McKinney: Malloy on Pace to Exceed Bonding Limit And Set New Record for Fiscal Irresponsibility

September 20, 2013

McKinney: “The governor, who two years ago set the record for the largest tax increase
in state history, has today set a new record for the highest amount of borrowing in state history.”

Hartford, CT – The State Office of Policy and Management (OPM) today posted the State Bond Commission Agenda for September. The agenda recommends the allocation of almost $396 million in new general obligation (G.O.) bonds, bringing total G.O. bonding for CY2013 to $1.789 billion – and it’s only September.

With the approval of the September agenda items, Governor Malloy will have borrowed $391 million more than the $1.398 billion the commission bonded in CY2012 – a staggering 28% increase and counting at a time when Connecticut already has the highest per capita debt in the nation.

With two more bond commission meetings before the end of 2013, the governor is on pace to shatter the self-imposed 1.8 billion bonding limit he promised rating agencies and the tax-paying public he would abide by.

“The governor, who two years ago set the record for the largest tax increase in state history, has today set a new record for the highest amount of borrowing in state history,” said State Senate Minority Leader John McKinney (R-Fairfield). “This level of borrowing and these broken promises show a lack of leadership, a lack of fiscal responsibility, and a lack of consideration for the taxpaying public. It also shows a failure to learn from past mistakes. Governor Malloy’s record tax increases, borrowing and overall fiscal mismanagement of our state have resulted in Connecticut being the only state in the nation whose economy shrunk in 2012. Our unemployment rate is too high, jobs are leaving the state, we are overtaxed, and our governor is doing nothing to change the trajectory of those trends.”

McKinney also warned that bond rating agencies would not ignore Governor Malloy’s failure to stay below the G.O. bonding limit he promised. During Governor Malloy’s term in office, Moody’s Investor Services has downgraded Connecticut’s G.O. bond rating and Fitch Rating Agency, as recently as July 2013, has downgraded its outlook for Connecticut G.O. bonds. One reason ratings agencies gave Connecticut poor fiscal marks, was the fact that the state’s high fixed costs for debt, pension and other post-employment benefits (OPEB) relative to its budget remain among the highest in the nation.

According to the Office of Fiscal Analysis, this year’s additional $391 million in G.O. bond allocations will equate to an additional $205.3 million in interest expenses over the 20 year life of the bonds, bringing the total cost to taxpayers up to $596.3 million.

“The assumption of this level of debt will further hinder the state’s economic recovery,” said McKinney.

McKinney said Malloy greatly exacerbated the problem this past legislative session by moving numerous operating items to bonding. The two largest items that have a debt service impact – the $750 million GAAP bonds and the 2 year extension of the ERN debt are estimated by OFA to cost over $230 million in additional interest expense. McKinney said all of this additional interest expense will put further stress on the state’s general fund in the FY 2016-FY 2017 biennium and beyond.