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Posted at 11:35 AM ET, 12/14/2010

McDonnell risks AAA for big-league bonds

By Paige Winfield Cunningham

Interviews with Virginia lawmakers often begin and end with boasts about how great they are at managing money. Not only are we fiscally responsible, they say, we're also the nation's hothouse for business growth, as they polish off Virginia's AAA bond rating with the corner of their sleeves. Don't you know, they add, that we encourage entrepreneurship and risk-taking that seeds economic growth superior to practically every other state?

It's easy to come away from such interviews feeling confident that Virginia's bills are paid, that its checkbook is balanced, and that it's responsibly tucking away money for the future.

But alas, all is not well inside Virginia's pocketbook.

A report released last month by the Senate Finance Committee delivered the depressing news: Virginia's debt is growing rapidly. It has expanded by more than 50 percent since 2005. And since 2007, the legislature has signed off on the three largest debt authorizations in state history.

We're selling government bonds like they were mortgage securities (that's before 2008) so we can continue to fund things like highways and jails while Medicaid eats up more and more of the available dollars.

We found all of this out just before Thanksgiving. Three weeks later, Gov. Bob McDonnell announced a partial solution: sell more bonds. Over the next three years, he wants to construct roads by issuing another $2.9 billion in bonds. While he won't raise the gas tax by nine cents to bring it back to its original 1987 value, he'll back a plan that flies in the face of the Senate study's conclusion: that Virginia's debt limit has been reached and breached.

But no worries, the Debt Capacity Advisory Committee is happy to pave McDonnell's (figurative) highway. One week before the governor announced his transportation plan, the committee effectively raised Virginia's credit limit by modifying the way the state determines how much debt it can take on.

Why could this be a problem? Let's go back to that AAA bond rating our legislators like to brag about. By restricting how much debt it incurs, Virginia has protected its reputation as business's Promised Land. But rack up too much bonded debt, and that rating could lose an A or two.

McDonnell seems to think that building roads right now is an investment we can't afford to not to make. But his way of raising money could throw away an asset we can't afford to lose.

Paige Winfield Cunningham is an investigative reporter and managing editor at Old Dominion Watchdog. The Local Blog Network is a group of bloggers from around the D.C. region who have agreed to make regular contributions to All Opinions Are Local.

By Paige Winfield Cunningham  | December 14, 2010; 11:35 AM ET
Categories:  Local blog network, Va. Politics, Virginia, economy  
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