Debate intensifies over CT’s credit card

Gov. Dannel P. Malloy’s administration continues to face criticism over its handling of Connecticut’s credit card for capital projects.

With three months to go in 2013, Malloy already has reached his self-imposed limit on designating projects for financing this year. That prompted a charge of fiscal irresponsibility from state Sen. John P. McKinney of Fairfield, one of the Democratic governor’s Republican gubernatorial rivals.

McKinney’s criticism come less than one week after a University of Connecticut report questioned a $6.2 billion backlog in the capital program. This involves financing approved by state officials, but not yet secured, on Wall Street and spent on actual projects.

In response to McKinney’s criticism, the administration challenged the Republican to point to a project on the list of those approved for bonding that he would omit.

Unlike the state budget, which follows a July 1-to-June 30 fiscal year, the bonding program is tracked according to the calendar year.

And McKinney noted Friday that if the State Bond Commission approves the projects included on its Sept. 27 meeting agenda, the total value of “general obligation bonding” for 2013 will fall just under $1.79 billion. That effectively matches the $1.8 billion limit the administration set for itself this year in reports both to the legislature and to Wall Street credit rating agencies. And the commission still has two more meetings scheduled for later this year.

“General obligation” bonds primarily are repaid with tax dollars from the state budget’s general fund, which collects receipts from income, sales and corporation taxes, as well as from most other minor taxes.

Some Republican lawmakers balked at the $1.8 billion limit Malloy set earlier this year, noting it was roughly a 28 percent increase higher than the general obligation bond financing the bond commission approved in 2012.

The state is not required to keep to that limit, but McKinney said, “This level of borrowing and these broken promises show a lack of leadership, a lack of fiscal responsibility, and a lack of consideration for the taxpaying public. It also shows a failure to learn from past mistakes.”

Financing for state government’s capital program basically follows a three-stage process:

  • The legislature has sole authority to “authorize” bonding. Every two years lawmakers adopt a schedule of projects that may be financed with long-term borrowing.
  • The bond commission — a 10-member panel of administration officials and legislators chaired by the governor — has sole authority to pick which projects will be financed.
  • And when a state agency or some other entity is ready to actually carry out a project, the state treasurer’s office is empowered to issue bonds on Wall Street to raise the funds needed to cover expenses.

So while bond commission action doesn’t necessarily mean money will be spent right away, it does represent the state’s intention to move forward at some point with a project.

And given that Connecticut has one of the largest bonded debts, per capita, of any state in the nation, McKinney said Malloy should be more restrained about assigning projects to the credit card.

“Our unemployment rate is too high, jobs are leaving the state, we are overtaxed, and our governor is doing nothing to change the trajectory of those trends,” the Fairfield lawmaker said. McKinney added he fears shattering the $1.8 billion limit could lead agencies to downgrade Connecticut’s bond rating and ultimately boost interest costs on future projects.

Malloy’s office responded Monday, saying, “The work supported by the bond commission creates jobs for Connecticut residents. It also allows the state to invest in local projects like schools, parks and senior centers. Senator McKinney should explain which important investment in job creation and qualify of life improvements for residents in all of our towns and cities he does not support.

Malloy’s office pointed to an article last week by the Providence Business News.  Citing an analysis of labor data by the Associated General Contractors of America, it reported that Connecticut led all New England states last year with a 7.3 percent increase in construction jobs.

But a recent study by the Connecticut Center for Economic Analysis at UConn said the state could be creating thousands of new jobs if it uses its credit card more efficiently.

As of July, nearly $6.2 billion in financing approved by the bond commission has yet to be actually borrowed — presumably because state agencies aren’t ready to spend the money yet. That is more than double the $3.06 billion backlog that existed when Malloy took office in January 2011.

Between 16,000 and 28,000 new jobs could be added in two years if even half of the $6.2 billion bonding backlog that currently exists is eliminated, the report says.