Rep. argues for tighter limit on bonding capital projects
CONCORD - The state has taken on too much debt and should limit bonding going forward, the House Finance Committee was told Thursday.
Committee member Rep. Neal Kurk, R-Weare, and several other lawmakers want to limit future bonding for capital construction projects to 90 percent of what was paid off during the prior year.
The committee held a public hearing on House Bill 614, which contains the restrictions sought by Kurk.
The limit would return the state to its "more traditional level" of bonding, Kurk told the committee. He said the state's indebtedness has grown substantially since 2009, but acknowledged it is still well below the 10 percent limit favored by bond rating agencies.
He noted the debt ratio has grown from 5.7 percent of general fund revenues in fiscal 2008 to 6.85 percent in 2012, while the per capita debt has grown from about $500 a decade ago to $758 in 2012.
He noted his proposal would need to end after several bienniums or the state's bonding authority would be too low.
"New Hampshire doesn't have a balanced budget amendment. The reason we have a balanced budget is because we have backbone," Kurk told the committee. "Our backbone with the operating budget is not as strong when it comes to debt. The purpose of this bill is to remind us we need to have backbone."
He said the more the state pays to service its debt, the less money it has for its operating budget.
State Treasurer Cathy Provencher opposed the bill, saying it would take away the state's flexibility, but agreed with Kurk the state indebtedness is going in a direction "we do not want to head."
Provencher recently told the House Public Works Committee it should hold capital projects to $125 million or less for the upcoming biennium.
If lawmakers heed her advice over the next few years, the state will retire $22 million more in debt than it issues in new debt through 2019, she told the Finance Committee.
She said the recent spike in state debt is the result of some one-time issues such as bonding school building aid and the economic crisis with assets, personal income and revenue on a downward trend.
"In 2011, we authorized more debt than in recent memory," Provencher said, "but in 2013 we are right back to where we were."
Provencher told the committee the real negative implications for the state's bond rating are its liability for state retirees' health care costs and the state pension's unfunded liabilities, one of the worst in the country.
There is a plan to fix the pension problem, although it is costly, she said, but there is no plan to fix the retirees' health care issue and that is two or three times higher.
The committee did not make an immediate recommendation on the bill.