The Mississippi Legislature will end its one-year bond bill moratorium in 2013, provided the spending levels and project priority lists largely mirror those contained in the Senate bond bill shelved in the closing days of the last session.
That’s the prediction of Lt. Gov. Tate Reeves, who kabashed the 2012 bill over displeasure with attempts by the House of Representatives to fatten up a $123-million Senate capital expenditures bill that included $50 million in appropriated dollars and $73 million in bond spending. House leaders had proposed $210 million bond borrowing.
“I will support much like I did last year a bond bill that is reasonable and rational in size,” Reeves said last Tuesday, shortly after the Joint Legislative Budget Committee approved a $5.52-billion spending blueprint for the new budget year.
The bill that came out of the committee has $20 million in general fund appropriations for bridge repair — a step Reeves hailed as the state’s new preference to use “cash not bonds” for recurring repairs.
Reeves wants to extend the pay-as-you-go strategy to upkeep of buildings on the state’s eight college campus. “I think the best way to do that is through the appropriation process and not through bonding,” he said.
Slicing the $20 million from a 2013 bond bill was welcomed by others with a stake in what ultimately goes into the FY13 bond bill by creating more room for their projects.
Chief among those projects is a new medical education building for the University of Mississippi Medical Center in Jackson, a project estimated at more than $60 million for which the university wants around $30 million put into this year’s bond bill. The med school money was in last year’s Senate bill and Reeves says he has no problem keeping it in the new bill. He said he also supports maintaining money for a new nursing education building at the University of Southern Mississippi.
Rep. Jeff Smith, a veteran legislator from Columbus who chairs the House Ways and Means Committee, has the new med school building atop his priority list, as well. But he is not buying into Reeves’ idea of funding maintenance of the state’s college facilities through annual appropriations.
He said he wants to avoid having the Institutes of Higher Learning “come in year in and year out and beg the Legislature for money for projects and repairs and renovations.”
The House wanted a four-year spending allocation for the Institutes of Higher Learning last year but seek a three-year allocation in the new session, according to Smith.
The absence of a bond bill last year and uncertainty over prospects for one this year led the IHL’s leadership to warn a new round of tuition increases could be ahead. “The IHL has two sources of income: the Legislature and the students,” Smith noted. “You certainly hate to go the bond route but you have to make sure there is funding to take care of the buildings they’ve got.”
Smith said he sees funding economic development incentives for use by the Mississippi Development Authority as another key priority for a bond bill, including grants for local infrastructure improvements that new manufacturers will need to begin operations.
Also, Agriculture Commissioner Cindy Hyde-Smith is lobbying legislators to insert $30 million into the 2013 bond bill to cover renovations of the aging Mississippi Coliseum and the Mississippi Trade Mart. Without some significant work, each of the venues could see a falloff in usage, leading to a loss of revenue that helps support other facilities within the Mississippi Fairgrounds, Hyde-Smith said in an interview in late summer.
Smith said he has spoken with Hyde-Smith, a former state senator from Brookhaven, about the allocation and is awaiting more projections on revenue the Coliseum and Trade Mart could generate through increased bookings if they undergo multi-million-dollar fixups.
“She told me we should either tear it down or make it feasible,” Smith said of the Coliseum in his talk with Hyde-Smith.
Before anything happens on the borrowing front, legislative leaders must agree that a bond bill will happen. “We never got close last year,” Smith said. “There was a sense in the Senate that we could take a year off.”
In addition to Reeves’ willingness to OK new bond spending, Senate Finance Chairman Joey Fillingane “is ready, willing and able” to give a nod to a bond bill, Smith said.
Fillingane did not return a phone call seeking comment.
In contrast to the 2012 session, “There is a sense in the Senate now that if they could do it over again, it would be done differently,” Smith said.
Some of that regret is rooted in the historic attractiveness of the bond market at the moment — at least on the issuer side. “Bonds are so low now that if you are going to do a bond, right now is the time to do it,” Smith said, putting 3 percent on tax exempt bonds as a good bellwether.
Whatever spending makes it into the bond bill must clear the Bond Commission, which consists of Gov. Phil Bryant, Attorney General Jim Hood and Treasurer Lynn Fitch.
About $1 billion in borrowing proposed in previous bond bills awaits approval by the commission, which is a big reason Reeves said he felt the state could take a year off from acting on new bond bills. That, Reeves said, “is $1 billion of potential new debt that could go on the books.”
Under Gov. Bryant’s budget proposal the state would limit new borrowing in 2013 to the amount of debt the state will retire — roughly $242 million. But even with that strategy, the $1-billion debt awaiting a green light from the Bond Commission ensures the state will be increasing the borrowing side of its ledger, Reeves stressed. “If we pay off $240 million and the Legislature authorizes an additional $240 million and the $1 billion is out there, our bond debt is going to go up.”
Bryant says that won’t happen because as chairman of the Bond Commission he will ensure his edict on new debt equaling retiring debt is followed. “By doing so, Mississippi should see its bonded indebtedness decline over time,” he said.
The only exception Bryant said he is willing to make would be the issuance of bonds for a major economic development project that would pay its own debt service through higher general fund tax revenues.
Treasurer Fitch said she is on board with Bryant’s desire to whittle down the hundreds of millions the state pays in debt service each year. “It is imperative that we decrease our state’s debt, so that we can spend our state dollars on programs and projects that matter to the future of the state, instead of on debt service.”
She said she wants more attention paid to matching capital projects to the term of the bonds. “Issuing 20-year bonds to pay for air conditioning units and sprinkler systems is not an effective use of state funds,” Fitch said.
A goal for 2013, she said, is to initiate a Debt Affordability Study that will provide a context to plan debt financing, track the debt and set guidelines for future issuance of debt. “Given increasing scrutiny from the rating agencies, a debt affordability study will demonstrate our commitment to carefully and prudently manage our debt program.”