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RALEIGH - When the state wanted to borrow $800 million to fix up water and sewer systems in 1998, the state treasurer called it a "financial risk." But after lengthy debate, voters approved what was then the largest bond issue of its kind in North Carolina's history.

But when the General Assembly agreed to borrow more than $857 million last week, it's fair to say that most voters had no idea the deed was done. The only voices of dissent were a few Republican legislators who voted against the state budget.

"When you look at the actual projects, it's hard to argue they're not worthwhile," said Rep. Hugh Holliman, a Davidson County Democrat and one of the legislative leaders who helped craft the final budget.

The bulk of the borrowing will go toward UNC-system projects aimed at coping with growing enrollments and to the state prison system to cope with an increasing number of inmates.

Still, in years past, voters would have been the final arbiters of what was worthwhile.

Holliman acknowledges the state has increasingly broken with the long-standing tradition and constitutional prescription for voter approval of major debt in favor of a procedure originally conceived to take care of only the most pressing needs.

According to a debt study by the state treasurer's office, North Carolina did not issue debt without voter approval until 2001. And although voter-approved bonds are still the bulk of the state's borrowing, the process has changed substantially.

North Carolina now owes about $940 million in loans that voters did not get to approve. If signed by Gov. Mike Easley, the budget legislators passed last week would nearly double that amount.

For many taxpayers, the difference between a general obligation bond that voters approve and so-called "certificates of participation" that the state can issue without a vote is the stuff of minutiae.

But an increasing number of state legislators and observers on the political left and right say that voters should be looking askance at the state running up its borrowing without seeking permission.

There are four main arguments for the concern:

• The constitution says the General Assembly should consult the voters.
• Although certificates of participation have been declared legal by the courts, they thwart a historic check on government power.
• Large borrowed amounts of money are repaid over many years, and could cause taxes to go up in the future.
• Borrowing not approved by voters is more expensive because it's considered slightly more of a risk by bond agencies. The differences can amount to millions of dollars over the life of the loan.
• Proponents of certificate borrowing argue that the state breaks even by getting projects under way before construction costs go up, a claim that's hard to verify.
• When projects go on a ballot, voters find out more about them. This can help ensure the state's most critical needs get money first.

The legislature "doesn't want to have to make its case to the public," said John Hood, who leads the conservative John Locke Foundation. "The fact that you are issuing bonds that cost more for no good reason and you are taking away a vote of the people for no good reason to me seems persuasive."

Holliman said that he would like to see the state lay down some guidelines on when to use certificates of participation. Other legislators have also suggested this may be necessary, although there's little consensus on what those guidelines might be.

State Treasurer Richard Moore has also urged the state to rein in spending not approved by voters.

But if anything, the budget signals legislators' willingness to borrow without voter approval is growing.

Legislative leaders inserted about $107 million in two-third bonds, a way that government can recycle debt previously approved by voters that has been repaid. It is the first time in decades, if ever, such authority has been used by the state.

Sen. Phil Berger, a Rockingham County Republican who has been critical of the budget's borrowing, said the two-thirds bonds might be a reasonable option - and they are specifically authorized by the state constitution.

"I actually wished if we were going to use them, we would have used them to do some of the transportation projects we need," Berger said.

A long-needed bridge on I-85 over the Yadkin River is an example of a pressing need that Berger said could have been paid for.

Holliman said that General Assembly will almost certainly consider a transportation bond.

Contact Mark Binker at (919) 832-5549 or mark.binker@news-record.com