Connecticut Gov. M. Jodi Rell yesterday called for a new bond program that would guarantee loans to business owners as part of a package of budget proposals.
The Republican governor announced the plan in her annual state of the state address before a joint session of the Democrat-led legislature.
The General Assembly opened its 2010 session yesterday with a $500 million current year deficit and nearly $700 million deficit looming in fiscal 2011.
Under Rell’s new proposal, the state would use $100 million general obligation bond proceeds to guarantee loans made by private banks as well as to make direct loans. The program would create the Connecticut Credit Consortium, to be run by the Department of Economic and Community Development.
Rell said the program would encourage banks to lend $400 million to businesses in the state. The state would make available $25 million of funds from the bond proceeds for small business loans.
Rell also wants to cancel bond authorizations for $400 million of previously approved projects for which bonds have not yet been sold and to put an expiration date on bond authorizations that are more than five years old.
“If a project is not worthy enough to be approved after five or more years then we probably shouldn’t bond for it and pay 20 years of interest on it,” she said, according to a prepared copy of her speech.
Rell said that unused authorizations are counted as liabilities by ratings agencies. Connecticut is rated AA with stable outlook by Standard & Poor’s, AA with negative outlook by Fitch Ratings and Aa3 with negative outlook by Moody’s Investors Service.
The governor’s office yesterday evening planned to release a series of options for completing a $1.3 billion securitization that was approved last year as part of the state’s fiscal 2010 to 2011 biennium budget. The options include the possibility of bonding against lottery revenue from the game Keno and a surcharge on utilities. Office of Policy and Management spokesman Jeffrey Beckham said that while bonding is a potential, the more likely scenario is one in which a concessionaire makes an up-front payment in return for a pledge of the revenue streams. The securitization was included in revenue assumptions in the budget enacted last year.
Rell also called for the creation of a group to come up with short-term and long-term proposals to address the $9.3 billion of unfunded pension liabilities.
She also proposed new safeguards on the state’s budget reserve fund. If the state runs a budget surplus in any given fiscal year and the reserve fund’s balance is less than 10% of general appropriations that year, then the proposal would require the comptroller to deposit at least 50% of surpluses into the fund.
In December, Rell proposed measures to cut the current fiscal year deficit, but the General Assembly didn’t act on them and instead passed their own measures which Rell vetoed. In November, the state sold $600 million of tax-exempt notes with maturities out to 2016 to close the state’s fiscal 2009 deficit.