Lamont: Cut back On Bonding To Manage Debt -- CCM Has Concerns
CT Post, February 15, 2019
By Ken Dixon
As part of a new effort to cut the state’s long-term debt on Connecticut’s “credit card,” Gov. Ned Lamont on Tuesday warned that he will be pulling back on big investments, including new school construction.
In what has become a daily rollout of details in advance of the governor’s two-year budget proposal next week, Lamont, speaking during a breakfast meeting with the Waterbury Regional Chamber of Commerce, said he wants to drastically reduce debt.
Lamont wants to decrease state borrowing by 39 percent, amounting to hundreds of billions of dollars from the average annual $1.6-billion in debt amassed under Gov. Dannel P. Malloy. Lamont’s target is to save $2 billion over the next 10 years. He wants to cut bond authorizations, through the State Bond Commission, which he controls, by $600 million a year, with an annual debt ceiling of $960 million per year.
That should put a squeeze on new school construction, which makes up a bulk of annual capital projects and in recent years pushed annual bonding authorization to about $2 billion.
State Senate Minority Leader Len Fasano, R-North Haven, said he was encouraged by a “long overdue” initiative to reduce borrowing that Lamont is expected to detail in his Feb. 20 budget proposal.
“State bonding should only be used for essential functions of government and long term investments that add value to our state,” Fasano said. “Unfortunately, under the previous administration, Connecticut drifted away from that understanding. For years, Gov. Malloy used the state’s credit card as a way to assure allegiances, borrowing to pay for political handouts. Those actions increased Connecticut’s bonded indebtedness by $6 billion, skyrocketing fixed costs and making it more difficult to fund core services.”
Alocating bond money for political favors in the State Capitol goes back decades, including Republican Gov. M. Jodi Rell, her Republican predecessor John G. Rowland, and Lowell P. Weicker Jr., an independent w2ho took office in 1991.
It is uncertain if the bonding cutback would impact plans for a new Bassick High School in Bridgeport. Several years in the making, the plan is to replace Bassick with a new building at the same location for $115 million. Up to 70-percent of that price tag would be paid by the state.
Bassick was one of just eight projects on a priority list sent to the governor and legislature for 2019. The design phase of the project is underway. One of Bassick’s two wings is 90 years old and it is the last of the city’s high schools to get a make over.
State Rep. Steve Stafstrom, a major backer of the plan, said he was uncertain where the governor’s announcement put the project until his budget is presented.
The idea is not only to rebuild Bassick, but to give it an advanced-manufacturing focus to prepare teens for 21st century jobs.
“Getting a new Bassick built remains a top priority and something I will absolutely be advocating for this session,” Stafstrom said.
Facind deficit back to top
Lamont is facing an estimated $1.5-billion deficit in the budget set to start July 1, along with up to $100-billion in under-funded pension liabilities for state employees and public school teachers.
“The state has had a problem putting costs on Connecticut’s credit card that it simply can’t afford to pay,” Lamont told the chamber breakfast. “As we get ready to release a budget that will reshape and stabilize Connecticut’s financial future, it is essential we look at our state’s borrowing and how the size of those future debt service costs will pile onto existing obligations - impacting our future, and our children’s. To trim costs down the road, we have to reduce our bloated capital spending starting right now.”
Lamont does not intend to halt any school projects under construction under his “debt diet” plan. Nor will he scale back major infrastructure and transportation projects. He has canceled the January and February meetings of the bond commission as part of his plan to limit the panel’s agendas to “critical needs only.”
The Connecticut Conference of Municipalities, meanwhile, is concerned that a lowering of expectations on investment returns in the Connecticut Municipal Employees’ Retirement System, from the current 8 percent, down to 7 percent, means higher costs for towns and cities.
The state Retirement Commission on Monday accepted the lower rate, but more realistic rate on returns in a five-year phase in that would result in an increase of employer contributions of up to 2.5 percent per year over the five years that could amount to a 21 percent jump in required payments, CCM said.
The CCM calculated that it could mean $3.8 million more for the city of Bridgeport to fund; $528,000 for Branford; $220,000 for Seymour; $178,000 for Redding; $177,000 for Weston; $90,000 for Easton; and $79,200 for Oxford.