HARRISBURG – By a unanimous vote today, the House passed legislation, sponsored by Rep. John Lawrence (R-Chester/Lancaster), which would change the way future state bonds are issued to more quickly and less expensively pay off state debt.
House Bill 24
would accelerate the retirement of Pennsylvania’s general obligation debt, reduce the amount of interest paid over the life of state-issued bonds and help the Commonwealth improve its bond rating. Existing practice “front loads” interest payments on state bond issuances, with reduced principal payments in the first few years and larger principal payments coming as the loan matures. This forces difficult budgeting decisions into future years. “My legislation would require the principal for new issuances of state debt to be repaid in equal amounts over the term of the bond, which is usually 20 years,” said Lawrence. “In doing so, the principal would be paid down faster and interest savings to the Pennsylvania taxpayer would be substantial. Not only would the Commonwealth’s overall debt obligation be paid off sooner, but its bond rating would improve, which would make future borrowing less expensive.
“House Bill 24 would effectively restore the Commonwealth to the more responsible Equal Annual Maturities Plan method of repayment, which was common practice prior to 2001. This simple change for all new debt issuances would reduce the obligations we pass on to future generations and end policies that have been negatively impacting Pennsylvania’s credit rating for years.”
A version of Lawrence’s bill overwhelmingly cleared the House and Senate last session with bipartisan support, but was vetoed by Gov. Tom Wolf. An amendment to this session’s bill addresses concerns raised by detractors of the bill.
House Bill 24 will now go to the Senate for consideration.
Representative John Lawrence
Pennsylvania House of Representatives