State Treasurer Denise Nappier. Contributed photo.
HARTFORD – The governor’s budget chief says it would cost the state hundreds of millions of dollars, but State Treasurer Denise Nappier said this morning that an option in the sale of bonds could save Connecticut even more in the long run.
During a public hearing before the tax-writing Finance, Revenue & Bonding Committee, Nappier said that using premiums that bond purchasers offer for slightly higher interest rates could help pay for more long-term capital projects.
“This is a compelling opportunity to manage long-term debt,” Nappier said, stressing that her bill would strengthen the state’s credit worthiness while reducing overall debt levels and long-term debt costs.
Premiums are up-front cash payments the state receives from investors that purchase Connecticut’s General Obligation bonds in the national marketplace. “This legislation is consistent with responsible borrowing and stewardship of public resources,” Nappier told the committee.
She calculated that if the General Assembly had approved the proposal when she first proposed it in 2005, the state’s debt would be $420 million less today.
The $300-million bond sale of last December, which generated $37.7 million in premiums that were transferred to the General Fund, would have saved the state $11.6 million over 20 years if directly applied to the cost of previously approved state projects.
Secretary of the Office of Policy and Management Benjamin Barnes.
Still, she asked that if approved, the law should not take effect until July 1, 2017. Benjamin Barnes, who as secretary of the Office of Policy and Management is Gov. Dannel P. Malloy’s budget chief, in written testimony, opposes the bill because it would remove premium income from the General Fund. Initially, it would cost the state about $178 million over two years to switch to the new procedure, Nappier admitted, adding that it was a reason why she wants to delay it for two years.
“Should we not be implementing this sooner?” asked Rep. Vincent J. Candelora, R-North Branford, a committee member. “This is not the best of times,” Nappier replied. “You’re creating a sound fiscal budgeting tool for the Legislature,” Candelora concluded.
Other states that use the premium income for paying for projects include Ohio, Wisconsin, Alaska and Massachusetts.
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