State On Pace to Exceed Malloy’s Self-Imposed Debt Limit
The state Bond Commission is poised to borrow $395.5 million in general obligation bonds by the end of the week, a move that would put Gov. Dannel P. Malloy within $20 million of his self-imposed $1.8 billion bonding limit.
But there are two more Bond Commission meetings scheduled before the end of the year.
“I can’t imagine that we would exceed $1.8 [billion], but we may be substantially less than that,” Malloy said in January after the first Bond Commission meeting of the year.
The $1.78 billion would already exceed the borrowing the state did in 2012 by about $391 million.
State Senate Minority Leader and gubernatorial hopeful John McKinney issued a statement on Friday shortly after the Malloy administration released the agenda for the Bond Commission meeting Sept. 27.
“The governor, who two years ago set the record for the largest tax increase in state history, has today set a new record for the highest amount of borrowing in state history,” McKinney said. “This level of borrowing and these broken promises show a lack of leadership, a lack of fiscal responsibility, and a lack of consideration for the taxpaying public.”
But Ben Barnes, Malloy’s budget director, said he doesn’t agree with McKinney’s premise that borrowing more money is a drag on the economy.
He said a report last week by the Center for Economic Analysis showed that releasing more of this money would benefit the economy and create jobs. He said the investments the state is making will pay dividends in the long run.
“It’s silly to hold projects up to meet arbitrary numbers,” Barnes said.
Malloy spokesman Andrew Doba concurred that releasing the money would have a positive impact on the state’s economy.
“The work supported by the Bond Commission creates jobs for Connecticut residents,” Doba said. “It also allows the state to invest in local projects like schools, parks, and senior centers. Senator McKinney should explain which important investment in job creation and quality of life improvements for residents in all of our towns and cities he does not support.”
Construction jobs in Connecticut have increased 7.3 percent over the past year, according to a report in the Providence Business News.
Some of the projects on Friday’s Bond Commission agenda include $250 million for school construction projects, $165,000 for architecture and engineering fees associated with the construction of a new centralized dispatch center for the state police, $200,000 for a generator at the Stratford Readiness Center, $1.3 million for improvements to Rentschler Field and the Connecticut Convention Center, and many more.
The borrowing will add $205.3 million in interest expenses over the 20-year life of the bonds, McKinney said.
In last year’s $20 billion state budget, debt service was nearly $2.2 billion — more than 10 percent — making Connecticut one of the nation’s most indebted states per capita. Debt service spending from the general fund in 2013 was $49.9 million, or 3.1 percent below the previous fiscal year, according to State Comptroller Kevin Lembo’s September budget report. But that’s because the General Assembly decided to delay repayment of the 2009 Economic Recovery Notes and the $750 million in bonds the state will use to transition to Generally Accepted Accounting Principles.
However, Barnes maintained Friday that the state has kept an aggressive repayment schedule and the debt service payments will remain at a similar level.
McKinney doesn’t believe the Wall Street rating agencies will look kindly at the state for taking on more debt.
During Malloy’s tenure, Moody’s Investor Services has downgraded Connecticut’s general obligation bond rating/ and the Fitch Rating Agency , as recently as this past July, has downgraded its outlook for Connecticut’s bonds, McKinney said.
One of the main reasons for the poor marks is the high level of debt and pension obligations, including health care benefits for retirees.
“The enacted budget for the new biennium delays repayment of deficit borrowing, adds to an already high debt load, and fails to rebuild the state’s financial cushion,” Fitch analysts said in July when they downgraded the outlook for the state.
State Treasurer Denise Nappier has said a “negative outlook” generally means that a credit rating will be under review for one to two years, and “is less concerning than a credit watch.”
There are two more Bond Commission meetings scheduled before the end of the year and the state, by all accounts, is expected to exceed $1.8 billion in bonding for the 2013 calendar year.
Friday’s Bond Commission meeting is scheduled for 10:30 a.m. at the Legislative Office Building in Hartford.