The Federal Government isn’t the only one with a spending problem. Local governments are finding themselves under a mountain of debt as well. The City of Portland currently owes more than $6.5 billion in long-term obligations. That comes out to about $11,000 for each of the city’s residents.
Portland is required by law to have a balanced budget, meaning income has to equal expenditures. However, an Oregon Revised Statute permits Portland to issue revenue bonds for “any public purpose.” $3.6 billion of the city’s obligations come from the sale of such bonds. The balanced budget requirement doesn’t mean much when funding can be created so easily, simply by going into debt.
Furthermore, only $60 million of Portland’s bonds receive the highest Aaa rating from Moody’s. If the city continues massive spending without strong assets to back its borrowing, the majority of its bonds risk being downgraded. This would lead to an overall reduction in Portland’s credit rating, which would spell financial catastrophe.
The simple truth is that to remain fiscally responsible, you cannot spend what you do not have. Portland inevitably must raise taxes to pay for its obligations or cut spending. Given the still-troubled state of the economy, tightening belts and cutting spending is the best option.
Christopher Robinson is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization.