Rep. Bob Vogel, R-Elko New Market, is the chief author of a bipartisan bill that would reinstitute a ceiling for debt payments related to state capital investment borrowing – aka, bonding.
Vogel, a banker by day, said a variety of factors have raised payments made on debt service by nearly double over the last several years. Nonpartisan reports show growth from $409 million in 2008 to $752 million in 2015, a trend Vogel said started around the time the state’s limit on debt payments was removed.
Vogel said he proposes setting a debt-service cap at 3.5 percent of projected general fund revenue because he sees the current rate of growth in debt service as unsustainable and threatening to overburden the state’s taxpayers.
“There are other tests the state does in assessing debt capacity, but right now we are just looking at how much debt is outstanding and not measuring the amount of payments the state is making in relation to revenue it is receiving,” Vogel said. “This is similar to a private citizen or business that maxes out their debt capacity in that it handcuffs your future. You shouldn’t borrow to the fullest just because you qualify.”
Vogel’s bill would cap state payments on borrowing at a fixed percentage of the state’s general fund revenue. His legislation only addresses bonds that come from the general fund, where that spike in debt service has occurred of late. He said there is concern the current track could negatively impact the state’s credit rating.
“The credit rating agencies haven’t expressed concern just yet, but the fear is if they get to the point of caring it will be too late because the debt already would be incurred,” Vogel said. “Prudence in borrowing now leaves us more nimble, with the ability to borrow later to respond to natural disasters or other situations that may arise.