|Fiscal Affairs Division|
During the late 1980s, capital expenditures grew substantially,
from roughly $600 million in Fiscal Year 1987 to approximately
$971 million in Fiscal Year 1989. In Fiscal Year 1990, a sizable
operating deficit necessitated the issuance of approximately $1.4
billion in Fiscal Recovery Bonds authorized under the Commonwealth
Fiscal Recovery Loan Act of 1990 to be repaid no later than December
31, 1997. This sizable debt issue contributed approximately $275
million of additional annual debt service expenditures to the
Commonwealth's operating budget, spending that could not fund
other Administration priorities. In order to contain the Commonwealth's
debt burden and limit the growth in debt service expenditures
imposed on the operating budget, the Weld/Cellucci Administration
implemented a rolling five-year capital spending plan in August,
The five-year capital plan is an administrative guideline subject
to amendment by the Governor at any time, that sets forth capital
spending allocations for a period of five fiscal years. The plan
limits capital spending to an average of $900 million per year
on a rolling five year basis, which is intended to limit the growth
in Commonwealth debt outstanding to an average of 2% over any
five-year period. Assuming an inflation rate of at least 2% per
year, this debt policy prevents the Commonwealth's debt burden
from growing in real terms. To the extent that inflation exceeds
2% per year and/or the state's economy grows in real terms, this
policy enables the Commonwealth to modestly reduce its outstanding
debt burden when measured as a percentage of gross state product
or total personal income.
Under the Weld/Cellucci Administration, the annual percentage
growth in debt outstanding has dropped from 29% in Fiscal Year
1991 to 2% in Fiscal Year 1996. Aggressive management of capital
spending has been one of the reasons that the Commonwealth's bond
rating has been increased by all three bond rating agencies several
times since 1990.
On May 13, 1996, the Executive Office for Administration and Finance
(EOAF) published an Administrative Bulletin to formalize procedures
for capital spending management. This Bulletin defined capital
spending, named the coordinating agencies for infrastructure and
information technology capital spending, defined the process for
annual agency submission of capital spending plans to EOAF for
consideration in the five-year capital plan, provided parameters
for monitoring capital spending and sanctions for non-compliance
with the Bulletin, and defined the process for requesting allotments
from capital appropriation accounts. EOAF has adhered to the schedule
outlined in the Bulletin for soliciting and approving agency capital
spending plans for the development of the Administration's five-year
The limitation on capital spending is carefully considered when
the Weld/Cellucci Administration determines which capital projects
to initiate. The Administration is committed to long-term investments
that will improve and sustain the Commonwealth infrastructure
well into the next century. The priority is on projects that provide
economic development opportunities, including transportation improvements,
improvements in higher education, increased public safety, and
open space for recreation and conservation.
Although the Administration's five-year capital plan focuses on
the $900 million in state-supported spending in Fiscal Year 1998,
the Commonwealth has access to approximately $1.5 billion in federal
highway and public transportation assistance and $200 million
in transportation funding for the proposed Metropolitan Highway
System. Including $301 million in MBTA capital spending, the Commonwealth
has a total proposed capital budget of $2.9 billion in Fiscal
Recent Bond Bills and Initiatives
From Calendar Year 1995 to Calendar Year 1996, several major capital
spending authorizations were presented by the Weld/Cellucci Administration
and approved by the Legislature. These bond bills, totaling $5.7
billion, including federal highway funding, represent a strong
commitment by the Administration to areas such as information
technology, environmental clean-up and improvement, public safety,
seaport revitalization, and transportation.
$314 million for the acquisition, upgrade, development, and implementation
of comprehensive integrated information technology systems.
$75 million for the acquisition, upgrade, development, and implementation
of a comprehensive integrated information system for trial courts
in the Commonwealth.
$617 million for repairs, renovations, deferred maintenance, and
new construction at state universities, state colleges, and community
$399 million for environmental enhancement and open space protection.
$30 million for the acquisition and protection of lands fronting
on the Commonwealth's rivers and streams.
$486 million for prison expansion, upgrades, renovations, and
repairs at the Commonwealth's state and county prisons.
$280 million for development and improvements to the Commonwealth's
seaports, including rail doublestacking initiatives.
$3.1 billion for an accelerated transportation development and
improvement program, which includes projected federal matching
$400 million in highway funds for the Metropolitan Highway System.
Central Artery and Third Harbor Tunnel Project
By far the largest capital project of the Weld/Cellucci Administration,
in terms of size, duration, and spending is the Central Artery/Third
Harbor Tunnel Project (CA/T). The CA/T Project is one of the largest
and most complex public works projects in the history of the United
States. The total estimated project cost is $10.4 billion (including
federal spending) over the life of the project, including $5.5
billion remaining to be spent between October 1, 1996 and project
completion in 2004.
On October 1, 1996 the Commonwealth submitted a Finance Plan to
the Federal Highway Administration (FHWA), which was accepted
by the FHWA in late November, 1996, without significant modification.
However, the FHWA did state that it would not authorize new contract
encumbrances relying on federal aid after April 1, 1997 unless
the Commonwealth formally adopted a structure and mechanism that
would provide financing for the non-federal share and ensure that
sufficient cash was available at all times to meet contract payment
obligations as they become due.
As required by statute, the Weld/Cellucci Administration submitted
to the General Court on December 1, 1996, a study completed by
a consultant team which identifies many different methods to achieve
these financial objectives. (1)
The key provision of the plan is passage
of legislation, which was submitted on January 6, 1997, creating
the Metropolitan Highway System. This will provide for the orderly
development and operation of the CA/T Project, with substantial
financial assistance from the Massachusetts Turnpike Authority,
as well as significant involvement by the Massachusetts Port Authority.
Proposed Bond Bills for 1997
In addition to the bond bills already passed, the Governor and
Lieutenant Governor plan to file, by the Spring of 1997, the following
An Act Providing For Certain Commonwealth Transportation Upgrade
and Improvement Programs.
In 1997, the Administration will file a new Transportation Bond
Bill. This bill will authorize additional state appropriations
necessary to complete the CA/T Project, as well as additional
appropriations necessary for the statewide road and bridge program.
It will also include the language necessary to authorize the Commonwealth
to use federal revenue anticipation note financing as a component
of the CA/T finance plan. Federal revenue anticipation note financing
has been used successfully in other states to smooth project cash
flows in years when project disbursements exceed federal grants,
by borrowing against a portion of federal grants to be received
in future years.
An Act Relative to Compliance with Life Safety Codes, Remediation
of Environmental Hazards, and the Preservation and Management
of the Commonwealth's Real Property Assets.
This legislation provides $125 million to the Division of Capital
Planning and Operations for the maintenance and repair of the
Commonwealth's public buildings to bring them into compliance
with various federal and state requirements. This legislation
will enable the Commonwealth to meet certain requirements including
sprinklers for its high-rise buildings; environmental laws and
regulations; the Americans with Disabilities Act; and scheduled
repair and maintenance of state buildings. The bill will replenish
existing general repair accounts that have been virtually depleted
An Act Relative to the Renovation, Reconstruction and Repair of
Commonwealth Court Houses.
This legislation will reinforce the Administration's commitment
to the Commonwealth's system of civil and criminal justice by
authorizing a $583 million capital plan to acquire, construct,
renovate, and repair courthouse facilities in the Commonwealth.
An Act Providing for the Development and Operation of the Devens Commerce Center.
Chapter 498 of the Acts of 1993 assigned to the Massachusetts
Government Land Bank, in concert with the Towns of Ayer, Harvard,
and Shirley, the responsibility for converting Fort Devens to
civilian use, and developing the property into a major mixed use
asset for the North Central Region of the Commonwealth. Chapter
498 expressly committed up to $200 million of state capital resources
to the development, but did not formally authorize state financing
of debt to provide these resources, pending the adoption of a
Reuse Plan by the surrounding towns. On December 7, 1994, the
three towns passed, by overwhelming majorities at special town
meetings, the Reuse Plan which the Land Bank is implementing.
All three towns relied on the commitment of state resources in
approving the Reuse Plan. In November, 1996, the Legislature enacted
Chapter 414 of the Acts of 1997 which authorized $3.75 million of state operating funds to be
transferred to the Land Bank to support the operation of the Devens
Commerce Center. This statute requires the subsequent enactment
of a capital outlay bill to finance the operation and development
of the Devens Commerce Center.
The bill will authorize traditional state general obligation bonds, together with Land Bank bonds to be issued pursuant to a contract for debt service assistance between the Land Bank and the State Treasurer. Prompt passage of this legislation will ensure that the Land Bank continues the major infrastructure development program at the Fort Devens site. The private sector response to the work already completed has been far above expectations, and the potential for the Devens Commerce Center to have a major positive impact on the regional and statewide economies can only be realized by prompt passage of the bill.
Continued investment in the Commonwealth's infrastructure and
facilities is critical for Massachusetts to maintain its economic
viability into the next century. This need for constant investment
must be carefully balanced with fiscal responsibility and the
Administration's strong desire to minimize future increases in
the amount of outstanding Commonwealth debt. The $4.5 billion
five-year capital spending plan limits the Commonwealth's debt
burden by controlling the relationship between current capital
spending and the issuance of Commonwealth bonds. While the Legislature
authorizes capital spending through capital appropriations typically
supported by bond authorizations, the Weld/Cellucci Administration
controls the rate at which capital expenditures occur through
its discretion over the allotment of capital expenditures which
is limited to $900 million per year on a rolling five-year basis.
The fact that the state could support higher debt service costs
during the current period of relative fiscal strength is comforting,
but does not justify greater capital spending supported by Commonwealth
debt. The state's fiscal condition may be subject to significant
stress during periods of general economic decline or stagnation.
Therefore, the Weld/Cellucci Administration must continue to exercise
fiscal restraint to prevent long-term debt service costs from
increasing to such a degree that rapid and severe program spending
reductions are required to balance the operating budget during
times of economic weakness. 1 Report of the Consultant Team on the Joint Feasibility Study Regarding the Metropolitan Highway System, Commonwealth Capital Partners, Inc., et. al., December 1996.
1 Report of the Consultant Team on the Joint Feasibility Study Regarding the Metropolitan Highway System, Commonwealth Capital Partners, Inc., et. al., December 1996.