Spending Affordability Committee Discusses the State’s Capital Programs, Debt Policy, Pressures on the General Fund

The Spending Affordability Committee, composed of members of the General Assembly and three public members, was briefed by the Department of Legislative Services (DLS) on November 14 regarding the State’s capital program, debt policy, transportation program, state employee personnel issues, teacher pension contributions, the Affordable Care Act, and the General Fund Outlook .

In 2012, the Capital Debt Affordability Committee recommended to restore GO bond authorizations to pre-recession levels by adding $150 million annually. The 2013 recommendation would add another $75 million annually for the next five years to assist the State Highway Administration with Watershed Implementation Plan (WIP) compliance. Once accounting for project pre-authorizations, General Obligation (GO) and PAYGO replacement, WIP, and public school construction, there are approximately $320 million in “Un-spoken for” authorizations, with almost $1 billion of competing requests.

With respect to transportation, DLS reported that the Transportation Trust Fund ended fiscal year 2013 with a fund balance of $218 million, $118 million greater than expected, due to spending being less than estimated.  DLS also provided an analysis of the new transportation revenues, major projects added to the construction program and how it is being allocated by category.

When examining the General Fund Budget Outlook, using baseline projections, it is anticipated that the State would need to close a gap of $421 million to balance the budget in fiscal 2015. This gap is projected to increase slightly in fiscal 2016, and then drop, but remain fairly constant, in fiscal 2017 and beyond. The State’s structural deficit follows this same trend line.

When comparing ongoing spending to ongoing revenues, the largest increase in ongoing General Fund spending is in the amount of dollars being allocated to debt service. The average annual percent change is estimated to be 24.3%.  To constrain growth in long-term obligations and reduced the amount of General Fund revenue being allocated to debt service, DLS is recommending that the previously established debt authorization level be maintained.  During this discussion, House Speaker Michael Busch asked DLS if they have ever looked at adjusting the amount of capital dollars being allocated to counties as a way to bring debt service more in-line. DLS responded, no, it had not.

An overview of the issues discussed can be found in the bulleted list below.