Legislators to break Lamont’s ‘debt diet’ by more than $1B

Keith Phaneuf

Senate Minority Leader Len Fasano threw the governor’s words about a “debt diet” back at him Wednesday.

Updated at 6:45 p.m. Wednesday with final vote on state bond package.

The Democrat-controlled legislature is expected to approve a two-year, $4.7 billion bond package Wednesday that shatters Gov. Ned Lamont’s planned “debt diet” for state borrowing by more than $1.1 billion.

The House of Representatives approved the borrowing plan 126-20 following a one-hour, early-afternoon debate. The Senate approved it 31-5 at 6:40 p.m., following a two-hour debate.

And while Democrats insisted the bond package they negotiated with the governor would advance economic development, affordable housing, municipal aid, transportation and other priorities, Republicans countered Lamont’s reversal would weaken Connecticut’s standing on Wall Street.

More than half of the Republicans in both chambers voted for the bill. But Senate Minority Leader Len Fasano, R- North Haven, said that was because the package included three overdue state grants to cities and towns that are paid for using bonded dollars, adding that many legislators were worried that would face criticism back home if they voted “no” on Wednesday.

“Governor Lamont has repeatedly told the public that he was committed to limiting bonding to the core functions of government,” Fasano said. “He has blasted his predecessors for overusing the state’s credit card. He told credit rating agencies, investors, businesses and taxpayers that he would be different. But today he is going back on that promise.”

The governor and his fellow Democrats in the legislature’s majority agreed on $2.3 billion in new borrowing for the current fiscal year, and $2.4 billion in 2020-21.

In addition, legislators already have approved $322 million in borrowing for this year and $351 million for next for capital projects at public colleges and universities and for the state’s bioscience and defense-related economic development programs.

Couple all of that with another $706 million in transportation-related borrowing approved previously for this fiscal year, and the total, potential hit to Connecticut’s credit card exceeds $6 billion over the two fiscal years combined.

Lamont, who took office in January 2019, pledged to curb this borrowing, and particularly to clamp down on the single-largest category – general obligation borrowing.

General obligation borrowing — bonds that will be repaid over many years with resources from the budget’s General Fund — should be limited to just under $1 billion per year, Lamont said. That’s in addition to the G.O. bonding used for higher education and special economic development programs.

But the bond package adopted Wednesday includes $1.4 billion in general obligation bonds for this fiscal year, and $1.64 billion in 2020-21.

Fasano, who held a late morning press conference in the Legislative Office Building, stood before a poster board containing a series of quotes from Lamont and state Treasurer Shawn Wooden hailing the debt diet during his first months in office.

“The credit rating agencies, investors, businesses around the globe and our taxpayers are watching what we do and have responded positively so far,” Lamont said last July. “As we move forward we cannot let them down by returning to old, bad habits and hoping for a different result.”

Fasano noted the average annual borrowing in the latest bond package nearly matches the heaviest level of borrowing during Gov. Dannel P. Malloy’s administration. Annual state bonding exploded dramatically under Malloy, who served from 2011 – 2018. Connecticut struggled during this period with a very sluggish recovery from the great recession and frequently used its credit card to ease pressure on the state budget.

Senate Minority Leader Len Fasano, R-North Haven, and Sen. Paul Formica, R-East Lyme, discuss the proposed bond package.

Reiss: Lamont has the last word on borrowing

But Max Reiss, the governor’s communications director, countered that the “debt diet” is not over.

That’s because legislative approval is just the first stage in a multi-step borrowing process. The State Bond Commission must approve any legislative authorization before any borrowed funds can be spent.

As governor, Lamont chairs the 10-member bond commission and his budget office sets its agenda.

Reiss noted that under Lamont’s leadership, the commission has allocated “about half of what the prior administration averaged while simultaneously making the necessary and needed investments we were able to under existing authorizations.”

Reiss added that “this is not a time for baseless allegations and finger-pointing, but it is time for effective governance of this great state and its finances, which will always be measured and balanced with making appropriate investments in Connecticut’s future.”

And the top Democrat in the Senate said the package recognizes critical needs in education, transportation, social services, economic development and housing, and would have tremendous long-term benefits.

“This is a capital bill that does meet the needs of the state of Connecticut in so many different respects,” said Senate President Pro Tem Martin M. Looney, D-New Haven, who called it “a reasonable, responsible level of capital borrowing.”

Year-long stalemate on bonding and tolls comes to a close

Wednesday’s action ended a yearlong stalemate between the governor and his fellow Democrats in the legislature over borrowing and tolls.

Connecticut ranks among the most indebted states, per capita, in the nation, and debt service costs consume more than 10% of the annual budget, a problem that prompted Lamont to press for his debt diet immediately upon taking office.

But the governor also had been urging lawmakers to curb their borrowing as part of a larger plans that also involved tolls and the state budget’s Special Transportation Fund.

Connecticut borrows just under $800 million per year for transportation work, pairing that with about $750 million in federal grants to support highway, bridge and rail upgrades. The STF covers the annual payments on that borrowing, but transportation officials say the aging, overcrowded infrastructure is overdue for a major rebuild and more resources are needed.

Lamont wanted tolls — first on cars and trucks and later on trucks only — to bolster the STF and, in turn, enable more transportation borrowing. And he frequently warned lawmakers that he couldn’t approve a bond package until tolls were resolved because — absent toll receipts — he would need to shift existing bonding away from non-transportation programs and into highway, bridge and rail work.

The governor finally conceded in February that lawmakers wouldn’t approve tolls and the new bond package does add $200 million in annual borrowing — to be repaid out of the budget’s General Fund — to complement the existing $780 million per year in bonding supported by the Special Transportation Fund.

Cities and towns receive overdue state grants

The bonding bill not only ends the standoff between Lamont and legislators but also releases three non-education grants for cities and towns that had been held up by this process.

The state will borrow $166 million per year for communities, including:

• $60 million for the Town Aid Road [TAR] grant;
• $30 million for the Local Capital Improvement Program;
• $76 million for an omnibus Grant for Municipal Projects.

Municipal advocates have argued for months that the delayed road grant is particularly problematic for local budgets.

Half of the $60 million TAR grant normally is given to communities shortly after the fiscal year begins on July 1 to help pay for summer road repaving and fall tree-clearing work. The second half goes out in early January to help fund snow plowing.

Both payments have been held up because there has been no bond package.

Mark Pazniokas :: ctmirror.org

Gov. Ned Lamont, center right, reached a deal on bonding with top Democratic lawmakers, including Sen. President Pro Tem Martin M. Looney (right) and House Speaker Joe Aresimowicz.

But Lamont has said once a bond bill is sent to his desk, he will hold a bond commission meeting soon to expedite release of the local aid.

“These are ways Connecticut is a partner for our municipality,” Looney said. While most other states have counties that assist their municipalities, Connecticut lacks this third level of government, he noted, adding that makes state assistance even more critical.

Bonding for economic development, housing, social services and coronavirus mitigation

The bonding deal includes many other components besides municipal aid.

More than $850 million over this fiscal year and next combined would be borrowed to support municipal school construction and renovation projects and another $84 million for improvements to municipal water treatment plants.

Lawmakers included $200 million for urban economic development initiatives statewide, $90 million for development of Connecticut’s deep water ports, and $30 million in economic assistance grants for small towns.

The package also includes $45 million for a new transit-oriented, quasi-public development agency and $65 million to renovate the XL Center in Hartford.

More than $200 million over this fiscal year and next combined would be authorized for affordable housing program. The bulk of those funds, $175 million, would be dedicated for the Flexible Housing Program, which provides grants and loans for the development of affordable housing projects.

Community-based, nonprofit social service agencies were winners in the bond package, receiving $50 million in total across this fiscal year in next to help cover capital expenses.

Nonprofits, who provide the bulk of state-sponsored social services for the disabled, mentally ill, abused children, drug addicts and others, also have been seeking additional operating funds in the state budget. Leaders of these nonprofits say state funding has not kept pace with the cost of inflation for nearly two decades, forcing agencies to reduce or eliminate programs and cut staff.

Lamont has not supported that request for additional funds in the operating budget to date.

Legislators also included $5 million in bond package to support various efforts to mitigate the spread of the coronavirus across Connecticut.

Other components of the package include:

• $40 million for workforce development and other job training efforts;
• $15 million to enhance local school security;
• $5 million for remediation of lead in drinking water at public schools.

Not all Republicans opposed the bond package

Not all Republicans saw the bond package as negatively as Fasano did, and that town aid played a key role.

In the House, a little more than half of the GOP minority voted for the bond package. And while the same was true in the Senate, some House Republicans publicly praised the bill.

Rep. Livvy Floren of Greenwich, ranking House Republican on the legislature’s bonding subcommittee, went so far as to say “it adheres to the ‘debt diet’ without imposing starvation.”

Floren later modified her description, saying it might better be compared to “intermittent fasting.”

Both Rep. Chris Davis of Ellington, ranking House Republican on the Finance, Revenue and Bonding Committee, and House Minority Leader Themis Klarides, R-Derby, said they voted for the deal to secure overdue aid for towns and additional funding for transportation work.

But Davis and Klarides both said the bond package was too large, and urged Lamont to use the bond commission to restrain actual borrowing.

We absolutely are 100% behind the municipal aid and the transportation funding,” Klarides said. “But you’re forced to vote for things you don’t like to get the things you do like.”

Klarides noted her caucus offered an amendment to cut more than $380 million in proposed borrowing out of the bond package, but House Democrats rejected it with a party-line vote.

But House Speaker Joe Aresimowicz, D-Berlin, said the House Republican support shows Fasano is more concerned with partisan politics than with the education, economic development, transportation, and other priorities the bond package supports.

“I’ve been saying for months now we have to put an end to this political division that’s ruling this state,” the speaker said.