Turzai Disappointed by Senate Removal of Debt Reduction Reform Measures
10/24/2017
HARRISBURG – Speaker of the House Mike Turzai (R-Allegheny) today expressed disappointment by the Senate’s removal of debt reduction reform measures from House Bill 785 again, most recently yesterday, Oct. 23.

“Harrisburg must once again become fiscal stewards of Pennsylvania’s citizens’ hard-earned money, as we did under Gov. Tom Corbett. We cannot keep up the rate of growth in annual spending as we have under this governor, especially the level of spending in 2016-2017, which created the fiscal crisis we are now facing,” Turzai said. “One way to change the course of direction is to reduce the cost of our annual debt service, and we can only do that by enacting debt reduction measures to bring down general obligation debt itself.”

House Bill 785 included three important reforms. First, the legislation would have implemented spending controls for new projects being financed by debt. No more than $350 million in new public improvement projects, and no more than $125 million in new Redevelopment Assistance Capital Program (RACP) projects, could be released in a fiscal year. Second, the legislation would have required the administration to use responsible debt management practices by repaying new capital debt using a level principal payment approach, which saves taxpayer dollars by reducing the amount spent on interest. Finally, the original bill would decrease the RACP debt ceiling by $500 million over the next five years. While a positive measure, this does not bend the Commonwealth’s cost curve moving forward like the first two reduction reforms.

Yesterday, the Senate once again amended the legislation to remove two significant reduction reforms. The Senate removed the annual limits on new public improvement projects and new RACP projects, which would have reduced outstanding general obligation debt by $4 billion over 20 years. The Senate also removed the provision requiring the administration to use responsible debt management practices by repaying new capital debt using a level principal payment approach, which would have reduced outstanding general obligation debt by $1 billion over 20 years.

According to projections from the budget office, the Senate’s failure to enact the House reduction reforms will allow general obligation (GO) debt to increase by nearly $2 billion over the next 20 years, from $11.58 billion in 2016 to $13.404 billion in 2036, with an annual debt service increase of $340 million over the same period.

Had the Senate passed House Bill 785 as it was sent over from the House – not once but twice – the citizens of Pennsylvania would have seen the reduction of the Commonwealth’s GO debt by an estimated $5.27 billion over a 20-year period and decrease the Commonwealth’s annual GO debt service by approximately $450 million. The total reduction in debt service payment savings to the General Fund budget would equal $3.14 billion over 20 years.

The House originally passed House Bill 785 on April 4. The Senate then amended the bill on July 10 to remove the two debt reduction reforms, cut the reduction to the RACP credit limit in half (from a $500 million reduction in the “credit card” limit to a $250 million reduction) and increased the amount of borrowing. On Oct. 4, the House amended House Bill 785 in Rules, with an amendment offered by the speaker, to reinstate the needed debt reduction measures, both the limits on annual PIP and RACP grants of money and the level principal payment approach to pay down debt incurred, while leaving the RACP “credit card” limit reduction at $250 million. The House passed the bill that same day.

“I am disappointed that the Senate removed positive debt reduction reforms – for the second time – that certainly would have bent the cost curve moving forward, saving future generations in Pennsylvania billions in tax dollars. We have been trying to restore fiscal responsibility in Pennsylvania,” said Turzai.

Representative Mike Turzai
The Speaker
28th District
Pennsylvania House of Representatives

Media Contact: Stephen Miskin
717.705.1852 (office) 717.756.3936 (cell)
Twitter.com/SAM1963 / smiskin@pahousegop.com
RepTurzai.com / Facebook.com/RepTurzai / Twitter.com/RepTurzai

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