OFFICE OF LEGISLATIVE RESEARCH
BONDING PROCESS IN CONNECTICUT,
MASSACHUSETTS, AND NEW YORK
By Judith Lohman,
Chief Analyst
March 12, 2004
2004-R-0292
You asked for a comparison of the process Connecticut uses to authorize
state bonds with that used by Massachusetts and New York. You also asked
if there have been bills proposed in Connecticut in the last four
years to change the bonding process, what changes the bills proposed, and at
what point in the legislative process they were defeated.
SUMMARY
All three states require their state legislatures to approve
state bond authorizations, but only Connecticut has a special
statutory bond commission that must approve actual allocations. Only Connecticut mandates that
state constitutional officers other than the governor and the state treasurer
or comptroller be involved in the allocation decisions.
Of the three states, Massachusetts gives the
governor the most control over bonding decisions by requiring him to propose
bond authorization bills before the legislature can act and allowing him to
make allocation decisions unilaterally. In New York, allocations are
part of annual budget negotiations between the governor and the legislature.
Other major differences are that New York requires voters
to approve general obligation bond authorizations and that Massachusetts requires a
two-thirds legislative majority to approve authorization bills.
Since 2000, two bills have been introduced to change aspects
of Connecticut’s bond allocation
process, particularly the procedures used by the State Bond Commission. A 2000
bill would have required the commission’s agenda to be available to members by
a specified time before each meeting. A 2004 bill also makes changes in the
Bond Commission’s membership, allows members to put items on agendas, and
requires additional reporting on bonded projects. The 2000 proposal died on the
House calendar without a vote. The 2004 bill is still under consideration by
the Finance, Revenue and Bonding Committee.
BONDING
PROCESS IN THREE STATES
Connecticut
At the beginning of each odd-numbered year, the governor
presents proposed capital and operating budgets to the General Assembly,
together with legislation needed to implement the budgets. The General Assembly
is responsible for authorizing all state bonding for particular projects or
purposes. Proposed bond authorizations are contained in bills that are subject
to the regular legislative process. The full legislature approves the
authorizations by passing one or more special and public acts, which the
governor must sign.
Even though the General Assembly has authorized bonding for
a particular purpose, before an agency may actually spend money for a project,
bond funds must be allocated expressly for the purpose by the State Bond
Commission. The State Bond Commission is a 10-member executive-legislative
committee consisting of the governor, treasurer, comptroller, attorney general,
Office of Policy and Management (OPM) secretary, public works commissioner, and
the co-chairs and ranking members of the Finance, Revenue and Bonding Committee
(CGS § 3-20).
The State Bond Commission meets periodically (usually
monthly) to allocate bonds the General Assembly has authorized to particular
projects. The governor chairs the commission and controls its agenda. The OPM
secretary acts as the commission’s secretary and keeps its records and minutes.
Massachusetts
According to a spokesperson from the Massachusetts
House Ways and Means Committee, Massachusetts’ bonding process
begins only when the governor proposes a bill containing bond authorizations
for specific purposes. The Massachusetts legislature is
barred from raising
its own bonding bills, but may amend the governor’s proposed
bond act by adding projects and earmarking general authorizations in the
governor’s bill for specific projects.
The Massachusetts Constitution
requires a two-thirds vote of the members of each house present and voting to
pass a bond act (Constitution Art. LXII, § 1).
Once authorizations are enacted, the legislature has no further
role. All allocations are the sole responsibility of the governor, who is not
bound to allocate amounts authorized. Although legislative bond authorizations
total more than $ 10 billion, according to Pat Landers, deputy treasurer for
debt management, the governor has imposed an annual administrative bond cap of
$ 1. 25 billion. The governor chooses which projects
to fund based on a five-year capital plan produced by the state’s Division of
Capital Management. Once the governor decides to fund a particular project,
money is advanced from the state General Fund. Then the state treasurer sells
bonds as needed to reimburse the General Fund, according to Landers.
New York
According to Mary Arzoumanian of
the New York State Senate Finance
Committee staff, New York’s bonding process
varies depending on the type of bonds being authorized.
The first step in authorizing state general obligation bonds
is for the New York legislature to
pass a bond authorization act. Such acts usually provide for large authorizations
for some general purpose, such as environment, clean water, or transportation.
They do not typically list specific projects.
Once passed by the legislature, a general obligation bond
authorization must be placed on the ballot at the next general election. To
take effect, the authorization must be approved by a majority of the voters. If
voters approve the authorization, the legislature and the governor enact annual
allocations for individual projects each year as part of the state budget act.
There is no separate bond commission and no periodic allocations through the
year as in Connecticut. Once the annual
allocations are approved, the state comptroller sells the bonds as needed.
The procedure for authorizing public authority bonds is
slightly different. New York’s numerous
special purpose public authorities are allowed to
issue state-backed bonds for such things as higher education and housing
capital projects. The legislature must approve this type of bonding, but voter
approval is not required. According to Arzoumanian,
public authority bonding is included in the annual budget act and, like the
general obligation bond allocations, is subject to negotiation between the
legislature and the governor on an annual basis (McKinney’s Consol. Laws of N.
Y. , State Finance Law, § 57, et seq. ).
BILLS TO AMEND CONNECTICUT’S
BOND ALLOCATION PROCESS
2000 Session
In 2000, the Finance, Revenue and Bonding Committee raised
House Bill 5866, An Act Concerning the Bond Commission Agenda. The original
bill required the State Bond Commission to give each member and the Office of
Fiscal Analysis a meeting agenda at least seven business days before each
meeting, along with the financial and programmatic information members needed
to make informed decisions on agenda items. The committee amended the deadline
to six business days before each meeting and reported the amended version
unanimously to the House floor.
The House referred the bill to the Government Administration
and Elections Committee, which gave it a unanimous favorable report, and then
to the Legislative Management Committee, which reported it favorably by an 11-9
vote. The House took no action on the bill.
2004 Session
In 2004, the Finance, Revenue and Bonding Committee raised
Senate Bill 594, An Act Concerning the State Bond Commission. The bill:
1. reduces the commission membership from 10 to nine by
removing the public works commissioner;
2. requires the commission agenda
to be available to members at least a week before each meeting;
3. allows any two commission
members to add an item to the agenda by notifying the OPM secretary at least
two weeks before the meeting;
4. requires that, before acting on an agenda item, the
commission receive a statement of (a) the full cost of the project or purpose
receiving the allocation and (b) the estimated operating costs of any
structure, facility, or equipment being built or acquired; and
5. requires the OPM secretary to
file an annual report with the Finance Committee that updates the cost
statement for each outstanding bond allocation.
The Finance Committee has not yet acted on SB 594. The bill
is scheduled for a public hearing on March 15, 2004.
JL: nf