Gov. Dannel P. Malloy got the $2.8 billion in bonding he needs to launch his transportation overhaul initiative — but not the legal ‘lockbox’ he insisted upon to protect it.
The transportation safeguards lawmakers approved Monday lack a mandated pledge to bondholders — something Malloy had said was essential to ensure dollars earmarked for transportation are spent for that purpose.
Instead legislators merely wrote in statute that transportation funds can’t be diverted for other purposes. For more than a decade, legislators and governors have assigned resources to transportation with one law, and then redirected them for other purposes with another law.
And with another significant state budget deficit projected just after the new biennial budget is over, Republican legislators charged a pseudo-lockbox was created because Democrats plan to raid new funds for transportation very soon.
The Senate voted early in Monday’s special session to approve a bond package that not only approves financing through 2020 for transportation projects, but also adopted a $5.9 billion capital bonding program for the next two fiscal years.
The program includes financing for municipal school construction, capital projects at public colleges and universities, sewage treatment plant upgrades, repairs to state facilities, housing development and miscellaneous smaller projects.
The Democrat-controlled Senate, voted 24-12 along party lines to adopt the bill. The House, where Democrats also hold the majority, approved the bond package 138-9 with bipartisan support late Monday afternoon.
“Today’s vote is the first step towards the future of a best-in-class transportation system,” Malloy spokesman Devon Puglia said. “This issue is too important — for jobs, for businesses, and for families. We would like to thank the legislature for sharing the governor’s vision to transform our infrastructure. This one vote will have ramifications that will benefit generations of residents.”
“There’s no part of the budget that we will pass that will do more to create jobs,” said Sen. Stephen T. Cassano, D-Manchester, who chairs the transportation bonding subcommittee on the Finance, Revenue and Bonding Committee.
Cassano added that “the needs are obvious to all of us who travel the roads in Connecticut.”
Malloy unveiled plans in February to start Connecticut down a 30-year path to invest $100 billion in state and federal funds on its highways, bridges, railroads, bus lines, air and sea ports and bike paths.
To help cover the debt service on this new spending, legislators and the governor agreed to dedicate a portion of state sales tax receipts to the Special Transportation Fund.
Many of the capital projects in the plan’s first five years are focused on design work for highway and bridge repair.
The bonding for Let’s Go CT includes $795 million in the next two fiscal years combined and another $2 billion for the three fiscal years after that, running through 2019-20.
To cover the debt payments on that borrowing, and to meet other transportation investments, Malloy and the legislature’s Democratic majority dedicated a portion of sales tax receipts to this initiative. That means about $160 million next fiscal year, $260 million in 2016-17, and an amount equal to one-half of 1 percentage point of sales tax receipts every year after that. In 2017-18, that half point would translate into $362 million for transportation.
But the governor also has been insisting that it’s not enough to simply to write that funding into law. In his State of the State Address in January, the governor said the state must pledge in its transportation bond covenant — effectively the control between the state and its investors — not to divert transportation funds.
“No gimmicks, no diversion,” the governor said. “And we should include a covenant with bondholders and all people of Connecticut to ensure that money set aside for transportation projects is only used for that purpose.”
Malloy added that until the legislature passed legislation with this safeguard, “I will veto any attempt to levy additional sources of new revenue for transportation.”
The governor also had called for a constitutional amendment to lock in transportation funding.
Puglia added Monday that the bonding and lockbox language set to be approved Monday was nonetheless ” no doubt a victory,” but added that the governor now wants to take a different step to safeguard transportation funding in the future.
“We believe that this is so important that our constitution should enshrine the lockbox and the values it represents,” Puglia said. “That’s why we are going to work to get it done going forward.”
But Republican legislative leaders said the message sent by Malloy and his fellow Democrats in the legislature is clear: they intend to raid transportation dollars for other purposes — and soon.
“A ‘lockbox’ sounds great and it makes people think we want to protect transportation,” said House Minority Leader Themis Klarides, R-Derby. “But there is no security. It has no teeth.”
Both Klarides and Senate Minority Leader Len Fasano noted that nonpartisan analysts are projecting an $832 million deficit built into state finances beginning July 1, 2017. That shortfall is more than double the sales tax receipts scheduled to be dedicated to transportation that fiscal year.
“I think there is no question this governor and (Democratic legislators) did this because they have every intention of stealing this money,” Fasano said. “They haven’t created a lockbox, no matter what they claim. The governor could have ordered us into special session to do a lockbox if this matter to him.”
Explaining Republican opposition to the overall bond package, Sen. Kevin Witkos, R-Canton, the second-highest-ranking GOP senator, said state officials must recognize Connecticut’s surging debt.
With about $21 billion in bonded debt, Connecticut already ranks among the most indebted states, per capita, in the nation.
And Malloy notified Wall Street credit rating agencies earlier this year that he planned to increase state borrowing dramatically in 2015, from about $1.8 billion to $2.5 billion.
“Each of us as individual taxpayers has to bear that,” Witkos said, adding that a dangerous trend in state bonding involves financing more and more operating costs traditionally paid for with cash in the budget. “We continuously move things from the general fund to bonding,” he said.
But Sen. Carlo Leone, D-Stamford, who chairs the general obligation bonding subcommittee on the finance committee, said his panel worked hard to carve out new space on the state’s credit card.
To bring the new, two-year bond package under $6 billion, legislators canceled more than $272 million in previously approved bond authorizations – most involving projects that haven’t gotten underway yet.
“We created room for the future to keep our state on track,” Leone said.