Bipartisan Debt Reduction Vetoed by Gov. Wolf
10/24/2018
HARRISBURG – Speaker Mike Turzai (R-Allegheny) today criticized Gov. Tom Wolf’s decision to veto House Bill 83.

“Gov. Wolf’s decision to veto legislation that would simply ensure that state debt is paid down quicker and at lower interest costs is fiscally irresponsible and disrespectful of Pennsylvanians’ hard-earned dollars,” Turzai said. “It is particularly egregious considering its passage in the House and Senate was near unanimous.”

This bill, sponsored by Rep. John Lawrence (R-Chester/Lancaster), passed the House 188-2 and the Senate unanimously.

The only reason the governor could provide for vetoing the bill was that it would remove flexibility when refinancing debt. However, the bill expressly would exempt debt for refinancing.

“Did he even read the bill?” Turzai asked

The bill would have required the administration to use responsible debt management practices when repaying new capital debt. Under the bill, new capital debt would be paid off using a level principal payment approach. The Commonwealth used this approach until 2001 when it switched to the level debt payment approach as a budgetary gimmick to provide short-term savings. However, in the long run, it costs taxpayers considerably more.

The legislation also would have produced budgetary savings over time. An analysis by House Appropriations Committee staff estimated that this one reform would reduce outstanding general obligation debt by $1 billion over 20 years. Savings would have been accomplished by paying more of the principal of the loan at the outset, which reduces the amount of interest incurred.

For example, issuing a 20-year bond for $1 billion at a 4 percent interest rate would have an interest cost of $454 million under the current (level debt payment) method of amortization. Alternatively, under the required payment method in the bill (level principal payment), the interest cost would be $420 million, resulting in a savings of $34 million in interest costs over the 20-year payback period.

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

Media Contact: Paul Engelkemier
717.783.1315 (office)
Pengelkemier@PAHouseGOP.com
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