Local borrowing up, state debt down in Iowa

DES MOINES — While the state continued its low-debt ways, local governments last year took advantage of low interest rates to take on debt and start infrastructure projects.

So while the state’s debt was reduced, the combined total of state and local government debt increased by 5.3 percent to $18.8 billion in the fiscal year that ended in June 2021, state Treasurer Michael Fitzgerald said Friday.

That increase is the highest in a decade, when the average increase was 3 percent, according to figures provided by the state treasurer’s office.

Fitzgerald attributed the increase to local governments pursuing infrastructure projects while interest rates were low. He said his analysis is that those local governments are operating responsibly.

“I’m very comfortable with that (increase),” Fitzgerald said. “Local political divisions are operating very responsibly. They have needs out there (like) sewers and school buildings. …

“Last year was the time to be borrowing. … Those communities really hit the sweet spot as far as low interest rates and building infrastructure.”

The total debt by government level at the end of the state budget year, according to the state treasurer, was:

• Cities: $7.1 billion

• Schools and Area Education Agencies: $4.9 billion

• State authorities: $3 billion

• Regents universities: $1.7 billion

• Counties: $1.1 billion

• Community colleges: $700 million

• State agencies: $414 million

The state agencies’ debt decreased 29 percent over the course of the budget year.

Fitzgerald said the state was able to refinance its debt from the I-JOBS program — an $830 million program for disaster recovery and infrastructure projects after the 2008 floods — which was a large driver of the roughly $168 million decrease in state debt.

“When we had first borrowed, we had such a big borrowing for I-JOBS that we had to have a really large reserve fund (of more than $100 million),” Fitzgerald said. “When we refinanced I-JOBS, … we were really able to do away with the reserve funds and pay off the bonds. That’s why we have such a big drop.”

All political subdivisions and state agencies are required to annually disclose outstanding long-term obligations to the state treasurer. Included in these obligations are bonds, notes, capital leases and loans.

Iowa had the 10th-lowest total state and local government debt per capita in 2019, according to an analysis by Commodity.com.

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