State Bonding Process

Much like the state budget, Connecticut’s bonding process begins with a proposal for capital expenditures from the governor. At the beginning of each odd-numbered year, during which a biennial budget is to be adopted, the governor presents a proposed capital budget to the legislature. The budget includes capital projects such as repairs to state-owned facilities, as well as bond-funded financial assistance programs like the Small Town Economic Assistance program. The capital budget is based on state agency program requests, the state’s facility plan (which outlines agency facility needs over a five-year period), the governor’s priorities, and the state’s fiscal capacity.

The state issues two main types of bonds: general obligation and special transportation. General obligation bonds are repaid using General Fund appropriations. These bonds fund common capital projects such as construction and repair of state buildings, economic development projects, housing development grants and loans, and school construction grants. Special transportation bonds finance transportation programs and facilities. They are repaid through the Special Transportation Fund, which collects revenue from the state’s car tax, gas tax, sales tax collected on certain motor vehicle sales, as well as vehicle registrations, licenses, and fees.

The General Assembly is ultimately responsible for authorizing all state bonding. Bond bills from either the governor or the legislature originate in subcommittees within the Finance, Revenue, and Bonding Committee. The General Bonding and Transportation Bonding Subcommittees have separate and distinct leadership from the greater committee. They hear testimony from legislators, agency heads, and stakeholders before submitting their recommendations to the full committee for a vote. Depending on their areas of focus and clientele, advocates may find themselves frequently lobbying on bonding matters. To do this effectively you must be engaging with the chairs of the Bonding Subcommittees. These subcommittee chairs, especially the Chair of General Bonding, wield substantial power within the Finance Committee because of their inherent control over the bonding process. Once their recommendations are approved by the full committee, the bond authorizations proceed like any other piece of legislation: First to the General Assembly, and then to be signed by the governor.

Although the legislature authorizes bonding, the State Bond Commission must allocate bond funds before an agency can spend the money. So advocates working bonding issues need to lobby the Commission to ensure their items actually get distributed to the benefactor. To do this effectively lobbyists have to engage with the governor or OPM. The Bond Commission is a 10-member executive-legislative committee consisting of the governor, treasurer, comptroller, attorney general, secretary of OPM, DAS commissioner, and the chairs and ranking members of the Finance, Revenue, and Bonding Committee. The governor serves as the chair of the commission and controls its agenda. They typically meet on a monthly basis for final approval of bonding, as well as the timing, conditions, and amounts of state bond sales.

As with all state government functions, the bonding process is always subject to change. As we have seen in recent years, the legislature can pass laws to restrict or enhance the State’s ability to bond. In October 2017, after a lengthy Special Session that convened in June, the legislature passed a bipartisan budget agreement that included a bonding covenant (Public Act 17-2). The covenant created an allocation cap, issuance cap, and spending cap on bond funding in a given fiscal year. The allocation cap limits the amount of bonding that the State Bond Commission can authorize ($2 billion); the issuance cap is a restriction on the amount of bonding issued by the treasurer ($1.9 billion); and the spending cap is intended to be a check on the Governor ($1.9 billion). However, in the waning moments of the 2018 Legislative Session the General Assembly adopted budget revisions that shortened the length of the bond covenant from 10 years to five. These changes have impacted how much the state can bond, but the process of approving bonding measures has remained the same.

 

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