Schapiro: For debt-phobic Virginia, debt yields big dividends | Govt-and-politics

U.S. Rep. Ben Cline, whose redrawn 6th District includes Clarke County, is channeling the notoriously parsimonious political personality who, from that sylvan spot in Virginia’s now heavily red Blue Ridge, raged for a half-century over government debt: the late U.S. Sen. Harry F. Byrd Sr.

Byrd-like in his fury over President Joe Biden’s order canceling up to $20,000 in federal college loan debt for 43 million Americans — a move that exposes political, economic and class fissures — Cline howled via Twitter, “It’s called personal responsibility: If you take out a loan, you pay back the loan.

“Biden’s student loan debt cancellation is a handout to the coastal elites and will fall on the backs of hardworking American taxpayers who didn’t have a chance to attend college.”

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Ahead of the midterm elections, that’s music to the ears of Cline’s constituents, 6 in 10 of whom favored President Donald Trump over Biden in 2020. The district is home to about 10 colleges and universities — public and private — that, if not for government-issued student aid, might have been out of reach for many.

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Notwithstanding Cline’s basic point — that people and politicians should be fiscally responsible — there is a larger issue: That debt, much of it generated by government, has yielded huge dividends — especially in Virginia, where a miserly approach to public spending was SOP long before Byrd’s reign began with his election for governor in 1925.

Until 1968, debt financing — through bonds repaid over time with interest — was anathema to Virginia’s conservative ruling class.

That year — at the urging of Gov. Mills Godwin Jr., a Byrd acolyte who recognized Virginia was shedding its rural-anchored reticence for a suburban appetite for progress — voters approved by referendum $80 million in tax-backed general-obligation bonds to finance construction at public colleges and mental institutions. The vote ended the state’s long tradition of pay-as-you-go; that is, financing projects with on-hand revenues.

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Byrd institutionalized pay-as-you-go, masterminding the campaign to defeat in a 1923 referendum a proposal to issue $50 million in gas tax-guaranteed bonds to pay for more and better roads. His distaste for debt would remain a cause célèbre during 32 years in the U.S. Senate, where — as a small-government anachronism during big government’s advance — Byrd lorded over the federal budget as chairman of the Finance Committee.

Virginia’s mania over spending and debt flared in the decade following the Civil War, when the white oligarchy that had dominated the state from Colonial times through the end of slavery would begin a long restoration, during which — except for the briefest burst of biracial progress in the 1880s — the operative word for most of its members was no.

No to education, despite a post-Reconstruction guarantee in the Virginia Constitution of free public schools. No to the social safety net, where what little money was spent went largely to services for whites over Blacks. No to transportation, because the state, though further impoverished by the Civil War, was still reeling from bad public bets on gone-bust private roads, rails and canals.

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Tight-fistedness had a significant benefit for the governing class: It kept down the governed, mostly poor whites and Blacks. Too many services would have the public clamoring for more. Worse, it might open the corridors of power to the powerless. All those old white guys with last names for first names — because tons of them were related to one another — couldn’t have that.

More than a half-century after Godwin shepherded the first voter-passed bond package — $80 million in 1968 is worth $681 million in 2022 — Virginia is carrying total bond debt of $52.5 billion, an increase of nearly 46% from 2011, according to the state’s Debt Capacity Advisory Committee.

Those bonds, retired with specific tax revenues or appropriations by the legislature, pay for any manner of stuff. Construction on college and university campuses accounts for 56% of all tax-backed projects, with transportation a distant second at 23%. The rest finance prisons, jails, parks, mental health facilities and general office buildings.

As for non-tax-backed bonds, the largest issues are for higher education and regional transportation improvements.

Most of these bonds are issued at the best rates. That’s because Virginia has the highest-possible credit rating, triple-A, and has since Wall Street started a scoring system in the late 1920s. Further — and this can be attributed, in part, to disciplined budgeting — the cost of maintaining most of these bonds is quite low. Debt service historically is no more than 5% of all state revenue.

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That higher ed — be it four-year colleges and universities or two-year community colleges — is the largest beneficiary of bond financing is a reminder of Virginia’s continuing growth, albeit slowing in recent years, and the accompanying demand for education. Democratizing the state’s campuses means opening them to the state’s diverse population — and helping financially those who haven’t the means to pay.

This is where federal programs come in — the ones that spewed billions of dollars in loans now partly forgiven by Joe Biden. But there are state programs, too, that help kids heading to public and private universities. And they’ve been supplemented this year with dollars recommended by lawmakers and Gov. Glenn Youngkin.

Have to wonder, though, whether tuition increases in Virginia and beyond were driven, in part, by the perception that money — federal and state — would always be available to students who need it, ensuring no end to the upside, at least near-term.

But even before Biden’s move signaled otherwise, Youngkin — giving voice to voter angst over inflation and readying to install conservatives on their oversight boards — got the attention of Virginia’s public four-year institutions, recommending a tuition freeze. Barely five months into his term, 10 of 12 obliged. An eleventh could follow suit in December.

It’s good to be the governor.

Contact Jeff E. Schapiro at (804) 649-6814 or Follow him on Facebook and on Twitter, @RTDSchapiro. Listen to his analysis 7:45 a.m. and 5:45 p.m. Friday on Radio IQ, 89.7 FM in Richmond and 89.1 FM in Roanoke, and in Norfolk on WHRV, 89.5 FM.

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