AZ GETS OUT OF SOME DEBT, AT 15% INTEREST
posted by Michael Chihak
Pay off your debt.
That is the singular message coming from the experts in the wake of the nation's fiscal woes of the last few years. It's an admonition for businesses, individuals and governmental entities.
So with Republican Gov. Jan Brewer saying she wants to use some of the state's improved tax revenue money to pay off state debt, why are Democrats complaining?
Because they want the money used in other ways. For example, restore some of the $1 billion or so cut from public education funding in the last few years, or the half-billion cut from AHCCCS/Medicaid funding.
Here's the scenario:
The state mortgaged several properties, including the Capitol and the Executive Office Tower next to the Capitol, for $81 million at 3 percent annual interest for 20 years and leased them back.
Because the investors wanted a guaranteed return on the money, the state agreed to a penalty of 10 years' interest if it were paid off before 10 years had lapsed.
Now the state is bringing in much more revenue than it projected, $500 million or more just this fiscal year. Brewer says she wants to pay off the debt and "burn the mortgage" for the state's centennial on Feb. 14.
Doing so means paying the lenders $105 million. the borrowing came two years ago, so that works out effectively to a 15 percent annual interest rate.
Doesn't matter, Brewer and Republican legislative leaders say. It's better to have it paid off. The state would pay the money now or over 10 years, and it has the money now, so why not? they argue.
Democrats say why not pay it off over 10 years and use the $105 million now to restore some spending in needed areas?
Brewer and the Republican super majority in the Legislature almost assuredly will get their way on this one. Look for the smoke from that burning mortgage in a month or so.