Debt Affordability Committee September 4, 2013

Debt Affordability Committee

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September 4, 2013


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• “On or before September 10 of each year, the committee shall submit to the governor and the general court the committee’s estimate of the total amount of new commonwealth debt that prudently may be authorized for the next fiscal year”

• “The committee shall review on a continuing basis the size and condition of the commonwealth tax supported debt as well as other debt of any authority of the commonwealth…The estimate shall be made available electronically and prominently displayed on the official website of the commonwealth.”

-Massachusetts General Laws Chapter 29 Section 60B

Debt Affordability Committee’s Charge


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Meeting Topics

1. Introductions – April 26, 2013

2. Tax Supported Debt – May 17, 2013

a. Tax Supported Debt Part 2 – May 31, 2013

3. Debt Ratio Comparisons – June 20, 2013

4. Debt Service and Authorizations – July 17, 2013

a. Public Hearing – July 17, 2013

5. Preliminary Recommendation – July 31, 2013

6. Recommendation – August 15, 2013

7. Recommendation– September 4, 2013


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• Introduction of attendees• Vote on Minutes of August 15, 2013 Meeting• Patrick Administration Long-Term Fiscal Policy Framework• Debt Ratio Review• Update on County Debt Research and Debt Service Scenarios• State Debt Affordability Policies/Measures• Report Due Date• Recommendation• Topics for Future Consideration• Next meeting

Today’s Agenda


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• August 15, 2013 – VOTE

Minutes


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Patrick Administration Long-Term Fiscal Policy Framework

• In May 2012, the Patrick Administration released the Administration’s Long-Term Fiscal Policy Framework.

• The Long-Term Fiscal Policy Framework included three goals: – (1) structural balance; – (2) sustainable spending growth; and – (3) disciplined management of long-term liabilities.

• This Framework assumed debt service would grow at a rate of 4.4% per year.

• Using the Patrick Administration’s FY2013-FY2017 Capital Investment Plan and debt affordability analysis assumptions, debt service will grow an average of 2.2% per year from FY2015-FY2019.


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Pertinent Debt Ratios

• Statute– Debt service to Governmental revenues – Debt to personal income – Debt to estimated full-value of property – Debt per capita

• Other– Debt service as a % of personal income – Debt as a % of GDP– Debt service as a % of GDP– Debt service as a % of total expenditures


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Debt Service to Governmental Revenues

Massachusetts

ConnecticutM

aine*New Ham

pshireNew YorkRhode IslandVerm

ont**M

arylandM

innesotaNorth CarolinaOhio**Virginia

0%2%4%6%8%

10%12%

Debt Service as % of Revenues

*Not included moral obligation debt at $4.5 billion** "Annual Debt Service" assumes the FY13 projection as footnoted as no debt service was listed for 2012


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Debt to Personal Income

Massachusetts

ConnecticutM

aine*New Ham


ont**M

arylandM


0%2%4%6%8%

10%12%

Debt to Personal Income



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Debt per Capita

Massachusetts

ConnecticutM

aine*New Ham


ont**M

arylandM


$0$1,000$2,000$3,000$4,000$5,000$6,000

Debt per Capita



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Debt Service as a % of Personal Income

Massachusetts

ConnecticutM

aine*New Ham


ont**M

arylandM


0.0%0.2%0.4%0.6%0.8%1.0%1.2%

Debt Service as a % of Personal Income



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Debt as % of GDP

Massachusetts

ConnecticutM

aine*New Ham


ont**M

arylandM


0%2%4%6%8%

10%12%

Debt as % of GDP



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Debt Service as % of GDP

Massachusetts

ConnecticutM

aine*New Ham


ont**M

arylandM


0.0%0.2%0.4%0.6%0.8%1.0%1.2%1.4%

Debt Service as % of GDP



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Debt Service as % of Expenditures

Massachusetts

ConnecticutM

aine*New Ham


ont**M

arylandM


0%2%4%6%8%

10%12%

Debt Service as % of Expenditures



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Update on County Debt Research and Debt Service Scenarios


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State Debt Affordability Policies/Measures


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Report Due Date


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Recommendations

• Definition of Affordability: The ability to meet debt service requirements without raising tax rates to uncompetitive levels and without negatively impacting the provision of critical public services.


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Recommendations

• The Committee recommends an amount of between $__ billion and $__ billion as being the total amount of new Commonwealth debt that may be prudently issued in FY15– Results in projected debt service in the range of $_____

billion in FY15, which is ___% of projected budgeted revenues

– This amount of additional debt service is not predicted to cause the Commonwealth to raise tax rates nor negatively impact the provision of critical public services


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Topics for Future Consideration

• Pensions• OPEB• Ratings• Other Topics


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Next Meeting Topics

Documents

Debt Affordability Committee September 4, 2013