Committee Keeps Debt Recommendation Below Traditional Guideposts

The State’s Capital Debt Affordability Committee (CDAC) chaired by State Treasurer Nancy Kopp, approved a recommendation during its meeting on September 29th to set the State’s bond authorization at $995 million for the coming year.

The Committee’s voting membership includes the Treasurer, the Secretary of Budget and Management, the Comptroller, a governor’s appointee, and the Secretary of Transportation.

At this meeting, the Committee heard a presentation and analysis of three different debt limit alternatives:

  1. The 2016 CDAC Recommendation of $995 million annually based on the Governor’s capital program
  2. The Spending Affordability Committee recommendation of $1,065 million for FY 2018 plus 1% annual growth
  3. The traditional CDAC approach, which includes 3% annual growth to account for inflation and increased demand for capital funding.

Following the presentation, the Treasurer asked for comments and questions. The Comptroller recommended $995 million as the maximum cap of debt service for fiscal year 2019, and spoke of “the perils of government by credit card.”

Department of Budget and Management Secretary Brinkley made a motion to adopt $995 as the debt limit, noting the last week’s revenue write-down and, with reference to the Comptroller’s remarks, stated that “the bill has come due.” Secretary Brinkley also stated that general fund debt service costs are more than the State’s annual investment in public school construction.

Treasurer Kopp said that she would not support $995 as a debt limit, and that she would support one of the other debt limit alternatives that had been presented to the Committee. She stated that there are “significant unmet infrastructure needs” in Maryland, and described the importance of building and maintaining bridges, roads, and other pieces of critical infrastructure.

The vote to approve the recommendation of $995 million for fiscal year 2019 was 4-1, with Treasurer Kopp voting against.

CDAC, created pursuant to Section 8-104, et seq., of the State Finance and Procurement Article, is required to submit to the Governor and the General Assembly each year an estimate of the maximum amount of new general obligation debt that prudently may be authorized for the next fiscal year. Today’s recommendation will be forwarded on to the Governor and General Assembly for their consideration.

For more information, see the 2017 CDAC Affordability Analysis.