Office of the Vermont State Treasurer - Debt Management: Debt Authorizations and Debt Service

The State reduced its new authorizations for general obligation debt from $60.9 million in Fiscal Year 1995 to $39 million in Fiscal Year 2004. While fiscal years 2000 and 2001 are lower than the long-term trend, this is the result of the application of one-time revenues to offset the cost of debt. Approximately $2 million of revenues was used to pay for capital projects authorized in fiscal year 2000 (instead of the proceeds of bonds). Similarly, approximately $22 million of revenues was used to pay for capital projects authorized in fiscal year 2001.

While representing increases for fiscal years 2005, 2006 and 2007, adoption of $41 million, $45 million and $45 million annual debt authorization levels, respectively, is designed to balance the need to invest in State infrastructure with the objective of continually improving the State's debt profile. The Recommended Annual General Obligation Debt Authorization in the September 2006 Report of the Capital Debt Affordability Advisory Committee ("CDAAC") for fiscal year 2008 is $49.2 million, an increase of just under 10% from FY 2007.

By keeping new authorizations at moderate levels, the State of Vermont has reduced its total level of outstanding long-term debt. Net tax supported debt outstanding reached a high of $536.2 million in 1997 and had been above the $500 million mark until fiscal year 2001. For June 30, 2006, net tax-supported debt outstanding has been reduced to $440.0 million. This is important given that the national trend has seen a significant rise in aggregate general obligation debt levels. Based on current debt levels and assuming a continuation of the current annual authorization recommended by CDAAC, outstanding debt is projected to decline in FY 2007 and rise only modestly thereafter.

Total debt service, i.e., the amount appropriated to pay principal and interest on bonds, is calculated at $69.1 million for fiscal year 2007, versus $67.2 million in 2006. Future debt service payments will continue to fluctuate over the next decade ranging from a high of $74.4 million in fiscal year 2010 and dropping to $68.3 million in fiscal year 2017, assuming continuation of current debt authorization levels.