Commentary: H. Stan Cavendish

Bonds Finance Long-term Obligations In Many Areas

The Charleston Gazette, June 17, 2005

I’ve worked on economic development projects for a long time, and I’ve made many contacts with businesspeople outside West Virginia . In order to bring new businesses to the state, we’ve had to overcome certain negative perceptions — that costs are high, that education is inadequate, and that West Virginia is financially unpredictable. (In fact, workers’ comp was out of control, and unfunded pensions and other obligations remain a ticking time bomb.)

We’ve recently invested political and other capital to solve that problem and help reverse those perceptions. Gov. Manchin sums it up under the banner, “Open for Business.” It’s not just a slogan. It means that we’re addressing problems that were decades in the making, putting discipline into state budgets, asking business and labor to share in finding solutions, and creating a stable environment for the future.

Unfunded pensions for teachers, judges and law enforcement have been just one part of the picture. It’s not a question of whether we’re going to pay what we promised to retired public employees. West Virginians never will default on these financial and moral obligations. We’re essentially facing a mathematical exercise — what is the most efficient way to pay this debt?

Under the current payment schedule, the cost of this pension debt will increase every year, doubling over the next 30 years. But there is a better way. Under the plan to refinance the debt, we will have a chance to fix the annual payments at the current $350 million level, saving the state $1.5 billion.

Opponents of this plan, who believe that we shouldn’t use bonds to finance known future obligations, miss a key point. We use bonds to fix the costs of long-term obligations in many areas; we invest surpluses in low-risk securities every day, saving West Virginians millions of dollars, because we have conservative but skilled managers and guidelines that restrict investment risk.

If we can get off this current pension debt escalator, West Virginia will be better able to invest in education and vital programs that will help our state and its citizens grow. It’s one more way to say to the world, “It’s a new day in West Virginia and, indeed, we’re open for business.”

Stan Cavendish of Charleston is president of Verizon West Virginia, chairs the State Workforce Council and is a member of the Board of Directors of the West Virginia Chamber of Commerce.