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There has been a lot of discussion in state government lately regarding bonds. So much so, that it can be pretty confusing for someone on the outside – even tough for those of us on the inside to follow.

One strange side effect of our lagging national economy is that interest rate changes have made this a very good time to sell bonds. In a state like West Virginia, which needs to leverage every penny it can to reduce current debt and encourage economic development, there are some significant investments on the horizon. But in two major cases, there are also legal challenges that will be worth tracking.

In my last column, I described the action the Legislature took regarding the state’s Economic Development Grant Committee. There’s currently at least one lawsuit pending regarding that potential bond sale. In addition, two major state officials have filed another lawsuit challenging the state’s plan to sell $3.9 billion in pension obligation bonds.

State Treasurer John Perdue and Auditor Glen Gainer filed a lawsuit last week in Kanawha Circuit Court claiming it would be unconstitutional for the state to issue bonds without putting the question before a statewide vote.

Legislative leaders and Gov. Bob Wise’s administration beg to differ. They argue that the state is not taking on new debt, just refinancing a pension debt that has long existed and has been upheld by the state Supreme Court since the 1980s.

In the 1990s, the Legislature realized that the state's pension systems, in particular the Teachers Retirement System, were steeped in debt. The Legislature developed a 40-year payment plan, and now appropriates $270 million annually to pay off that debt. The debt, which could have grown exponentially, has gone from $3.7 billion in 1992 to about $4.6 billion, a 24 percent increase.

While the current state pension debt is nearly $5 billion, it is believed that the state could save $1billion by using bonds to refinance the state’s unfunded pension liabilities, then investing the money, and could pay off the entire debt by 2024. Under the current payment plan, the debt would not be eliminated until 2034.

But the Legislature and the Governor actually welcome Perdue and Gainer’s court challenge, so that once the constitutionality question is resolved, the bond sale can move forward unhindered. And as I mentioned in my previous column, the Legislature and Governor are also anxiously awaiting another court ruling, this one regarding the Economic Development Grant Committee.

One lawsuit which challenged the structure of the grant committee led to a May state Supreme Court ruling that necessitated legislation to reconfigure the committee process. Another pending lawsuit questions the state’s current plan to use of $19 million in video lottery funds each year to repay a bond sale of about $215 million.

But this isn’t the first time the state has sold bonds to pay for economic development projects.

In the mid-1990s, a group of private investors asked the Legislature to use a portion of lottery revenue to help pay for the Clay Center in Charleston (which just opened last week, incidentally). Rather than create a funding stream for only one project, the Legislature in 1996 passed a bill to allow the state to borrow $100 million for parks and tourism projects across the state, tapping lottery proceeds to pay off the debt. A five-person committee chose the projects to be funded.

And many attempts by the state to sell bonds have been challenged, including the School Building Authority’s bond issuance, which has led to at least $1 billion in school construction. Other bonded debt in the past 10 years include $1.1 billion in infrastructure projects, nearly $600 million on roads, and more than $300 million on much-needed jails and prisons.

The two court challenges will be interesting to follow in the coming weeks. The state must be careful in taking on any additional debt, and certainly we want to make sure it’s done constitutionally, but such efforts have benefitted West Virginia’s economy and helped improve our quality of life.

I welcome and appreciate your input on these issues, or any other legislative matter. Please call me at (304)340-3106 or write to Delegate Virginia Mahan, 215-E, Capitol Complex, Charleston, WV 25305.