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House of Representatives
Session of 2017 - 2018 Regular Session


Posted: January 26, 2017 04:01 PM
From: Representative Jesse Topper
To: All House members
Subject: Co-Sponsorship: Capital Facilities Debt Reduction - Annual Spending and Borrowing Limits
In the near future, I will be introducing 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 2015-16 shows the following:

• Even though growth of our GO debt slowed substantially under the Corbett Administration, our general obligation debt obligation for outstanding at the end of Fiscal Year 2015-16 was about $11.6 billion. That’s an increase of 78% in just 13 years since the beginning of the Rendell Administration. It is important to note that the amortization method for debt changed during the Schweiker Administration from level principal to level annual debt service. The level annual debt service methodology defers principal retirement to later years. This methodology serves to increase debt outstanding and consequently, increase debt service costs.

• Debt service increased by $526 million during this same timeframe to $1.26 billion in Fiscal Year 2015-16. 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 $4.9 billion of the Commonwealth’s General Obligation debt load; RACP accounts for another $2.6 billion. Together, they make up more than 70% of the Commonwealth’s GO debt obligation. The debt service on these two categories of Capital Debt accounted for about $816 million in FY 2015-16.

This legislation amends the “Capital Facilities Debt Enabling Act” to establish an annual spending limit on RACP and PIP projects. Projections show that if we put 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.

Introduced as HB81