Federation of Connecticut Taxpayer Organizations

You asked for a comparison of the process Connecticut uses to authorize state bonds with that used by Massachusetts and New York. You also asked if there have been bills proposed in Connecticut in the last four years to change the bonding process, what changes the bills proposed, and at what point in the legislative process they were defeated.

SUMMARY

All three states require their state legislatures to approve state bond authorizations, but only Connecticut has a special statutory bond commission that must approve actual allocations. Only Connecticut mandates that state constitutional officers other than the governor and the state treasurer or comptroller be involved in the allocation decisions.

Of the three states, Massachusetts gives the governor the most control over bonding decisions by requiring him to propose bond authorization bills before the legislature can act and allowing him to make allocation decisions unilaterally. In New York, allocations are part of annual budget negotiations between the governor and the legislature. Other major differences are that New York requires voters to approve general obligation bond authorizations and that Massachusetts requires a two-thirds legislative majority to approve authorization bills.

Since 2000, two bills have been introduced to change aspects of Connecticut�s bond allocation process, particularly the procedures used by the State Bond Commission. A 2000 bill would have required the commission�s agenda to be available to members by a specified time before each meeting. A 2004 bill also makes changes in the Bond Commission�s membership, allows members to put items on agendas, and requires additional reporting on bonded projects. The 2000 proposal died on the House calendar without a vote. The 2004 bill is still under consideration by the Finance, Revenue and Bonding Committee.

BONDING PROCESS IN THREE STATES

Connecticut

At the beginning of each odd-numbered year, the governor presents proposed capital and operating budgets to the General Assembly, together with legislation needed to implement the budgets. The General Assembly is responsible for authorizing all state bonding for particular projects or purposes. Proposed bond authorizations are contained in bills that are subject to the regular legislative process. The full legislature approves the authorizations by passing one or more special and public acts, which the governor must sign.

Even though the General Assembly has authorized bonding for a particular purpose, before an agency may actually spend money for a project, bond funds must be allocated expressly for the purpose by the State Bond Commission. The State Bond Commission is a 10-member executive-legislative committee consisting of the governor, treasurer, comptroller, attorney general, Office of Policy and Management (OPM) secretary, public works commissioner, and the co-chairs and ranking members of the Finance, Revenue and Bonding Committee (CGS � 3-20).

The State Bond Commission meets periodically (usually monthly) to allocate bonds the General Assembly has authorized to particular projects. The governor chairs the commission and controls its agenda. The OPM secretary acts as the commission�s secretary and keeps its records and minutes.

Massachusetts

According to a spokesperson from the Massachusetts House Ways and Means Committee, Massachusetts� bonding process begins only when the governor proposes a bill containing bond authorizations for specific purposes. The Massachusetts legislature is barred from raising

its own bonding bills, but may amend the governor�s proposed bond act by adding projects and earmarking general authorizations in the governor�s bill for specific projects.

The Massachusetts Constitution requires a two-thirds vote of the members of each house present and voting to pass a bond act (Constitution Art. LXII, � 1).

Once authorizations are enacted, the legislature has no further role. All allocations are the sole responsibility of the governor, who is not bound to allocate amounts authorized. Although legislative bond authorizations total more than $ 10 billion, according to Pat Landers, deputy treasurer for debt management, the governor has imposed an annual administrative bond cap of $ 1. 25 billion. The governor chooses which projects to fund based on a five-year capital plan produced by the state�s Division of Capital Management. Once the governor decides to fund a particular project, money is advanced from the state General Fund. Then the state treasurer sells bonds as needed to reimburse the General Fund, according to Landers.

New York

According to Mary Arzoumanian of the New York State Senate Finance Committee staff, New York�s bonding process varies depending on the type of bonds being authorized.

The first step in authorizing state general obligation bonds is for the New York legislature to pass a bond authorization act. Such acts usually provide for large authorizations for some general purpose, such as environment, clean water, or transportation. They do not typically list specific projects.

Once passed by the legislature, a general obligation bond authorization must be placed on the ballot at the next general election. To take effect, the authorization must be approved by a majority of the voters. If voters approve the authorization, the legislature and the governor enact annual allocations for individual projects each year as part of the state budget act. There is no separate bond commission and no periodic allocations through the year as in Connecticut. Once the annual allocations are approved, the state comptroller sells the bonds as needed.

The procedure for authorizing public authority bonds is slightly different. New York�s numerous special purpose public authorities are allowed to issue state-backed bonds for such things as higher education and housing capital projects. The legislature must approve this type of bonding, but voter approval is not required. According to Arzoumanian, public authority bonding is included in the annual budget act and, like the general obligation bond allocations, is subject to negotiation between the legislature and the governor on an annual basis (McKinney�s Consol. Laws of N. Y. , State Finance Law, � 57, et seq. ).

BILLS TO AMEND CONNECTICUT�S BOND ALLOCATION PROCESS

2000 Session

In 2000, the Finance, Revenue and Bonding Committee raised House Bill 5866, An Act Concerning the Bond Commission Agenda. The original bill required the State Bond Commission to give each member and the Office of Fiscal Analysis a meeting agenda at least seven business days before each meeting, along with the financial and programmatic information members needed to make informed decisions on agenda items. The committee amended the deadline to six business days before each meeting and reported the amended version unanimously to the House floor.

The House referred the bill to the Government Administration and Elections Committee, which gave it a unanimous favorable report, and then to the Legislative Management Committee, which reported it favorably by an 11-9 vote. The House took no action on the bill.

2004 Session

In 2004, the Finance, Revenue and Bonding Committee raised Senate Bill 594, An Act Concerning the State Bond Commission. The bill:

1. reduces the commission membership from 10 to nine by removing the public works commissioner;

2. requires the commission agenda to be available to members at least a week before each meeting;

3. allows any two commission members to add an item to the agenda by notifying the OPM secretary at least two weeks before the meeting;

4. requires that, before acting on an agenda item, the commission receive a statement of (a) the full cost of the project or purpose receiving the allocation and (b) the estimated operating costs of any structure, facility, or equipment being built or acquired; and

5. requires the OPM secretary to file an annual report with the Finance Committee that updates the cost statement for each outstanding bond allocation.

The Finance Committee has not yet acted on SB 594. The bill is scheduled for a public hearing on March 15, 2004.

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