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House of Representatives
Session of 2015 - 2016 Regular Session


Posted: April 23, 2015 04:17 PM
From: Representative John A. Lawrence and Rep. Todd Stephens
To: All House members
Subject: Lease-Back Debt Itemization Bill
Colleagues -
In the near future, we will introduce legislation to require legislative approval for the Commonwealth or any of its departments, agencies or authorities to enter into a “lease-back debt obligation.”
These arrangements have also been called “installment purchase agreements.” But, the transaction is virtually the same. A Commonwealth entity is the lessee and makes payments pursuant to a lease agreement which are used to service bond obligations. Effectively, this is “stealth debt,” and is typically serviced by Commonwealth appropriations to different agencies and authorities under their general government operations (GGO) line in the annual budget.
The General Assembly, the branch of government solely vested with the power of appropriation under the Constitution, only finds out about these agreements long after the ink is dry and the obligation already exists. Failing to meet these lease-backed debt obligations would have a direct and substantial impact on the Commonwealth’s credit ratings.
Currently, there are nine (9) such lease arrangements. All of these “off the books” debt deals were created under the Rendell administration. The outstanding principal balance on these debts is nearly $785 million. Annual debt service (i.e. the “lease payment”) paid out of the General Fund is about $64 million; with an additional $27 million paid out of the Gaming Economic Development and Tourism Fund (though, if the GEDTF funds fall short of the annual “lease” payment, the Commonwealth is obligated to make up the difference).
Using “lease-back” debt is the equivalent of paying the electric bill with a credit card. These “stealth debt” obligations currently encumber $64 million that should be used for the current operational expenses of government.
My legislation would require the administration to introduce a Lease Backed Debt Itemization Bill and obtain a super-majority vote in the General Assembly before entering into such agreements. This ensures that the power of appropriation remains with the General Assembly and we, as a Commonwealth, only enter into these agreements with full disclosure of all the relevant aspects of the proposal.
We urge you to add your name to the list of cosponsors to put an end to “stealth debt” by bringing a level of openness and transparency to the process.

Introduced as HB931