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BHI 
 
Testimony
 
on
 
 H 
 
4617 
 
1
 
Paul
 
Bachman
 
Director
 
of
 
Research,
 
Beacon
 
Hill
 
Institute
 
Testimony
 
House
 
No.
 
4617
 
An
 
Act
 
Relative
 
to
 
Debt
 
Restructuring
 
Suffolk
 
University,
 
8
 
Ashburton
 
Place,
 
Boston,
 
MA
 
02108
 
Phone,
 
617
‐
573
‐
8750,
 
Fax,
 
617
‐
994
‐
4279
 
May
 
5,
 
2010
 
Good
 
afternoon,
 
I
 
am
 
Paul
 
Bachman
 
and
 
I
 
am
 
the
 
Director
 
of
 
Research
 
at
 
the
 
Beacon
 
Hill
 
Institute
 
at
 
Suffolk
 
University.
 
I
 
would
 
like
 
to
 
thank
 
the
 
members
 
of
 
the
 
Senate
 
Committee
 
on
 
Bonding,
 
Capital
 
Expenditure
 
and
 
State
 
Assets
 
for
 
opportunity
 
to
 
testify
 
today
 
and,
 
in
 
particular,
 
Sen.
 
Mark
 
Montigny,
 
chairman.
 
House
 
Bill
 
No.
 
4617
 
would
 
authorize
 
the
 
state
 
treasurer
 
to
 
restructure
 
some
 
$573.7
 
million
 
dollars
 
in
 
state
 
 bonds.
 
Given
 
the
 
current
 
 budget
 
problems
 
facing
 
the
 
legislature,
 
restructuring
 
is
 
an
 
attractive
 
option.
 
W
hile
 
the
 
restructuring
 
may
 
serve
 
the
 
 best
 
interest
 
of
 
the
 
Commonwealth
 
in
 
the
 
current
 
fiscal
 
year,
 
the
 
state’s
 
outstanding
 
debt
 
obligations
 
could
 
 become
 
problematic
 
in
 
the
 
medium
 
and
 
long
 
term,
 
particularly
 
in
 
light
 
of
 
the
 
state’s
 
current
 
high
 
debt
 
 burden
 
relative
 
to
 
other
 
states.
 
Massachusetts
 
Current
 
Debt
 
Burden
 
Massachusetts
 
carries
 
one
 
of
 
the
 
highest
 
government
 
debt
 
 burdens
 
of
 
all
 
50
 
states.
 
The
 
Patrick
 
administration’s
 
“FY
 
2010
 
Capital
 
Budget
 
&
 
Investment
 
Plan”
 
includes
 
a
 
debt
 
affordability
 
analysis.
 
The
 
report
 
section
 
titled
 
“Existing
 
Debt
 
Burden”
 
cites
 
a
 
2007
 
U.S.
 
Census
 
Bureau
 
study
 
that
 
ranked
 
Massachusetts
 
third
 
in
 
the
 
nation
 
in
 
 
BHI 
 
Testimony
 
on
 
 H 
 
4617 
 
2
 
outstanding
 
debt
 
and
 
first
 
in
 
the
 
nation
 
in
 
debt
 
per
 
capita.
 
The
 
report
 
also
 
cites
 
numerous
 
debt
 
measurements
 
 by
 
Moody’s
 
Investor
 
Services
 
and
 
Standards
 
&
 
Poor’s
 
that
 
ranks
 
Massachusetts
 
first
 
in
 
tax
‐
supported
 
debt
 
per
 
capita;
 
second
 
in
 
net
 
tax
‐
supported
 
debt
 
as
 
a
 
percentage
 
of
 
personal
 
income;
 
fourth
 
in
 
total
 
net
 
tax
‐
supported
 
debt
 
and
 
fifth
 
in
 
total
 
gross
 
tax
‐
supported
 
debt.
1
 
The
 
A&
 
F
 
report
 
attempts
 
to
 
mitigate
 
these
 
sobering
 
statistics
 
 by
 
noting
 
that
 
these
 
figures
 
include
 
certain
 
debt
 
issued
 
 by
 
entities
 
other
 
than
 
the
 
Commonwealth
 
for
 
which
 
the
 
Commonwealth
 
is
 
not
 
liable
 
such
 
as
 
the
 
Massachusetts
 
School
 
Building
 
Authority
 
(MSBA).
 
The
 
report
 
also
 
notes
 
that
 
the
 
numbers
 
exclude
 
local
 
debt,
 
which
 
can
 
 be
 
substantial
 
in
 
other
 
states
 
that
 
have
 
“stronger
 
county
 
governments
 
and
 
other
 
political
 
subdivisions
 
that
 
issue
 
debt
 
to
 
finance
 
capital
 
improvements.”
 
The
 
report
 
observes
 
that
 
”it
 
is
 
safe
 
to
 
assume
 
that
 
Massachusetts
 
would
 
likely
 
rank
 
lower
 
when
 
measuring
 
debt
 
as
 
a
 
percentage
 
of
 
personal
 
income
 
or
 
per
 
capita
 
if
 
 both
 
state
 
and
 
local
 
debt
 
were
 
taken
 
into
 
account.”
 
Unfortunately,
 
the
 
numbers
 
do
 
not
 
support
 
this
 
safe
 
assumption.
 
The
 
Beacon
 
Hill
 
Institute
 
used
 
U.S.
 
Census
 
Bureau
 
data
 
for
 
FY
 
2007
 
to
 
compare
 
the
 
debt
 
 burden
 
of
 
Massachusetts
 
to
 
other
 
states
 
using
 
data
 
for
 
 both
 
state
 
and
 
local
 
government.
 
At
 
$89.6
 
 billion
 
in
 
FY
 
2007,
 
Massachusetts
 
state
 
and
 
local
 
debt
 
represented
 
28%
 
of
 
state
 
personal
 
income
 
compared
 
to
 
an
 
average
 
of
 
20%
 
for
 
all
 
states.
 
Massachusetts
 
ranked
 
third,
 
 behind
 
Alaska
 
at
 
35.6%
 
and
 
New
 
York
 
at
 
28.4%.
 
This
 
outstanding
 
debt
 
represents
 
$13,792
 
per
 
capita,
 
nearly
 
double
 
the
 
$7,990
 
average
 
for
 
all
 
states,
 
putting
 
us
 
in
 
second
 
place,
 
again
 
 behind
 
Alaska.
 
The
 
A
 
&
 
F
 
report
 
is
 
technically
 
correct
 
that
 
the
 
Commonwealth
 
is
 
not
 
liable
 
for
 
a
 
portion
 
of
 
the
 
debt,
 
which
 
is
 
issued
 
 by
 
entities,
 
such
 
as
 
the
 
$4.6
 
 billion
 
in
 
MSBA
 
debt.
2
 
In
 
fact,
 
the
 
newly
 
created
 
Massachusetts
 
Department
 
of
 
Transportation
 
holds
 
a
 
large
 
portion
 
of
 
this
 
debt,
 
including
 
debt
 
from
 
the
 
MBTA
 
and
 
Massachusetts
 
Transportation
 
Authority.
 
Moreover,
 
the
 
MBTA
 
debt
 
of
 
$6.2
 
 billion
 
for
 
FY
 
2009
 
is
 
no
 
longer
 
subject
 
to
 
the
 
statutory
 
 bond
 
cap.
3
 
However,
 
it
 
is
 
naive
 
to
 
suggest
 
that
 
the
 
state
 
would
 
not
 
ultimately
 
 bear
 
at
 
least
 
partial
 
responsibility
 
for
 
the
 
debts
 
of
 
the
 
MSBA
 
or
 
other
 
agencies
 
in
 
the
 
event
 
of
 
a
 
change
 
in
 
status.
 
I
 
am
 
reminded
 
of
 
the
 
Special
 
Investment
 
Vehicles,
 
or
 
SIVs
 
used
 
 by
 
1
 
Governor
 
Deval
 
Patrick
ʹ
s
 
Five
 
Year
 
Capital
 
Investment
 
Plan
 
FY2010
‐
FY2014
 
“Existing
 
Debt
 
Burden”
 
Administration
 
and
 
Finance
 
(2009)
 
http://www.mass.gov/bb/cap/fy2009/exec/hdebtafford_5.htm
 
(accessed
 
May
 
3,
 
2010).
 
2
 
Massachusetts
 
School
 
Building
 
Authority
 
 Annual
 
Report
 
2008
 
 – 
 
2009
 
http://www.massschoolbuildings.org/uploadedFiles/Pressroom/Newsletters/2208.2009_Annual_Report.pdf
 
(accessed
 
May
 
3,
 
2010).
 
3
 
Massachusetts
 
Department
 
of
 
Transportation,
 
“Stakeholder
 
Briefing,”
 
(October
 
2009)
 
http://www.eot.state.ma.us/downloads/90_DayReport/briefing100609.pdf
 
(accessed
 
May
 
3,
 
2010).
 
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