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House of Representatives
Session of 2015 - 2016 Regular Session


Posted: April 23, 2015 05:07 PM
From: Representative Steven C. Mentzer and Rep. Matt Gabler
To: All House members
Subject: Capital Facilities Debt Reduction
In the near future, we will introduce legislation to control the rate that the Commonwealth accumulates Capital Facilities debt and reduce our General Obligation (GO) debt and debt service over time.

In Fiscal Year 2002-03 (the last fiscal year of the Ridge/Schweiker Administration), the Commonwealth’s GO Debt (including non-highway capital facilities debt, voter approved debt and disaster relief debt) totaled about $6.5 billion and the annual debt service (the annual payment on our debt obligation) was $701 million. As you know, debt spending substantially increased during the Rendell Administration. An analysis of the Commonwealth’s GO debt and debt service for the 11 years starting with the year immediately prior to the Rendell Administration and ending with FY 2014-15 shows the following:
  • Even though growth of our GO debt slowed substantially under the Corbett Administration, our debt obligation for Fiscal Year 2014-15 is about $10.6 billion. That’s an increase of 63% in just 12 years since the beginning of the Rendell Administration.

  • Debt service increased by $520 million during this same timeframe to $1.2 billion this year. This is an increase of 81% since the beginning of the Rendell Administration.
Redevelopment Assistance Capital Projects (RACP) and Public Improvement Projects (PIP) were the two main drivers in the increase in this debt. PIP accounts for about $5 billion of the Commonwealth’s General Obligation debt load; RACP accounts for another $2.7 billion. Together, they make up more than 72% of the Commonwealth’s GO debt obligation. The debt service on these two categories of Capital Debt accounted for about $859 million in FY 2014-15.

This legislation amends the “Capital Facilities Debt Enabling Act” to establish an annual spending limit on two categories of projects under the “Capital Facilities Debt Enabling Act.” Effective July 1, 2015, and each year thereafter, new project releases would be limited to the following:

  • Redevelopment Assistance Capital Projects (RACP) would be capped at $125 million per year in new projects.

  • Public Improvement Projects (PIP) annual spending could not exceed $350 million annually.
This legislation also contains a carry-forward provision which allows any unused allocations for a project type (or half the amount allocated in that year whichever is less) to be carried forward to the next fiscal year. For example, if the administration released only $100 million in new RACP projects in a fiscal year, the remaining allocation ($25 million) could be carried forward. Similarly, if the administration did not release any projects in the PIP category (which has a $350 million annual cap), then $175 million could be carried forward to the next fiscal year.

Projections show that if we put these reasonable limitations in place, the Commonwealth’s GO debt will reach a high in 2018 and then incrementally decrease every year thereafter.

This is a measured, long-term approach to a very serious problem and I urge you to add your name to the list of cosponsors of this legislation.

Thank you.

Introduced as HB928