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Debt Affordability Committee June 20, 2013

Debt Affordability Committee June 20, 2013. Debt Affordability Committee’s Charge.

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Debt Affordability Committee June 20, 2013

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  1. Debt Affordability CommitteeJune 20, 2013

  2. Debt Affordability Committee’s Charge • “On or before September 10 of each year, the committee shall submit to the governor and the general court the committee’s estimate of the total amount of new commonwealth debt that prudently may be authorized for the next fiscal year” • “The committee shall review on a continuing basis the size and condition of the commonwealth tax supported debt as well as other debt of any authority of the commonwealth…The estimate shall be made available electronically and prominently displayed on the official website of the commonwealth.” -Massachusetts General Laws Chapter 29 Section 60B

  3. Meeting Topics • Introductions – April 26, 2013 • Tax Supported Debt – May 17, 2013 • Tax Supported Debt Part 2 – May 31, 2013 • Debt Ratio Comparisons – June 20, 2013 • Debt Service and Authorizations – July 17, 2013 • Public Hearing – July 17, 2013 • Recommendation – August 15, 2013 • Final Report – September 5, 2013

  4. Today’s Agenda • Introduction of attendees • Vote on Minutes of May 17, 2013 and May 31, 2013 Meetings • Rating Agency Criteria • Comparison States – Final list • Pertinent Debt Ratios • July Meeting – July 17th • Public Hearing • Debt Service • Authorizations

  5. Minutes • May 17, 2013 – VOTE • May 31, 2013 – VOTE

  6. Rating Agencies The Commonwealth uses the three major rating agencies: • Fitch Ratings • Moody’s Investors Service • Standard & Poor’s • Working Group chose to use all comparison information from Standard & Poor’s, except as noted

  7. Rating Agency Criteria • Rating Agencies focus on four main criteria • Debt • Economy • Finances • Management

  8. Debt and Liability Profile • Debt burden • Pension liabilities • OPEB risk assessment • Other: • Debt amortization • Derivative profile • Fixed rate vs variable rate • Future capital requirements • Nondebt liabilities • Indirect risks and contingent liabilities

  9. Economy • Demographic profile • Economic structure • Wealth and income indicators • Economic development • Other: • Industrial diversity • Employment volatility • Tax burden

  10. Finances/Budgetary Performance • Financial management assessment • Budget management framework • Budget Reserves • Liquidity • Tax/revenue structure • Revenue forecasting • Service levels • Structural budget performance • Other: • Operating margin trends

  11. Governance/Management • Fiscal Policy Framework • Balanced Budget requirement • Disbursement autonomy • Voter initiatives • Legal framework for debt • Intergovernmental funding • other: • Institutionalized policies • Financial reporting and accounting • Political, taxpayer and labor environment • Revenue and spending limitations

  12. Comparison States Additional • Maryland • Minnesota • New Jersey • North Carolina • Ohio • Oregon • Pennsylvania • Washington Required • Connecticut • Maine • New Hampshire • Rhode Island • Vermont • New York Remove • California • Illinois • Kansas • Oklahoma • South Carolina

  13. Comparison States with Ratings Additional • Maryland (AAA) • Minnesota (AA+) • New Jersey (AA-) • North Carolina (AAA) • Ohio (AA+) • Oregon (AA+) • Pennsylvania (AA) • Washington (AA+) Required • Connecticut (AA) • Maine (AA) • New Hampshire (AA) • Rhode Island (AA) • Vermont (AA+) • New York (AA)

  14. Pertinent Debt Ratios • Statute • Debt service to General Fund revenues • Debt to personal income • Debt to estimated full-value of property • Debt per capita • Other • Debt as a % of GDP • Debt service as a % of total budget • Debt service as a % of tax levy

  15. Debt to Personal Income *Not included moral obligation debt at $4.5 billion ** "Annual Debt Service" assumes the FY13 projection as footnoted as no debt service was listed for 2012

  16. Debt per Capita *Not included moral obligation debt at $4.5 billion ** "Annual Debt Service" assumes the FY13 projection as footnoted as no debt service was listed for 2012

  17. Debt as % of GDP *Not included moral obligation debt at $4.5 billion ** "Annual Debt Service" assumes the FY13 projection as footnoted as no debt service was listed for 2012

  18. Debt Service as % of Total Budget *Not included moral obligation debt at $4.5 billion ** "Annual Debt Service" assumes the FY13 projection as footnoted as no debt service was listed for 2012

  19. Debt Service as a % of Tax Levy *Not included moral obligation debt at $4.5 billion ** "Annual Debt Service" assumes the FY13 projection as footnoted as no debt service was listed for 2012

  20. July Meeting Topics • July Meeting – July 17th • Public Hearing • Debt Service • Authorizations

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