BRADENTON, Fla. - For the first time in seven years, Florida's ratio of debt service costs to available revenue in fiscal 2014 will fall below the 6% target ratio that lawmakers like to see.
The projection indicates that the Sunshine state's economy is well on the way to recovery since growing revenues are a major reason the ratio is improving. Legislators target a 6% ratio of debt service to revenues with a cap at 7%.
The lower ratio should also provide the state more bonding capacity in coming years, though the Republican-led Legislature and Republican Gov. Rick Scott have preferred to use cash rather than debt since Scott took office in January 2011.
Florida had $24.6 billion of outstanding debt at the end of fiscal 2013, according to the 2013 debt affordability report and overview of the state's bonding activities.
The report will help the Legislature formulate annual capital spending plans when this year's session begins in March.
The amount of debt the state used to finance capital needs in recent years is "down significantly," Florida Division of Bond Finance Director Ben Watkins told Scott and other Cabinet members during a presentation Jan. 22.
In fiscal 2013, the state issued $448 million of new money bonds compared with average annual issuance of $2.2 billion between 2003 and 2010. The state issued $416 million in 2012 and $888 million in 2011.
Watkins said his division has taken advantage of historically low interest rates to refund outstanding bonds, and 2013 was no exception with 10 sales refunding $2.05 billion of debt for $515 million "in avoided future interest costs."
Annual debt service in 2013 was $2.2 billion and nearly unchanged from the two prior years. In 2014, debt payments are expected to drop by $300 million to $1.9 billion annually due to the retirement of bonds from the Preservation 2000 land conservation program.
General fund reserves are an important measure to credit ratings, said Watkins, adding that fiscal 2013 ended with $3.6 billion or 14.2%, which exceeds the 10% considered minimally adequate. Reserves are projected to decrease to $3.1 billion during fiscal 2014.
Analysts also remain focused on pension liabilities and Florida ranks as the lowest state among its peer group for the adjusted net pension liability relative to personal income, per capita and gross domestic product, he said.
"This tells me that Florida is managing its pension system and liability well," Watkins said.
Florida does not issue general obligation bonds, however, its equivalent ratings are AAA from Fitch Ratings and Standard & Poor's, and Aa1 from Moody's Investors Service.