Connecticut is on a path of debt destruction in recent years, eliminating billions of our long-term pension debt recently.
Now, it seems there's a similar plan on the table to tackle the debt we owe when it comes to transportation projects.
NBC Connecticut's Mike Hydeck spoke with State Treasurer Erick Russell about it.
Mike Hydeck: So first up, our special transportation fund is overflowing right now, has been for a little bit. What do you suggest we do with the money?
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Erick Russell: Yeah, so, it's why we've proposed a solution to some of the outstanding debt that we have in conjunction with the governor. And so our proposal right now is to implement a mechanism similar to what we do with our budget reserve fund, where once we have 18% excess in that special transportation fund, we would use anything above that to pay down existing bonds that we use to fund special transportation projects across the state.
Mike Hydeck: And that's a similar thing, what we do now with our budget at large. When we go over a certain amount, we pay down debt.
Erick Russell: Exactly. And it's been very successful in Connecticut. We've paid down nearly $8 billion toward our pension debt, which is really freeing up money on an annual basis and saving taxpayer dollars. This would be a similar approach to the special transportation fund, allowing us to continue to really invest in projects in our state.
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Mike Hydeck: So as we know, there's no shortage of projects in Connecticut. You could pick I-95, you could pick all the railroad bridges that need to be done. These are massive projects, also the ones that are proposed in Hartford to try to have more access to the city of Middletown. Could we fast track them with this money instead of paying down the debt? It seems like those things have been waiting for a long time to get done.
Erick Russell: So this isn't going to impact our ability to implement projects. And if anything, it will actually help us to move that further. We want to give so much credit to Commissioner Eucalitto who is doing incredible work at DOT to really expedite these projects. And it's also about taking advantage of federal dollars that are coming in right now under Biden's infrastructure plan. But what we know we need in terms of really expediting these projects is more folks working, really getting to work on these projects. This will not impact our ability to fund these projects. It's really about saving taxpayer dollars, so that we're financing them in the most efficient way possible.
Mike Hydeck: So another way to save taxpayer dollars. The Connecticut mirror had this report. The surplus happened even when we suspended the gas tax. And that helped out gas station owners, it helped commuters as well. Gas station owners would like to see that happen again, or even lessen the state gas tax. What are your thoughts on that?
Erick Russell: So I think it's important to think about this long-term. While we're paying down debt and we have a surplus in this special transportation fund right now, we do have some deficits in those out years. So part of the solution was really about paying down long-term debt, which is flattening out some of those out years so that we're not in a spot where we need to raise any type of revenue in the short-term future. We're not in a spot, in my opinion, right now where we can cut revenue that's going into the special transportation fund. But we want to make sure we're maximizing the opportunity to save taxpayer dollars.
Mike Hydeck: So when you say long-term, this is a project that, say, is bonded over 30 years. Is that what you mean, something like that?
Erick Russell: So most of our special transportation bonds are 20-year bonds. After 10 years, those bonds are normally callable where we can either refinance them for savings, or we can pay them off. Under this proposal, once it takes effect, we'll immediately pay down about $500 million in outstanding bonds. That would be next February. And then any surpluses that we would have on a rolling basis after that we would use to similarly tackle outstanding debt.
Mike Hydeck: Do things like that affect the rates you could get when you borrow money? So if you pay these, like if we pay off things as a regular consumer, your credit rating goes up. Would that help us as a state?
Erick Russell: Certainly. So one, it's going to help save taxpayer dollars, where these outstanding bonds, I mentioned about $500 million, we'd be paying off, are at about 5% coupons for the most part. So we'd be saving all of that interest over a 10-year period. In addition to that, we would be saving money from a credit rating standpoint, as you mentioned, I think credit rating agencies will look very favorably on us lowering our outstanding debt, much like they have with us paying down our unfunded pension liabilities.
Mike Hydeck: So the proposal, it started with getting support from both sides of the aisle. Where does it go from here? What are you hearing? And what's the next step?
Erick Russell: I think there's very broad support. This is, again, a continuation of implementing sound fiscal policy to address the state's overall fiscal health. Again, it's not going to impact our ability to fund projects and continue to finance infrastructure in our state. So I expect that there will continue to be broad support for this. It is in the governor's proposed budget. And our hope is that it remains in whatever ultimate budget is passed at the end of this session.
Mike Hydeck: Have you heard anything from Republicans across the aisle saying this sounds good?
Erick Russell: Everything's been very positive. We've met with both sides of the aisle to talk through this proposal, as well as the governor's office and OPM. Again, I think there's very broad-based support in lowering our debt profile, and really just doing something that makes the most sense for taxpayers.
Mike Hydeck: And again, we need bridges, we need extra lanes. It's not going to stop any of that?
Erick Russell: It's not going to stop any of that. And I think we're going to continue to see more investment in transportation as we move forward, and really trying to take advantage of these federal dollars that are coming in.
