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Letter: Wilton Rep Critical of $900 Million in New State Borrowing

WILTON, Conn. -- The Wilton Daily Voice accepts signed letters to the editor. Send letters to wilton@dailyvoice.com.

State Rep. Gail Lavielle, a member of the General Assembly’s Appropriations Committee, expressed concern about the state’s issuance of nearly $900 million in new bonds. According to a statement from State Treasurer Denise Nappier, Connecticut issued $560.4 million in bonds to fund the state’s GAAP conversion deficit over a 15-year period and another $314.3 million to pay off outstanding operating debts dating from 2009. Nappier noted that the $560.4 million issue would improve the state’s cash position enough to allow it to cancel its $300 million emergency line of credit.

To the editor:

Borrowing to pay off the GAAP deficit and canceling the state’s credit line is simply replacing one debt with another. It’s like withdrawing cash on a credit card to pay a bill. You pay the bill, but you’re still in debt to the credit card company, and you owe interest as well. This fills up the state’s coffers, but it doesn’t strengthen its cash position.

The original plan proposed by the governor in 2011 was to set aside an appropriation of $80 million each year for 15 years. Now, because the state has spent too much money to do that, it’s piling up debt instead, and it’s incurring about $200 million in interest costs that will be charged to taxpayers over the life of the bonds. The obligation to pay off the GAAP deficit is essentially a debt that the state owes itself. Borrowing money, with the attendant interest costs, to pay it off is not a smart way to manage the state’s finances. Nor is it likely to satisfy the rating agencies, which have expressed concern about the state’s level and cost of debt, that Connecticut’s financial situation is improving.

The bonds in the $314.3 million issue are a new type of security called ‘Variable-Rate Remarketed Obligations’ (VRO). While their initial rate is a low 0.5 percent, the rate can vary over the life of the bonds. This exposes the state, and taxpayers, to a great deal of uncertainty at a time when the nonpartisan Office of Fiscal Analysis is already predicting a deficit of $712 million for fiscal 2015. Taking this risk does not seem responsible.”

Gail Lavielle

State Rep. Gail Lavielle, a Republican, represents Wilton, Norwalk and Westport in the 143 Assembly District. She is Ranking Member of the General Assembly’s Commerce Committee and a member of the Appropriations Committee.

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