State Still Has Credit

By Keith M. Phaneuf

©The Connecticut Mirror

State government’s credit card still carries a large balance, but it is no longer on pace to shatter its limit. That is due to dozens of projects being scrapped and modest revenue growth that expanded Connecticut’s borrowing capacity.

According to new estimates from state Treasurer Denise L. Nappier, the state will enter the new fiscal year on July 1 an estimated $620 million below its borrowing limit.

And though the next governor and legislature still must deal with a projected $3.4 billion budget shortfall, this will give officials some new options to help balance the books, the co-chairman of a key legislative bonding panel said Tuesday.

“We needed some fiscal discipline to get here and we need more discipline going forward,” Senator Donald J. DeFronzo, D-New Britain, who heads the Finance, Revenue and Bonding Committee’s bonding subcommittee, said. “But this does give us flexibility to relieve a bit of pressure on the appropriations side of the budget.”

State government borrowed $30 million earlier this fiscal year, and is scheduled to do so again in 2010-11 to finance its main road reconstruction grant program for cities and towns. It also issued bonds during previous economic downturns to finance grant programs related to capital projects.

But DeFronzo and others were quick to note that increasing borrowing capacity can help solve the upcoming fiscal crisis, but is hardly a solution on its own.

“I hope that from this point on, we look to bond things that are going to create jobs or help achieve the strategic development needs of this state,” DeFronzo said.

Just over $200 million of that $620 million in new bonding capacity already is targeted for use. The legislature and Governor M. Jodi Rell agreed to commit $207 million in additional bonding to support a $362 million plan to build a new hospital tower and research facilities at the University of Connecticut Health Center in Farmington. The project would make the financially troubled center part of a regional health network and underwrite improvements to network hospitals in Hartford, New Britain, and Bristol.

The $207 million is dependent on the state successfully competing for $100 million in federal funds that US Senator Christopher J. Dodd inserted in the federal health care reform law. The state already has dedicated $55 million toward the project.

Senator Tony Guglielmo of Stafford, the ranking Republican senator on the bonding subcommittee, said 2011 will be a watershed test for state government’s latest attempt at borrowing discipline.

“Obviously we haven’t unlocked the secret yet because whenever we have had a little capacity in the past, we’ve used it,” he said, adding lawmakers have to accept that the days of plentiful borrowing for local projects are over. “Once the pressure relaxes here, are we going to go back to the bad old ways? ...We can’t afford to.”

Two major factors contributed to the increase in the state’s borrowing capacity: cancellation of some $570 million in previously approved bonding, and an increase in revenue projections for next year.

 (This material originally appeared at CTMirror.org, the website of The Connecticut Mirror, an independent, nonprofit news organization covering government, politics, and public policy in the state.)