Last Thursday the Capital Debt Affordability Committee (CDAC) convened to finalize recommendations for the state’s fiscal year 2027 capital budget. Members voted to maintain the borrowing of $1.75B but align the issuance closer with actual spending that has slowed in recent years.
Chaired by the State Treasurer, the committee’s primary task during the meeting last week was to vote on the maximum level of new general obligation (GO) debt the state may prudently authorize, as well as the amount of academic revenue bonds for higher education projects. The meeting focused on balancing the state’s long-term capital needs with adherence to established debt affordability ratios.
Rebecca Ruff, Director of Debt Management, opened with an overview of the state’s debt ratios and recent issuance patterns. She outlined three potential scenarios for managing future debt authorizations, each reflecting varying degrees of alignment with actual capital expenditure trends. Ruff emphasized that while CDAC had consistently recommended a $1.75 billion annual GO bond authorization since 2023, actual spending has lagged in recent years. Her analysis expressed that maintaining the existing authorization level would keep Maryland’s debt service ratios comfortably within affordability limits. Another official later acknowledged this should not affect the two rating agencies that have yet to downgrade Maryland from AAA.
One consideration that was discussed compared to previous years however, is aligning the issuance rate with actual expenditures. From Director Ruff:
We just wanted to start with an overview acknowledging the previous intentions of maintaining the $1.75 billion in authorizations, but suggesting that CDAC in their considerations today, may want to take into account an issuance schedule that may not necessarily align each year with the amount of authorizations.
The chart below from the presentation shows those expenditures and issuance schedules through 2031.
Following discussion, committee member David Nichols moved to authorize $1.75 billion in general obligation bonds for fiscal year 2027, with continued planning for the same level through 2031. Committee members highlighted their work is supporting vital investments in school construction, housing, economic development, and state facility upgrades. The committee also voted to authorize $30 million in academic revenue bonds for the University System of Maryland to support capital improvements at higher education institutions. The letter from Treasurer Davis to Governor Moore and the presiding officers included the formal recommendations.
