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Utah GOP lawmakers love to bash about anything that has to do with President Barack Obama’s economic stimulus/recovery program.

But that didn’t stop lawmakers and GOP Gov. Gary Herbert from taking all the federal stimulus money they could – more than $1 billion to date.

In fact, a special legislative session will be called by Herbert on Wednesday in order to spend another $101 million in special federal education money – cash that will allow a number of Utah school districts to avoid laying off teachers this next year.

In the middle of all this is a relatively unknown new federal bonding program which Utah State Treasurer Richard Ellis, also a Republican, has taken advantage of. It’s called the Build America Bonds, or BABs.

In the end, the special bonding program will save Utah state government – and so Utah taxpayers – a lot of money. Ellis estimates the savings at around $60 million over 15 years.

But in the short run – because of the federal government’s overspending, new conservative congressmen coming into office who want to trim the federal deficit, and because of the always-critical independent bond rating firms’ judgments – Utah lawmakers will have to decide whether to put an extra $17 million into the state’s transportation bonding program in the 2011-2012 budget.

Or, they could put that $17 million into the state’s general fund and spend it on non-transportation issues, like education or state worker salaries.

Legislators will adopt that fiscal year’s budget in the 2011 Legislature, which meets in about two months.

The reasons for the extra $17 million cost are complicated, as is the BABs program.

And, according to officials in Ellis’s office, Utah’s top AAA bond rating is not in jeopardy.

Still, in the world of government financing one never wants to take chances on bond ratings. For a state like Utah, which is embarking on record-setting freeway, bridge and road construction spending, a slight change in the bond market could cost Utah millions of dollars.

Ellis’ office has issued around $2.6 billion in bonds in just the last two years.

The irony is, of course, that, once again, conservative Utah GOP legislators – who like nothing about Obama and the old Democratic-controlled Congress –are taking advantage of a federal economic recovery program.

Simplifying the current bond issue, this is what Ellis, Herbert and GOP legislative leaders must contend with:

• When the economic crisis hit America several years ago, the municipal bond markets dried up quickly. Cities and states couldn’t afford to borrow money to build things – like roads and buildings.
• Not hiring construction workers, designers and so on, would just hurt the economy more. So, Congress decided to act to stimulate the municipal bond market.
• Historically, states and cities issue tax-exempt bonds. Various groups, including old folks living on their retirement investment interest, like to buy these bonds to avoid paying state and federal income taxes.
• Congress, in an effort to stimulate these bond markets, decided to start a new program whereby the muni-bonds would be taxable, but the federal government would pay the issuers 35 percent of the debt service.

That, in turn, allowed the interest rate paid by the issuer to drop. For example, said Ellis, the BABs issued by Utah recently got a good 2.078 percent interest rate. If the state had issued the normal tax-exempt bonds, the rate would have been 2.39 percent over 15 years.

It was a great deal, say state treasurer officials. The new device promised to, and in fact has, brought new groups, like insurance companies and banks, that were not big players in the muni-bonds, into that specialized market.

And so, Ellis started issuing a number of transportation bonds under BABs. (Now, the Legislature and Herbert approved of the road bond issuance. But they did not have to specifically authorize Ellis to use the BABs. He did so because BABs are a good deal, saving Utah taxpayers money.)

-- But now, state officials say, there is worry among the three major bond rating firms that Congress may not keep its promise of the full 35 percent debt service paybacks in the future.

So, the rating agencies are giving “guidance” to state and city treasurers that they have to put more debt service money aside now, just in case the feds flake out on the promise later.

“There is very little chance” that Congress won’t continue to provide the 35 percent debt service cash, says David Damschen, deputy state treasurer.

And the bond rating firms have not said Utah’s AAA bond rating is in jeopardy if state officials don’t put the extra money aside.

Still, GOP legislators already start the 2011-20121 budget process around $100 million in the hole – money that they were counting on having next fiscal year, which starts July 1, that in fact they don’t have.

Now having to account for the new $17 million is just one more concern.

In taking advantage of BABs, GOP conservative legislators are again dancing to Obama’s recovery tune – and that puts them in the same position they found themselves in when they chose to accept the federal government’s stimulus cash in the first place.