CDAC Recommends Accelerated Debt Schedule for Maryland

The Capital Debt Affordability Committee (CDAC) met on December 19 and amended its earlier recommendation to authorize $925 million in State general obligation bonds for the FY 2013 Capital Budget.  After some debate, CDAC recommended an additional FY 2013 authorization of $150 million (for a total of $1.08 billion).  The additional $150 million represents a “front loading” of debt and there is an expectation that debt issuance be reduced by $150 million in the FY 2018 capital budget.   CDAC also recommended the $150 million be dedicated to ready-to-go projects that would immediately generate jobs, as opposed to land acquisition.  The extra debt would be issued over an accelerated 2-year period instead of the normal 5-year issuance period.  Under the scenario considered by CDAC, the State is not projected to violate its own debt ceiling guidelines.

“There is an infrastructure need,” noted State Treasurer Nancy Kopp, who argued that the proposal would allow the State to take advantage of unusually low-interest rates and construction costs.  She did caution that it would “take significant self-discipline” from the State to reduce capital debt spending for FY 2018.

Secretary of Budget and Management T. Eloise Foster explained that according to a Department of Budget and Management study, the $150 million would create 1,000 additional jobs.    

Senator Ed DeGrange also expressed concern about whether future debt issuances would be reduced.  He reiterated that the State’s longstanding goal of $250 million a year for school construction remained “a good target” but questioned whether county governments could meet the matching requirements for anything allocated above the $250 million base.  Delegate Adrienne Jones noted the need for air-conditioning in many Baltimore-area schools and stated that job creation in the capital budget has been a priority for Speaker of the House Michael Busch. 

Maryland Comptroller Peter Franchot was the only CDAC member to vote against the recommendation, arguing that the State was assuming fiscal self-discipline in the future.  He described the proposal as a “brutal kicking of the can down the road.”

December 20 article

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