TRENTON – Legislation sponsored by Senator Jeff Van Drew that would require an annual analysis on the affordability of the state’s debt load – and on the ability to afford any increases in the state’s debt – was approved today by the full Senate. It now goes to the desk of the governor.
“When residents take on debt, they have to consider whether they will be able to foot the bill for repayment both over the short and long term. The state must do the same,” said Senator Van Drew (D-Cape May/Cumberland/Atlantic). “Providing an annual report on the implications of borrowing will ensure that everyone has a grasp of the financial situation the state is in long before the bills come due. This is a common sense measure that will improve fiscal accountability and transparency at the state level.”
The bill (S1739) requires the affordability analysis to be included in the annual State Debt Report to provide executive and legislative policymakers a clear, data-driven framework for evaluating and establishing future State debt management and issuance priorities.
The affordability analysis would have to include a number of specifics such as: an estimate of revenues available for the next 10 fiscal years to pay debt service; an estimate of additional debt issuance for the next 10 fiscal years for the State’s existing borrowing programs; and a schedule of the annual debt service requirements, including principal and interest allocation, on outstanding State debt.
The report would also have to include the calculations and listing of pertinent debt ratios, including debt service to State revenues available to pay debt service, debt to State per capita personal income, and debt per capita for the State’s net tax-supported debt; a comparison of the State’s debt ratios with those for the 10 most populous states; an overview of the State’s general obligation credit rating and a review of the criteria used by municipal securities rating services in rating governmental obligations.
“Just as families across New Jersey are forced to watch every dollar they spend, so must the state,” said Senator Van Drew. “As we continue to have to make difficult financial decisions, it is important that we have consistent comprehensive reporting of our fiscal status. This analysis will provide a clear picture of the state’s debt and the effect of additional borrowing on the budget and taxpayers.”
The bill would require the report to include any other information the Commission on Capital Budgeting and Planning deems relevant. State agencies, independent authorities, and other entities issuing debt secured by State revenue, or assisting in the issuing of that debt, would be required to provide all information determined necessary by the commission in order to complete the debt affordability analysis.
The Assembly approved the measure by a vote of 77-0 in March. The Senate approved it today by a vote of 40-0. The law would take effect immediately.