By Rep. Steve Mentzer (R-Lititz)
The House of Representatives earlier this month advanced debt reduction legislation similar to what I have been advocating for the past several years. Last session, I authored House Bill 80
that would have restricted the debt load the state is allowed to carry at any given time.
When I introduced House Bill 80 in the 2016-17 legislative session, it would place spending controls on certain projects that are financed by carrying debt. Specifically, it would curtail by $500 million the debt carried by the Commonwealth’s grant program for the acquisition and construction of regional economic, cultural, civic, recreational, and historical improvement projects.
House Bill 80’s concept was rolled into House Bill 785
, which the House approved by a bipartisan 117-80 vote and sent to the Senate on Oct. 4.
Now, House Bill 785 is a bit of a compromise, as it only restricts by $250 million, but it is a step in the right direction. House Bill 785 reduces the maximum amount of capital grant debt which can be outstanding at any one time from $3.45 billion to $3.2 billion.
Why is this important?
Since 2004, Pennsylvania’s outstanding debt grew from $6.89 billion to over $12 billion – that is an increase of 74 percent over 13 years while inflationary growth was only 28 percent! Our debt service payments - the annual money coming out of our budget - grew by 65 percent over the same period.
House Bill 785 would reduce the capital grant debt ceiling by $50 million immediately, with an additional $200 million over the course of the next 4 fiscal years. It also would place spending controls on new releases of certain projects financed by debt: Public improvement projects are capped to $350 million per year and capital grant at $125 million per year.
The bill also imposes Responsible Debt Management, which requires the Commonwealth to use and "equal annual maturities" plan (i.e. equal principal payments) for retirement of principal on new capital debt.
That will pay down an additional $1 billion in principal over the next 20 years.
Every family knows that in order to get control of their finances, you first must get control of your debt. We often talk about reducing spending, and I am all for that as well. But carrying too much debt is not good fiscal management and we need to rein it in.