State Borrowing Poised To Climb to $2.1B For The Year
The state Bond Commission is poised to borrow $188.6 million Tuesday for a number of projects, including $1 million for improvements to the Connecticut Tennis Center in New Haven.
The $1 million is expected to be spent on construction of administrative offices and a media center and upgrades to the heating and cooling systems and other electrical equipment, according to the agenda. The state of Connecticut purchased the U.S. women’s tennis tournament, which is played every August at the center, in 2013 for $618,000. As far as tennis tournaments are concerned, Office of Policy and Management Secretary Ben Barnes has called the purchase price a “bargain in the world of owning tennis tournaments.”
The Tennis Foundation of Connecticut also received a $1.2 million grant in January from the state Bond Commission to finance other renovations and improvements to the center.
However, it’s not necessarily the Connecticut Tennis Center, the $2.5 million to replace the ice rink at the XL Center, or the $22 million in borrowing the state Bond Commission approved in May for the world’s largest hedge fund that has Republican lawmakers concerned. It’s the total amount of borrowing the state plans on doing this calendar year.
In March, Gov. Dannel P. Malloy, who chairs the state Bond Commission, announced he was increasing the amount of borrowing the state planned to do this year from $2.5 billion to $2.7 billion.
Under Malloy, Connecticut’s borrowing has increased from $1.4 billion in 2011 to $1.8 billion in 2013, $1.96 billion in 2014, and $2.5 billion in 2015.
If the state Bond Commission approves the $188.6 million in general obligation bonds Tuesday that will bring the total amount of borrowing the state has done in 2016 up to $2.1 billion.
“Despite all their talk about new realities, the mindset of Connecticut Democrats has not changed when it comes to bonding and managing state debt,” Senate Minority Leader Len Fasano, R-North Haven, said. “They are still borrowing uncontrollably, adding more burdens to taxpayers and our children for generations to come.”
He said there are needs and wants and Connecticut has to prioritize.
“Far too many of these programs getting bond money are not necessities. They are wants,” Fasano said. “A bronze statue in Hartford is a want, a tennis center is a want, and donations to private entities that already have other significant funding sources are all wants, not needs.”
There is $250,000 on Tuesday’s agenda to build a bronze statute of Walter ‘Doc’ Hurley for the city of Hartford.
Fasano said making tough decisions will help restore fiscal sanity and “bring Connecticut back from the policies that have led this state to a fiscal disaster.”
A spokesman for Malloy said Republicans were being hypocrites.
“Since 2011, and over countless meetings and agenda items, the Republican Senator on the Bond Commission has voted against one project. One,” Chris McClure, a spokesman for Malloy, said. “And while Senator Fasano decries bonding – even though interest rates are extraordinarily low and even though Connecticut does not have county government – not once this year has the Senate Republican on the committee voted against an item. Clearly, there are Republican words – and then there are Republican actions.”
There are two Republicans, Sen. L Scott Frantz, R-Greenwich and Rep. Chris Davis, R-East Windsor, who are voting members of the state Bond Commission. The Malloy administration pointed out that Frantz has only voted against one project and Davis has voted against 8 during his tenure on the 10-member commission.
McClure also pointed out that the overall bonding Fasano pointed out in his press release amounts to about 1.7 percent of what has or will be bonded. In fact, Republicans will celebrate the borrowing done for their districts “even as they seek to decry borrowing in general.” He suggested that Fasano return the $500,000 in borrowing that went to his district for bleachers and a snack shack.
Meanwhile, Malloy has argued that the interest rates on borrowing are good. In March, the state sold $500 million of bonds at a 3.07 percent interest rate. In May, it sold $504.1 million in bonds at 2.11 percent.
But Connecticut’s overall fiscal health is on shaky ground according to Moody’s Investment Services.
A report from Moody’s at the end of June placed Connecticut into a “credit negative” category due to the declining personal income tax receipts.
State income tax volatility was expected due to changes in capital gains related to stock market performance, but Connecticut’s weakness in personal income taxes withheld from paychecks indicates the source of the underperfomance is more deep-seated than a shortfall in capital gains, according to Moody’s.
“With weak tax collections likely to carry over into fiscal 2017, the state has limited flexibility to maintain a balanced budget,” Marcia Van Wagner, vice president and senior credit officer, wrote in the June report. “Budget reductions are especially challenging to achieve in Connecticut, where fixed costs – the sum of pension contributions, retiree health contributions and debt service payments – claimed more than 25 percent of the state’s own-source governmental revenue in fiscal 2014.”
The state plans on closing the 2016 $315.8 million deficit with money from the Rainy Day Fund. That will leave around $90 million in reserves, which is less than 1 percent of revenues.