Maryland Comptroller Peter Franchot was the lone voice opposing an increase in the state debt affordability limit Monday. Gov. Martin O’Malley’s appointees on the committee also beat back attempts by Franchot and State Treasurer Nancy Kopp to keep from floating $1.1 billion in new debt next year, in order to help jump-start a slowing economy.
The increase means the state will again be able to spend $325 million on public school construction next year, a number O’Malley is touting around the state this week.
Franchot told the Capital Debt Affordability Committee, which recommends debt limits to the governor and legislature, that the state is at “a particularly perilous moment right now. We find ourselves on the edge of a precipice.”
Franchot said that today’s meeting of the Board of Revenue Estimates was going to announce “a significant write-down,” lowering revenue forecasts.
Led by Kopp and O’Malley Budget Secretary Eloise Foster, the committee voted to increase Maryland’s debt limit from 3.2 to 4 percent of total personal income in the state, but it did not increase the 8 percent limit on debt service, the amount of interest and principal as a percentage of state revenues.
With the 8 percent debt service limit still in place, the state would still be spending less than 3.5 percent of personal income, said Patti Konrad, an aide to Kopp. The bond rating agencies in New York did not object to the increase to 4 percent of personal income, but there would have been a “negative reaction” to increasing the debt service to 10 percent, Konrad said.
State Transportation Secretary John Porcari said that increasing the state’s indebtedness to build roads and buildings would come at a time when contractors are telling him “they’re on the verge of laying off their crews.” Paul Merritt, a banker whom O’Malley appointed to the panel, said now is a good time to spend money on infrastructure like schools and highways because commodity prices are down and “it’s going to cost you more in the future.”
Franchot got a chilly response to his call in a letter Monday for a blue-ribbon commission to study state spending and revenues.
“Haven’t we done this many times?” Foster asked. “We’ve had a number of commissions over the years.”
