Pennsylvania officials plan to price $775 million of new-money, general obligation debt in mid-January after legislators yesterday passed the state's fiscal 2010 Capital Debt Act.
The $1.68 billion borrowing plan, HB 1418, passed with a 48-to-1 vote. The bill now heads to Gov. Edward Rendell for his consideration.
The Keystone State typically issues new-money debt in the fall or early winter to help finance capital projects.
Late enactment of the fiscal 2010 operating budget postponed passage of HB 1418.
In addition, lawmakers continue to work on a table games bill that is expected to generate up to $250 million of revenue for the state this year, according to Rendell spokesman Gary Tuma. Fiscal 2010 began July 1.
The Senate late yesterday was set to amend and cast a final vote on the table games measure, SB 711, after the House passed the legislation late Tuesday evening in a final vote.
The bill would then head back to the House for debate on the amendment.
Annual state aid to colleges, universities, museums, and other such institutions is on hold until the governor signs the table games initiative into law.
SB 711 allows racetracks and casinos to implement blackjack, poker, and roulette. The current rates and fees in the bill include a one-time license fee of $16.5 million and a 16% tax on table game revenues. Of that 16%, the state will receive 14%, with counties and cities collecting 1% each.
Meanwhile, payments owed contractors for infrastructure projects have piled up, amounting to $375 million of outstanding bills, Budget Secretary Mary Soderberg warned lawmakers earlier this month.
The $775 million bond sale will price competitively, as required by state law, and roughly two-thirds of the transaction will consist of taxable Build America Bonds. The remaining portion will include traditional tax-exempt bonds priced for the retail market, according to Rick Dreher, director of the bureau of revenue, cash flow, and debt.
In looking at the state's recent short-term sale, JPMorgan was the winning bidder among eight offers, Dreher said, for $800 million of tax anticipation notes. The Tans will help the state with cash-flow needs until April's tax receipts come in. The notes priced with a 1.5% coupon and a yield of 0.299% and will mature on June 30.
This is the first short-term borrowing to help boost Pennsylvania's liquidity in more than 10 years.
For months, officials anticipated issuing $500 million to $1 billion of notes, depending upon revenue collections.
"The late passage of the budget didn't really impact our need to borrow [short term], the sizing of it is more relative to a decline in tax revenues," Dreher said.
Rendell on Tuesday announced a $450 million revenue shortfall by June 30, the end of the fiscal year, due to underperforming revenues.
From July through November, Pennsylvania's total revenue collections came in $217 million below budgeted estimates.
To offset the sluggish revenues, the governor said he would reduce spending this year by $170 million and regain $50 million from prior-year unspent funds.
Rendell will also take $230 million from the state's anticipated $354 million surplus for fiscal 2010, with $124 million remaining for future budgetary needs.
So far this year, Pennsylvania's sale tax collections are down by $150.6 million and personal income tax receipts are $105.5 million below prior estimates.
Conversely, business tax revenue is $27.8 million above earlier projections, according to the administration's mid-year budget report.
