IOWA LEGISLATURE

Public debt in Iowa grows but still among nation's lowest

State treasurer says low debt can contribute to slow growth

State Treasurer Michael Fitzgerald waits for the start of a Condition of the State address at the Capitol in Des Moines.
State Treasurer Michael Fitzgerald waits for the start of a Condition of the State address at the Capitol in Des Moines. He reported Friday on the level of government borrowing in Iowa in the 2020 fiscal year. (The Gazette)

DES MOINES — The outstanding debt for state and local governments topped $17.9 billion for the fiscal year that ended last June, the state treasurer reported Friday.

That’s a 4.8 percent increase from the previous fiscal year, Michael Fitzgerald said, though Iowa remains among the states with the lowest debt in the nation.

“Usually, for Iowa, you’ll see 3 (percent) to 5 percent growth in the debt,” he said. “Iowa is a pay-as-you-go, low-debt state, and it’s continuing to be that way, but local governments are making some investments.

But low debt, he said, “contributes to a slow-growth state, too. So which one do you want? If you’re going to invest, now is the time to do it.”

This is a good time for public units to borrow money — given low interest rates — “to pay for capital projects that benefit Iowans, such as public buildings, schools and utility improvements,” Fitzgerald said.

Borrowing by local governments represented more than 60 percent of the total debt reported in fiscal 2020, he said.

Cities recorded the largest share of outstanding debt at $6.556 billion, which accounted for 36.6 percent of the debt reported and represented an increase of more than $259 million compared with fiscal 2019, he said.

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Schools issued $4.45 billion in outstanding debt, while state authorities followed with $2.84 billion.

Counties, state authorities and community colleges had the highest percentage increases from fiscal 2019 levels, the state treasurer said, while state agencies, public universities and utilities decreased their total outstanding debt.

“The state and regents paid down some of their debt,” he said, most notably a 7.5 percent drop for the University of Iowa, from $1.193 billion in fiscal 2019 to about $1.1 billion last fiscal year — a reduction of $89.5 million.

The UI was able to pay down its debt with proceeds from a 50-year, $1.17 billion deal it signed with ENGIE North America to manage the university’s utility system.

“In this time of very low interest rates, cities and schools are investing for the future. Counties, too, if they have to build a new prison or new courthouse and stuff like that,” Fitzgerald said. “They’re taking advantage of these low rates where the state and the Board of Regents are not.”

Fitzgerald, a Democrat, said refinancing of bonds for I-JOBS and Vision Iowa programs produced tremendous savings for the state while reaping the benefits of those initial investments.

With Vision Iowa, he said, the state borrowed $220 million “and worked with counties and cities and local efforts and generated — by many estimates — over $3 billion in growth. So some of those really paid off. But the state’s not doing any of that right now, and it might be something they want to think about.”

Iowa traditionally ranks between 45th and 48th place among U.S. states for the lowest amount of debt per person and continues to be a “very, very low-debt state,” Fitzgerald said.

”The state government itself has been really super conservative,” he said.

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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.

Iowans can review the debt in their counties and communities at IowaTreasurer.gov. Click Outstanding Obligation Report under the ‘For Governments’ tab to view the report and then click on Report Detail by County to view additional information.

Comments: (515) 243-7220; rod.boshart@thegazette.com

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