Oct. 19, 2018
HARRISBURG – Speaker Mike Turzai (R-Allegheny) urged Gov. Tom Wolf to sign
House Bill 83, which passed with bipartisan support in the House and Senate.
“While debt may not be the most exciting issue, it is extremely important to our residents and taxpayers, and if not checked could affect our children and grandchildren,” Turzai said. “This is an important bill that received strong bipartisan support and protects taxpayer dollars; Gov. Wolf should sign it.”
This bill, sponsored by Rep. John Lawrence (R-Chester), passed the House 188-2 and was passed unanimously by the Senate.
The bill would require the administration to use responsible debt management practices when repaying new capital debt. Under the bill, new capital debt would be paid off using a level principal payment approach. The Commonwealth used this approach until 2001 when it switched to the level debt payment approach as a budgetary gimmick to provide short-term savings. However, in the long run, it costs taxpayers considerably more.
It will also produce budgetary savings over time. An analysis by House Appropriations Committee staff estimates that this one reform would reduce outstanding general obligation debt by $1 billion over 20 years. Savings are accomplished by paying more of the principal of the loan at the outset, which reduces the amount of interest incurred.
For example, issuing a 20-year bond for $1 billion at a 4 percent interest rate would have an interest cost of $454 million under the current (level debt payment) method of amortization. Alternatively, under the required payment method in the bill (level principal payment) the interest cost would be $420 million, resulting in a savings of $34 million in interest costs over the 20-year payback period.
Representative Mike Turzai
Speaker of the House
28th District
Pennsylvania House of Representatives
Media Contact: Paul Engelkemier
717.783.1315 (office)
Pengelkemier@PAHouseGOP.com
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