Historically, when the Revenue Forecast is released, we are at the press conference and ask a standard question of the Office of Management and Budget Commissioner, which is what tis the state’s Debt Capacity. This year, as I was last year, we didn’t attend the briefing at the state Capitol, due to COVID, it was virtual and needed to get to get our question answered later. Hence the reason this information didn’t come at the same time as the Revenue Forecast.
In 2009, the state adopted two guidelines for Debt Capacity. Both are intended to provide a measurable value of the state’s ability to meet a debt obligation and are measured against the amount of personal income collected. Guideline #1 compares the total amount of debt the state has sold and currently owes to the state’s personal income. It also comes with this caveat, “Our measure for Guideline #1 is that the amount of debt sold and currently owed does not exceed 3.25% of personal income.” Guideline #2 compares the total amount of authorized state debt, including state moral obligations and equipment capital leases, to personal income. This limitation is, “Our measure for Guideline #2 is that total debt authorized does not exceed 6% of personal income.”
Under Guideline #1 the state’s Debt Capacity is $3.759 billion but with an Asterix, the Asterix being “Bonds authorized are typically not sold all at once; they are sold over several years.”
Under Guideline #2 the state’s Debt Capacity is $8.791 billion.
Again, the state is well positioned to have a historically sized Bonding Bill and with the combination of Federal dollars we are facing a once in a lifetime opportunity to boost tour state’s economy with new jobs and technological advancements paid off over 30-years.
This is a year for being bold and also through bonding, a way for our state to aggressively fight back against COVID.
Here is the Management and Budget Forecast on Debt Capacity.