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Posted at 2:54 PM ET, 01/25/2011

Legislators want to limit future debt

By Anita Kumar and Rosalind S. Helderman

Senate Majority Leader Richard Saslaw wants add language to Virginia's constitution that would cap the amount of debt the state could take on the future, but he says he is not targeting Gov. Bob McDonnell's current proposal to bond $2.9 billion over the next three for transportation.

"I made a commitment to people I wouldn't interfere with what's going on now.'' Saslaw said. "It's more about future governors than this situation. We're going to try to get it straightened out."

Del. Mark Cole (R) has introduced a similiar bill in the House.

Saslaw (D-Fairfax) opposes McDonnell (R)'s plan to issue nearly $3 billion in bonds for road improvements, although five other leading Democrats in the Virginia Senate crossed party lines Monday and agreed to co-sponsor the bill.

For years, Virginia has used a self-imposed cap that required the state not take on debt equal to more than annual debt service payments for each of the next 10 years. The cap has helped the state hold on to its vaunted AAA-bond rating.

But in November the Debt Capacity Advisory Committee, made up of legislative and gubernatorial staffers, voted to recommend the state pay debt service each year that equals 5 percent of the average annual revenue for the next 10 years. By taking an average of future years' revenues, it allows the state to take into account future growth --when the economy has presumably turned around and revenues have become healthy.

The state will still be eligible to borrow the same amount over a decade but more money would be available during the first few years.

"Just like a responsible individual uses a mortgage to purchase a house, Virginia similarly only uses debt for major capital projects. We do not use debt for operational expenses,'' McDonnell spokesman Tucker Martin said. "The commonwealth is one of the lowest debt states and is also low among the AAA bond rated states. The slight reform made by the Debt Advisory Committee simply smoothes out the existing 5 percent cap over 10 year periods, allowing for greater flexibility in the use of the state's bonding capacity. Wall Street has been thoroughly briefed on the reform, and has no concerns whatsoever about it. It is a fiscally responsible step that will ensure we can undertake major projects when they are the most affordable."

By Anita Kumar and Rosalind S. Helderman  | January 25, 2011; 2:54 PM ET
Categories:  Anita Kumar, General Assembly 2011, House of Delegates, Robert F. McDonnell, Rosalind Helderman, State Senate, Transportation  
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