Selling long-term assets doesn’t show fiscal discipline
Selling long-term assets doesn’t show fiscal discipline
In cash-strapped times, states appear to be ready to put just about anything on the open market in exchange for money that elected officials can spend now.
Ohio sold off its anticipated future income from a 40-year, $18 billion tobacco fund for about 30 cents on the dollar. The highfalutin’ word for such a sell-off is securitization. In California, Gov. Arnold Schwarzenegger has another plan to securitize future lottery income be floating bonds that would be repaid from future and (presumably) larger lottery profits. That deal would give Schwarzenegger and the California Legislature about $18 billion to play with now.
There’s good reason to question such deals, because what they essentially demonstrate is a willingness of government to trade three or four monetary birds in the bush for one in the hand.
Meanwhile in Pennsylvania, Gov. Ed Rendell is continuing to pursue his plan to raise money not by trading on tobacco payments or lottery profits. He wants to sell-off (well, lease for 75 years) what one of the state’s own Web site describes as “one of the premier infrastructure assets in the United States.” We’re talking about the Pennsylvania Turnpike.
We would submit that it is one thing to try to cash in on future projected income, as Ohio did with the tobacco money and California is considering doing with its lottery income. But taking an asset that was built over a period of 70 years and improved over time using federal highway funds and user tolls, and then privatizing it so that a private corporation can rake in the profit is irresponsible.
That the apparent high bidder on the first cross-state turnpike in the United States is a Spanish company only adds insult to injury.
These deals are perhaps the best indication of how fiscally lazy government has become. The turnpike deal in Pennsylvania is being sold as an opportunity to capitalize on an asset.
Not the first proposal
We’ve heard that all before. Leasing the Ohio Turnpike was floated here by Republican Kenneth Blackwell in his race 2006 against Democrat Ted Strickland. Blackwell suggested the money could be used for economic development. A good part of that economic development money would have been spent in improve roads, especially access roads to the turnpike. We remember asking Blackwell: “So, you will lease the turnpike to a private company and then use a good part of the money to improve access to the turnpike so the private operator can make more money?” Yes, that’s what he would have done, and it made perfect sense to him.
Maybe Rendell has the same thing in mind, maybe not. It doesn’t really matter. What specifically will or will not be done with the money is almost incidental. The whole point is that a government that has a valuable asset in hand — a turnpike that collects tolls from more than a half-million vehicles a year — admits that it can’t run the turnpike as well as private company. Yet, it expects taxpayers and toll-payers to trust the state to make the best use of the windfall that will be received from the turnpike’s sale.
If the state is such a capable steward of the public treasury, then it should simply run the turnpike more efficiently. Either the state is incapable of doing so, or the state is going to use a private company to charge higher tolls or otherwise divert money into profits for the company and payments to the state.
How, we wonder, does it serve the state’s economic development needs by turning the turnpike over to a for-profit company?
The turnpike lease should be seen for what it is. A money grab by politicians in office today who are willing to sell off an asset built by past generations and take an advance on turnpike revenues that would have normally come to future generations until the year 2085 or so. It is an ugly, greedy, undisciplined sleight of hand with public money.