Multiple Debt Recommendations, One Budget

The Capital Debt Affordability Committee begins work on new recommendations for the General Assembly, in light of the fact the General Assembly has not followed all of its advice in recent years.

For the past several years, the Capital Debt Affordability Committee has operated alongside a planning policy of a $995 million limit on debt, rather than letting the debt recommendation fluctuate with the State’s affordability ratios.

The General Assembly’s Spending Affordability Committee and the final budgets passed by the General Assembly have not reflected that policy, however.

Today’s meeting of the Capital Debt Affordability Committee began with a review of the past several years of recommendations and actions by the General Assembly.

From the Department of Legislative Services,

Debt limits recommended by CDAC and SAC began to diverge in 2013.

  • In its 2013 report, CDAC recommended increasing the GO bond authorization to $1,160 million by adding $75 million to each annual authorization beginning in fiscal 2015. SAC adopted the fiscal 2015 recommendation, but recommended
    against increasing out–year authorizations.
  • In fiscal 2016, CDAC maintained its higher level of authorizations, totaling $1,170 million. SAC reduced the recommendation to $1,095 million, keeping with its prior year recommendation. The General Assembly’s authorization was $1,045 million.
  • Since fiscal 2016, SAC has increased annual authorizations 1% over the actual
    fiscal 2016 authorization. CDAC has recommended a $995 million limit.

Screenshot 2018-09-05 11.55.33The Capital Debt Affordability Committee 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.

The Committee is also charged with making a recommendation regarding additional funding for school construction.

MACo observes the work of the Committee, especially as it relates to transportation and education capital spending by the State.

As described by the Department of Legislative Services, in the 2018 legislative session the Spending Affordability Committee (SAC) recommended an annual increase of 1% from the fiscal 2016 authorization,

Due to the Committee’s ongoing concern that freezing authorizations without recognition of construction inflation will reduce the purchasing power of the State capital program, SAC policy is to increase annual authorizations 1% from the fiscal 2016 authorization, which totaled $1,045 million. This rate is less than the projected
increase in revenues.

There are two more meetings of the Capital Debt Affordability Committee as it crafts its recommendations for the coming fiscal year. The next meeting is on September 12 at 1 pm.

For more information see the September 5, 2018, CDAC Meeting Materials.