Monday, April 07, 2008

Keeping us off the edge 

On August 14, 2007, there was $4.486 billion in state general obligation bonds outstanding; on Feb 1 this year the level stood at $4.339 billion. The government has to service these bonds (i.e., pay interest and principal) and this was currently forecasted for 2008 to be at the level of $409.4 million, up from $353.7 million in 2006, a rate of increase of 7.5% per year. The growth in the next biennium adds another $50 million in debt service costs. The maximum that was set for this year was $885 million, and with today's actions on line-item vetoes by Gov. Pawlenty we spent $777 (the $717 million today and the $60 million in the transit bill.)

Also worth noting: That bill obligates the state to issue bonds going forward of an additional $1.8 billion. While it has gas money dedicated to its expenditure, the state also has a guideline on debt service as a share of state personal income, which is unlikely to rise as the result of tax increases. It's not yet the binding constraint of the state's debt management policy, but any slowdown resulting from higher spending on fuel could cause the state to graze that 3% limit. Limiting the bonding bill to the lower figure chosen by Gov. Pawlenty today will give the state at least a little breathing room.

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