Leaders Laud Passage of Debt Reform and Reduction Measure
HARRISBURG – A measure aimed at reducing Pennsylvania’s debt burden passed the House and now heads to the Senate for consideration, Appropriations Chairman Stan Saylor (R-York) and Speaker of the House Mike Turzai (R-Allegheny) said today.
“This was a real team effort,” Turzai said. “For too long, debt was able to grow out of control in Harrisburg. We have been leading the charge to reduce the indebtedness of our Commonwealth, which burdens future generations of taxpayers. We need to get these reforms and reductions to the governor’s desk to continue the progress we have made over the last several years.”
“A prime focus of our caucus has been to lower the amount of debt that Pennsylvania carries,” Saylor said. “Our current debt issuance procedures need reform, and House Bill 785
will help to protect our children’s generation from carrying an undue burden.”
Specifically, the bill lowers the debt ceiling of the Redevelopment Assistance Capital Program (RACP) by a total of $500 million over a 10-year period. This is a continuation of the efforts in Act 77 of 2013 (sponsored by Rep. Matt Gabler, R-Clearfield/Elk, and then-Majority Leader Turzai) in which the RACP debt ceiling was reduced by $600 million, the first reduction in the life of the program, from $4.05 billion to $3.45 billion. The RACP program was established in 1999 and the debt ceiling was raised five times in eight years under Gov. Ed Rendell:
• 2003 – $1.51 billion
• 2004 – $2.15 billion
• 2005 – $2.65 billion
• 2008 – $3.45 billion
• 2010 – $4.05 billion
House Bill 785 also imposes limits on new project releases for RACP at $125 million and Public Improvement Projects (PIP) at $350 million annually.
Lastly, the bill requires new debt issued to use equal annual maturities repayment, also known as level principal payment. This will accelerate debt retirement and decrease the total interest payments over the life of the debt. An analysis shows that, had the Commonwealth not switched to a level debt service amortization methodology in 2001, outstanding debt would be almost $900 million lower.
In 2004, Capital Facilities Debt obligation was $6.25 billion. By 2016, that number increased to $10.43 billion, which represents a 67 percent increase in 12 years. Debt service payments made out of the General Fund grew from $669 million to $1.22 billion over the same time period.
Representative Mike Turzai
Speaker of the House
Representative Stan Saylor
Appropriations Committee Chairman
Turzai Contact: Steve Miskin: firstname.lastname@example.org
Saylor Contact: John O’Brien: email@example.com