Comptroller Justin Wilson, the self-described “money cop” for the State of Tennessee, talked a lot about the nuts and bolts of managing debt in a speech to the Southern Legislative Conference Sunday in Memphis.
It was a timely subject for state and local governments grappling with gaping budget holes just as political gambits are playing out over a federal debt crisis unfolding in the backdrop.
But Wilson laid it out in plain English that taking on government debt requires some basic rules anyone should recognize.
One of the recurring lines Wilson gave his audience in a ballroom of The Peabody Hotel was about “kicking the can down the road.”
He talks like a man who has seen enough of that.
“Kicking the can,” in Wilson’s view, is having the strong desire to provide a particular government service, but putting off paying for it.
It’s a common pitfall in realms of public policy-making, he said.
“It may be political. But it may be something better,” Wilson said after his speech. But still, his message resonated for any budget official who might assume too easily that funds are a sure thing down the road. He made a special note of planning for pension funds.
Wilson is one of Tennessee’s three constitutional officers attending the conference, the others being Secretary of State Tre Hargett and Treasurer David Lillard.
If there was one rule in particular Wilson implored public officials to follow it was to try to at least know what they’re getting into when they start mounting public debt. Too often, Wilson said, officials don’t understand the arrangement they approve. It’s crucial to grasp exactly what you’re signing on for, he said.
“You have to understand the transaction,” he said.
Too many times, new people get elected, don’t understand a plan they approve and become bound by the transaction.
“If you’re going to kick the can down the road, have a justification for it,” he said.
Wilson offered four basic principles:
- Understand the transaction.
- Explain to citizens what is being considered.
- Avoid conflicts of interest.
- Disclose costs and risks.
Those may not sound like profound revelations, but they are steps that officials can overlook if not careful.
Defaults do happen. Wilson said there was one recently in Tennessee in Watertown. “But we think we’ve got it worked out,” he said.
Even if officials have all the bases covered, it’s wise to be prepared for unforeseen, negative events, he said.
His bottom line: It’s common sense.
“That’s all it is,” he said. “It should be self-evident.”