Measure Aimed at Reducing State Debt, Restoring Credit Rating
Legislation Assemblyman Troy Singleton, Assembly Speaker Vincent Prieto and Assemblymen Wayne DeAngelo, Joseph Lagana and Eric Houghtaling sponsored to help keep debt levels affordable in New Jersey and restore the state’s credit rating gained approval from the General Assembly on Thursday.
“Reports about our mounting state debt are disconcerting, to say the least,” said Singleton (D-Burlington). “Fiscal responsibility can’t be achieved blindly. We need a comprehensive and precise forecast on what we can and cannot afford in order to create more sound fiscal policies for the future.”
The bill (A-316) would require the State Debt Report, an annual report on the state’s debt and bonded obligations, to include an annual debt affordability analysis in order to provide a clear, data-driven framework for the executive branch and the legislature to evaluate and establish priorities for legislation that may impact the amount of state debt during future fiscal years.
“Debt affordability can’t be the elephant in the room when it comes to discussions about our fiscal future,” said Prieto (D-Bergen/Hudson). “To continue to let it go unchecked will only further jeopardize our ability to establish a stable and improved credit standing with investors.”
Underscoring the need for a better picture of New Jersey’s debt affordability, the sponsors pointed to the most recent annual debt report released by the Treasury Department, which showed that the state borrowed more than $3.4 billion in FY 2015 and total bonded debt now exceeds $36.2 billion.
“After multiple credit downgrades over the last few years, performing a debt affordability analysis must be a crucial part of the plan to enhance New Jersey’s credit rating,” said DeAngelo (D-Mercer/Middlesex). “Having a clear portrait of the state’s debt will encourage greater fiscal responsibility.”
“Debt affordability analyses provide the kind of context that can help the state make more prudent financial decisions,” said Lagana (D-Bergen/Passaic). “This legislation is about promoting a more fully informed fiscal policy discussion on the state’s long-term debt portfolio and ensuring sufficient financial capacity for essential capital projects.”
“New Jersey owes it to taxpayers to take on a course of action that will help the state better manage its debt and restore its credit rating,” said Houghtaling (D-Monmouth). “Other states have successfully worked to reduce their debt burdens by requiring debt affordability analyses. This is a method that clearly works, and New Jersey ought to employ it.”
Under the bill, the analysis would include:
- An estimate of revenues available for the next 10 fiscal years to pay debt service on the debt listed in annual State Debt Report, including state general revenues plus any revenues specifically pledged to pay debt service;
- An estimate of additional debt issuance for the next 10 fiscal years for the state’s existing borrowing programs;
- A schedule of the annual debt service requirements, including principal and interest allocation, on outstanding state debt and an estimate of the annual debt service requirements on the additional debt projected for existing borrowing programs for each of the next 10 fiscal years;
- The calculations and listing of pertinent debt ratios, including, but not limited to, debt service to state revenues available to pay debt service, debt to state per capita personal income, and debt per capita for the state’s net tax-supported debt;
- The estimated debt capacity available over the next 10 fiscal years benchmarked to various debt ratios of debt service to state revenue exceeding current actual percentages;
- A comparison of the New Jersey state debt ratios with the comparable debt ratios for the 10 most populous states;
- An overview of the state’s general obligation credit rating and a review of the criteria used by municipal securities rating services in rating governmental obligations; and
- Any other information the Commission on Capital Budgeting and Planning deems relevant.
The measure, which the Assembly passed 66-7-1, now awaits Senate consideration.