April 12, 2002 |
2002-R-0429 | |
STATE BOND DEBT | ||
By: Judith Lohman, Chief Analyst Linda Miller, Office of Fiscal Analysis | ||
You asked (1) if any other states have programs in place to decrease their current bond debt, (2) what Connecticut's current bond debt is, (3) how much Connecticut pays annually in bond interest, and (4) how Connecticut compares to other states in amount of bond debt.
SUMMARY
Many states paid off part of their bonded indebtedness in the late 1990s but most such programs have ceased. Extensive computer searching and a call to the National Conference of State Legislatures (NCSL) yielded only one state, Utah, that is currently in the midst of a multi-year program to reduce its debt.
As of February 28, 2002, Connecticut's bond debt was more than $ 11. 8 billion, according to the state treasurer. The state paid just over $ 615 million in interest on its debt in FY 2000-01.
Moody's Investor's Service ranks Connecticut first among states in tax-supported debt per capita and third in tax-supported debt as a percentage of personal income. Congressional Quarterly ranks Connecticut fourth in state and local debt per capita and 17th in state and local debt per capita as a percentage of personal income.
DEBT REDUCTION PROGRAMS IN OTHER STATES
Many states had programs to reduce bond debt in the 1990s by paying down outstanding bonds and avoiding additional bonding, according to Arturo Perez, a fiscal analyst with NCSL. Louisiana, for example, reduced its debt from $ 4 billion to less than $ 2. 3 billion between 1994 and 1998, and New York's governor proposed to increase the size of the state's Debt Reduction Reserve Fund from $ 250 million to $ 1. 25 billion in 2000. But these kinds of debt reduction initiatives have not been maintained in the last two years as state revenues have fallen, Perez says.
The only state that Perez could name that is currently pursuing a debt reduction program is Utah. According to John Massey, director of Utah's Office of Legislative Fiscal Analyst, Utah's goal is not just to reduce, but to eliminate its General Obligation (GO) debt over five years.
Utah began its debt elimination program last year (2001). Massey says the program is easier for his state than it might be for a state such as Connecticut because Utah does not issue long-term bonds. The state's bonds have a maximum six-year maturity. Last year, the state legislature authorized no new bonding. Massey admitted that the plan has fallen behind schedule this year. Utah, like many states, has a revenue shortfall and was unable to get through the year without authorizing additional debt. But the state is sticking to its goal of paying off all its GO bonds in five years and, after that date, paying for its capital budget with cash.
We requested a copy of Utah's debt elimination plan and will forward it to you when we receive it.
CONNECTICUT'S BONDED INDEBTEDNESS
Table 1 shows the state's bonded indebtedness as of February 28, 2002, by type.
Table 1: State Bonded Indebtedness as of 2/28/02* | |
General Fund Debt |
|
GO - tax supported |
$ 6,863,220,522 |
GO - revenue supported |
104,927,796 |
UCONN 2000 |
537,672,147 |
CDA Incremental Financing |
33,380,000 |
Total |
$ 7,539,200,465 |
Transportation Fund Debt |
|
GO - transportation |
$ 22,881,576 |
Special Tax Obligation (STO) |
3,050,282,825 |
Total |
$ 3,073,164,401 |
Other |
|
Revenue - Clean Water Fund |
$ 603,085,000 |
Revenue - Bradley Airport |
263,935,000 |
Bradley Parking Garage |
53,800,000 |
CDA governmental lease revenue |
7,360,000 |
CHEFA revenue debt |
82,115,000 |
CHEFA childcare bonds |
40,275,000 |
SIF (Second Injury Fund) revenue |
199,255,000 |
Juvenile Training School |
19,165,000 |
Total |
$ 1,268,990,000 |
Grand Total |
$ 11,881,354,866 |
*Data from the Office of the State Treasurer | |
INTEREST PAID ON STATE DEBT
Table 2 below shows the interest paid on state debt in FY 2000-01.
Table 2: Interest Paid on State Debt in FY 01* | |
General Fund Debt |
|
GO - tax supported |
$ 362,730,985 |
GO - revenue supported |
7,165,061 |
UCONN 2000 |
21,849,118 |
CDA Incremental Financing |
1,933,301 |
Total |
$ 393,678,465 |
Transportation Fund Debt |
|
GO - transportation |
$ 2,040,161 |
Special Tax Obligation (STO) |
162,809,459 |
Total |
$ 164,849,620 |
Other |
|
Revenue - Clean Water Fund |
$ 27,812,437 |
Revenue - Bradley Airport |
5,182,021 |
Bradley Parking Garage |
2,824,268 |
Unemployment compensation |
13,631,603 |
CDA governmental lease revenue |
495,748 |
CHEFA childcare bonds |
1,919,445 |
SIF (Second Injury Fund) revenue |
4,539,870 |
Juvenile Training School |
302,432 |
Total |
$ 56,707,824 |
Grand Total |
$ 615,235,909 |
*From the Annual Report of the State Treasurer for 2001 | |
PER CAPITA AND PERSONAL INCOME DEBT RANKINGS BY STATE
Industry sources such as Moody's Investors Service, Inc. publish annual rankings of various debt ratios for the 50 states. Two such statistics compare each state's level of debt that is supported by state tax revenues on a (1) per capita basis and (2) personal income basis. As shown in Table 3 below, Connecticut ranks highest in the nation on a per capita and third highest on a personal income basis.
Table 3: Per Capita and Personal Income Comparisons of Debt Supported by State Tax Revenues [1] (based on 2000 population data and 1999 personal income data) | ||||||
Rank |
State |
Net Tax-Supported Debt per Capita |
Rank |
State |
Net Tax-Supported Debt as % of Personal Income | |
1 |
Connecticut |
$ 3,037 |
1 |
Hawaii |
11. 0% | |
2 |
Hawaii |
$ 2,987 |
2 |
Massachusetts |
8. 5% | |
3 |
Massachusetts |
$ 2,957 |
3 |
Connecticut |
8. 0% | |
4 |
New York |
$ 2,020 |
4 |
New York |
6. 2% | |
5 |
New Jersey |
$ 1,935 |
|
5 |
New Jersey |
5. 5% |
[1]Net tax supported debt takes into account all debt serviced by tax revenues of the state, including General Fund debt and Transportation Fund debt. The net figure is reached by deducting any self-supporting debt, debt serviced by another unit of government, sinking funds, and short-term operating debt. | ||||||
Source: Moody's Investors Service, Inc. , April 2001 | ||||||
Another method of comparison combines state and municipal debt levels. As shown in Table 4 below, Connecticut ranked fourth highest in per capita levels of state and municipal debt. However, in a comparison based on personal income levels, Connecticut is ranked 17.
|
Table 4: Per Capita and Personal Income Comparisons of State and Local Debt (based on 1997 data) |
| ||||
Rank |
State |
State and Local Debt per Capita |
Rank |
State |
State and Local Debt per Capita as % of Personal Income | |
1 |
Alaska |
$ 11,651 |
1 |
Alaska |
44. 7% | |
2 |
New York |
$ 8,351 |
3 |
New York |
28. 5% | |
3 |
Massachusetts |
$ 6,791 |
12 |
Massachusetts |
23. 0% | |
4 |
Connecticut |
$ 6,623 |
17 |
Connecticut |
19. 8% | |
5 |
Rhode Island |
$ 6,499 |
|
5 |
Rhode Island |
25. 8% |
Source: CQ's State Fact Finder, 2001 | ||||||
The difference between the two methods stems from the fact that, unlike Connecticut, many states, such as California, bond for items like school construction on the local rather than the state level. Since such items can account for a large percentage of total capital expenditures (school construction accounted for over 60% of Connecticut's total bond allocations in FY 00), a comparison that includes both state and local debt provides a more accurate picture.
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