically, the state really can't "borrow' money for its operations. A constitutional provision going back to the first days of statehood limits debt to $350,000.
Lawmakers have gotten around that with various schemes.
Most recently, they sold off $735 million worth of state buildings -- including the House and Senate -- and are paying money to investors to lease them back. At the end of 20 years, the state will own them again outright.
It doesn't constitute "debt' because the deal allows the state to walk away from the deal at any time, though it would lose the right to reclaim the buildings.
Martin envisions a constitutional amendment to raise the borrowing limit from the current $350,000 to cover that $4.5 billion in debt he proposes to refinance. But he also wants language in that to keep lawmakers from borrowing money again -- in any fashion -- without prior voter approval.
He said that is similar to the restrictions that already apply to cities, counties and school districts.
That requirement for voter approval would not apply to the Department of Transportation, which borrows money now for road construction which is paid back from gasoline taxes and vehicle registration fees. Universities bonding also would be exempt.
Martin said refinancing the debt -- and buying back the House and Senate -- would send a strong signal to investors that Arizona is getting its financial house in order. Those sales gained national attention as well as a bit of ridicule on The Daily Show on Comedy Central.
Martin has used his opposition to the temporary sales tax, which will be on the May 18 ballot, as one of the planks of his platform to convince Republican voters to support him instead of Brewer in the party's gubernatorial primary. He said this plan is "a much better way' to balance the budget.
"I think any tax increase at this point in our economy will prolong the recession, it will delay recovery,' Martin said. He also predicted that revenues over its three-year life span will be less than the $3 billion projected.
Gubernatorial press aide Paul Senseman brushed aside the idea.
"This proposal contains nearly nothing realistic or new, except it appears to have $2.5 billion in new debt for our children and grandchildren to pay,' he said.
But Martin is not alone in his thinking. The idea of restructuring the state's debt was suggested publicly two weeks ago by the Arizona Chamber of Commerce and Industry.
Martin said, though, he did not get the idea from that group and even suggested that the business organization may have heard about it indirectly from him because of discussions he has had with others.