Florida’s State Debt Declines Again This Year

October 24, 2012

Florida will report in December that it has significantly reduced its outstanding debt for the second year in a row, and that continued refinancing of outstanding debt will save more than $1 billion on future interest payments, the state’s top bond finance official said Tuesday.

A second year of lower debt appears to portend a reversal of a long trend. Two years of reductions follow about a decade of increasing debt loads and represent the first year-over-year drops in 20 years.

In a preview of an annual report due later this year, Director of Bond Finance Ben Watkins told Gov. Rick Scott and the Cabinet that the year-end report is likely to say the state reduced its debt by about $1.5 billion this year, following last year’s reduction of debt by $500 million.

The main reason – the state isn’t issuing new debt, primarily in its biggest borrowing program, the Public Education Capital Outlay, or PECO bonding program, because of lower revenue and efforts to be more frugal.

PECO bonding, which funds school construction, relies largely on revenue from utility taxes, known as gross receipts taxes, to pay back bondholders. Revenue from the tax has dropped in the down economy and there hasn’t been any money available for new construction bonding in the most recent year.

Lawmakers have also slowed down funding for land-buying for conservation purposes, another purpose for which the state has in the past borrowed more heavily.

Watkins also said the state has refinanced more than $6 billion in debt over the last three years – nearly a third of the state’s entire debt portfolio – to take advantage of low interest rates, allowing for a reduction in interest from 4.65 percent to 4.33 percent.

When applied to the entire $26 billion state debt portfolio, the reduction on future interest costs is likely to be about $1.1 billion.

“That’s real money by any measure,” Watkins said.

The amount is expected to continue to drop.

“Based on existing borrowing plans, total State debt outstanding is expected to continue to slowly decline as annual debt retirement increases and new debt issuance decreases,” the state Revenue Estimating Conference said in August when it released its long range forecast.

With interest rates at very low levels, refinancing outstanding state debt has been a priority of the state bonding agency, Watkins said. For example, in August Florida announced the state had lowered the interest rate on certain PECO bonds from 4.97 percent to 2.76 percent, with an expected savings of about $85 million.

By David Royse
The News Service of Florida

Comments

8 Responses to “Florida’s State Debt Declines Again This Year”

  1. jesse on October 25th, 2012 5:37 pm

    Jim isn’t it ironic that everytime a republican is in control we have a recession?? Florida has not had any significant growth in their economy during Scott’s term. As for voting republican, wasn’t W a fine example? And no I am not supporting Obama
    Jane, where are the new businesses?

  2. PSU1Earl on October 25th, 2012 9:49 am

    I just looked up the actual 2011 growth rate in Florida and its 0.5%… At least it didn’t shrink like Alabama’s…

  3. PSU1Earl on October 25th, 2012 9:46 am

    jp, cool site .. but you forgot to read the footnote on where the data was collected from…

    “Percent change in GSP from 2004 to 2005.”

    A bit dated and a bit before Scott had anything to do with it…

  4. Jp on October 24th, 2012 7:56 pm

    Opinions are great, but being informed is even better:
    Florida has the third fastest economic growth in the US with 7.8% – StateMaster.com
    Florida along with eleven other states have the highest credit rating of AAA and a rank of 1.
    This contrasts with California which has a credit rating of A- and a rank of 50 = the lowest.

  5. PSU1Earl on October 24th, 2012 1:52 pm

    Jim, nice try but the economy in Florida is dismal and has grown far slower than the rest of the country… he has reduced Florida’s debt and give him credit for that, but the economy and jobs fronts are not any success.

  6. Jim on October 24th, 2012 10:10 am

    Isn’t ironic to see that States with Republican Governor’s have better policies in place to grow their economy. Enough said! Vote Republican Nov 6.

  7. PSU1Earl on October 24th, 2012 7:37 am

    Glad to see Scott doing what really all levels of government need to do..and with the interest rates low for the state, refinancing the rest of the debt is a smart move…. I think the only time the debt for the federal government was paid down was when Clinton was in office… I saw numbers for 1999 that have the national debt reduced by $140 billion… and a surplus in the budget of $123 billion… (which should have been applied to the debt also IMHO)…

  8. Jane on October 24th, 2012 5:14 am

    Looks like Governor Scott is doing what he said he would…lowering the debt and adding new businesses in Florida. Let’s hope it continues.

Written by William Reynolds · Filed Under News