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State On Pace to Exceed Malloy’s Self-Imposed Debt Limit

by Christine Stuart | Sep 23, 2013 5:30am
(18) Comments | Commenting has expired
Posted to: Economics, Town News, Stratford, State Budget, State Capitol

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.

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(18) Comments

posted by: Fisherman | September 23, 2013  6:29am

… AND THEN THERE WERE TWO:

“It’s silly to hold projects up to meet arbitrary numbers”, said Barnes

“State budget aren’t like household budgets… they don’t have to balance”, said Harp

Goodbye, fiscal responsibility.

posted by: DirtyJobsGUy | September 23, 2013  8:35am

Note the similarity to the US Senate where no budget has been produced in years. Harry Reid swears a continuing resolution is the same.  Sorry guys, being in Government carries the responsibility to be adult.  You may have to piss off a constituency once in a while.  CT has been on several occasions dipping into capital accounts to cover current spending.  Take a look at the great story in the Detroit Free Press that shows this as the key to Detroit’s problems.

posted by: Noteworthy | September 23, 2013  8:42am

And the stupidity continues.

While Malloy and the minions can argue that debt spurs economic activity and therefore it is justified, that is a very low bar of justification. Sure it spurs economic activity, just like shopping with our family credit cards does. That doesn’t mean that when it exceeds 10% of the budget, that it’s smart or that the economic activity it spurs is sustainable or sufficient to pay off the credit card debt. Sometimes, it just adds debt.

Internally - between Barnes and Malloy and the other policy people, it is highly doubtful they even ask these questions. They just spend knowing that they with their colleagues in the legislature, slam us with higher taxes to pay for it. And that is what lowers our standard of living, makes our lives more miserable and robs our families of the ability to pay for college, put food on the table and pay the property taxes which are driven by the same stupidity as the state.

posted by: justsayin | September 23, 2013  3:21pm

Mr. Doba, last time I checked unemployment has not changed and labor participation is down. The So we can cut back on all three schools, parks? and senior centers. All buzz words with necessary social benefit. The debt is the only long term item Malloy is leaving this state.

posted by: Beatles2013 | September 23, 2013  7:41pm

I had a lot of hope when Malloy won the governor’s post. I was particularly drawn to his tough rhetoric around balancing the state budget on a GAAP basis and reducing the heavy burden the state has carried in unfunded pension, health obligations and the huge debt the state is saddling our children with to pay down in future years. Because of a sweetheart deal with the state workers’ union, our state is handcuffed for many years in terms of taking some of the more draconian steps that some states are taking to mitigate the bloated costs for state employees.  The GAAP adoption has been slower than expected.  The budget has been balanced like Rell and other predecessors using smoke and mirrors accounting gimmicks and taking on more debt for one of the most indebted states in the nation to fund “projects” is not responsible budgeting in my estimation.  Its like a family member who thinks he/she has an unlimited limit on his/her credit card.  When does this kicking the debt can down the road and irresponsible budgeting stop? I’m very disappointed that Malloy doesn’t seem to be the Governor to get it done.  I’m looking forward to seeing if any of the governor candidates in the next election is going to get dead serious about our state’s shabby finances.

posted by: Stan Muzyk | September 23, 2013  9:25pm

Some liberals took Tom Foley’s freedom of speech questioning of of Malloy’s ethics to task—“when our governor has no fiscal ethics.”

posted by: Lawrence | September 23, 2013  9:59pm

24 hours before issuing a press release criticizing state bonding, Senator/candidate McKinney issued a press release welcoming state bonding.


http://ctsenaterepublicans.com/2013/09/westport-to-receive-school-security-funding-sen-mckinney-sen-boucher-rep-lavielle-protecting-our-children-is-a-top-priority/#.UkDwuMXD85s

posted by: Commuter | September 24, 2013  12:12am

O! The hypocrisy!
“The task forces commissioned by the administration and the legislature in the wake of the Sandy Hook tragedy identified a number of ways we can make Connecticut schools safer,” said Senate Minority Leader John McKinney (R-28) whose district includes both Westport and Newtown. “We’re pleased to know that Westport and other towns are making security improvements with the help of state funding made possible by legislation the Westport delegation voted for and passed earlier this year.”

posted by: dano860 | September 24, 2013  8:49am

Lawrence, get real!
$5 M to further the sham of ‘school security’ is a drop on the bath tub.
Take out the $5M and Dannel only wants another $390.5M!!??
Imagine if they didn’t include that $5M, he would be $25M away from his ‘self imposed’ $1.8B limit. Now that would be self control, wouldn’t it?
As it stands we have a $10M interest yearly. INTEREST ONLY!
Nobody is saying that the State can’t bond for projects or improvements. This is the type of bonding that is considered proper. What should be at issue is the phony method of achieving GAAP was done by bonding $750M. They will have to write checks out of that GAAP account just to pay interest on that loan. Let us see how they intend to dole out the $395M they want now, we probably can’t get that list.
Throwing State money out to just create jobs for the short term is a waste. Construction is needed to create infrastructure and long term needs for the public but it shouldn’t be tossed about just to keep the unions happy.
On school security, the money passed out to the few that will get it will only cover security at the main entrance. The security of our children is still going to be extremely lax.

posted by: Lawrence | September 24, 2013  12:19pm

Is this “real” enough for you, Dano??

http://www.ctmirror.org/story/2013/08/19/gop-opposition-malloy-budget-melts-when-state-dollars-come-home

You Republicans crack me up—you’re like an Onion news story come to life—with comments!

posted by: Christine Stuart | September 24, 2013  2:20pm

Christine Stuart

No offense but that’s not a good example. The Republicans in the story were taking credit for money they didn’t vote in favor of. In this case McKinney did vote for the money he touts in the press release. Republicans aren’t saying all bonding is bad. They’re concerned about the amount, which happens to be the most in the state’s history in 2013. Just saying. Not passing judgment here. Just pointing it out.

posted by: Lawrence | September 24, 2013  7:58pm

So let’s on to this afternoon’s example: another $3.7 million in state bonding—that we apparently can’t afford and is irresponsible to spend and an insult to the taxpayers—to build a new Newtown elementary school.

Sen. McKinney welcomes it, as do Reps. Bolinsky and Hovey. None of those Republicans voted for the bonding package which authorizes the state to spend way, way more than it should—but they’re all darned glad to get the money for their town, don’t you know.

http://www.governor.ct.gov/malloy/cwp/view.asp?Q=532310&A=4010

I don’t care if the GOP criticizes state bonding levels. I believe it should be cut, too.

But don’t tell me it’s all bad, and an insult to taxpayers, but then welcome it when it’s for something you support. Billions of dollars in state bonding is made up of lots of smaller (tens of millions of dollars) of smaller state bonding projects, spread around CT, welcomed by Democrats and Republicans alike.

I don’t see Democrats complaining, only Republicans—and then praising the money when it comes to their district. That’s my point. If you complain, if you vote against it, then be quiet when it comes your way. Or at least remind your constituents you didn’t vote for that funding, and they should thank a Democrat for making the right decision for them. That’s only fair.

posted by: dano860 | September 25, 2013  8:13am

Lawrence, notice in the previous post I mentioned proper uses of borrowing. The pandering to Newtown will go on for years, bogus legislation and catering to their perceived needs. Why don’t they use the millions of donated dollars to build a new school. This will be a school that will rival maximum security at Somers. Bullet / bomb proof windows that are 15 feet above the ground, underground gated bus loading / unloading zone, high security parent pick up area. It should resemble a prison in the end.
Yup, pandering to Newtown isn’t a party separated issue.
Wasteful borrowing is something like giving millions to Bass Pro Shops to set up shop in Bridgeport or giving millions to a company in East Hartford to move to Hartford, huh? Why are we giving $6M to a German firm to create 37 jobs?
http://courantblogs.com/ct-jobs/state-offers-6-million-to-german-firm-to-add-37-jobs/
These are forgivable loans too. If they do as the loan contract requires the loan is FORGIVEN! Ya, they get it free and we get stuck paying it back with INTEREST.
These are the types of borrowing that fiscal conservatives are opposed to.

posted by: Stan Muzyk | September 25, 2013  11:09am

Pandering in Newtown will stop if the remainder of the Newtown fund to help victims of the Sandy Hook School disaster—is used to build a new Sandy Hook School—instead of using state-borrowed grant maney to pay for it.  Under Gov. Malloy’s “unwatchful” watch we are funding too much grant-money-debt already.

posted by: JamesBronsdon | September 25, 2013  11:39am

dano, in addition to the corporate welfare you list that we conservatives oppose (Lawrence, are you with us on that?), we also oppose the liberal-agenda, union payoffs such as the useless busway.

posted by: Stan Muzyk | September 25, 2013  8:01pm

Our outstanding bonding debt has been reported as   frozen at $19.3 billion dollars for the past year.It’s like our massive national debt—which has reported as being vitrually frozen at under $17 trillion dollars for the past year—when the true national debt reportedly stands at $59.6 trillion dollars—- and growing daily.  Is someone careless with the truth?
Figures lie—if they are incorrect.

posted by: Lawrence | September 25, 2013  10:19pm

James—yes. I just don’t know how to level the playing field nationally.

posted by: JamesBronsdon | September 26, 2013  6:38am

Lawrence, constitutional amendment. Both political parties are equally susceptible to the temptations to buy friends. (Hey, they’re only human.) Must take the ability to do so completely out of their hands