BRADENTON, Fla. - As the Mississippi Legislature's annual session winds down, the state's first Debt Affordability Study is guiding lawmakers' decisions on the use of bond financing, according to State Treasurer Lynn Fitch.
The 22-page document concludes that the state could issue $1.8 billion in new-money bonds over the next five years supported by a forecast increase in revenues. However, the March 7 report warns, "Continued uncertainties in the national and global economy present risks to the state and could affect the revenue forecast going forward."
The state constitution limits indebtedness to 1.5 times the amount of total revenue collected by the state in any one of the preceding four fiscal years, whichever is higher. As of June 30, that debt limit was $12.6 billion.
In fiscal 2013, ratio of outstanding debt to the debt limit dropped to 32.11% from 33.04%, the study said.
The treasurer's study points out that in 2000, the state's outstanding debt to available revenue was below 30%.
"Prudent debt issuance could help us return to a healthier debt ratio number," the report said. "This benchmark should be considered by the Mississippi Legislature and used as a general guide when evaluating future debt authorization."
Fitch said her office began preparing the Debt Affordability Study in the summer of 2013 to help the state better plan for current and future needs. Rating agencies also encouraged the creation of a plan for long-term budget planning.
"Policymakers will also benefit from this tool as they assess the impact of bond programs on the state's fiscal position, enabling them to make informed decisions regarding capital spending priorities and economic development needs," the treasurer said.
Fitch developed the $1.8 billion bond amount based on requests that the state's top agencies are expected to make over the next five years for capital improvements, economic development, and transportation projects.
"This level of debt issuance when coupled with ongoing principal amortization creates a moderate and manageable level of debt for the state," she said.
The Mississippi Legislature's annual session is expected to conclude around April 6, and multiple bond bills have been filed. While many bills have already died in committee, those still being evaluated appear to reflect lower-than-historic amounts approved for annual bond issuance.
The state had $4.05 billion of double-A rated outstanding general obligation bonds backed by the full faith and credit of the state as of June 30. There were some $645 million in authorized but unissued GO bonds as of Dec. 31.
In fiscal 2013, outstanding debt declined by $75 million primarily due to principal amortizations and a reduction in new money issuance, according to the study, which also evaluated rating agency comments and considered the state's debt ratios compared to national and peer group averages.