Gov. Charlie Baker’s administration should boost state capital borrowing by no more than about 3 percent, a committee of state finance experts plans to recommend this week.
The Capital Debt Affordability Committee by Thursday is expected to report that Massachusetts can afford $2.26 billion of bonding for capital spending in fiscal year 2018, an increase of about $70 million or 3.2 percent over the current year, according to Executive Office of Administration and Finance officials.
To reach its recommendation, the committee used as a definition for debt affordability, “the ability to sustainably meet projected debt service within the budget without raising taxes to uncompetitive levels or negatively impacting critical public services.”
The panel includes representatives of A&F, the Treasury, the comptroller, the Department of Transportation, an outside capital planning expert and others. It determined an administrative bond cap of $2.26 billion “balances demand for state infrastructure investment with recognition that increasing fixed obligations may limit fiscal flexibility in the future,” and the recommended level of debt “falls within targeted debt service to revenue ratio levels.”
If agreed to by Baker, the recommendation would keep the administration on a more conservative capital spending path compared to Gov. Charlie Baker’s predecessor, Gov. Deval Patrick. Those with a stake in capital spending are also monitoring President-elect Donald Trump infrastructure spending plans.
After at least five years of $125 million increases, the maximum allowable amount, the Baker administration held capital spending flat for fiscal 2016 and put a freeze on plans for a big expansion of the Boston Convention and Exhibition Center. Last year, the committee approved a $65 million, or 3 percent, increase in bonding for capital spending.
As of Oct. 31, the state had approximately $25.2 billion in outstanding direct debt, according to state financial disclosure statements, $20 billion of which is subject to the debt limit.
A&F projects that Massachusetts will have $20.9 billion in outstanding debt subject to the limit at the end of this fiscal year. The debt ceiling will increase to $22.9 billion in fiscal 2018, which begins July 1, 2017.
Executive branch budget officials had projected that Massachusetts would hit the debt ceiling for the first time this fiscal year, but later said updated projections showed the state remaining just under the limit this fiscal year and bumping up against it in fiscal 2018.
