Public Meeting Notice  October 17, 2025 Capital Debt Affordability Committee Meeting

Meeting ID: 820 8964 9271

Passcode: 547583

Teleconference line: 1-305-224-1968; Phone Conference code: 547583#

The meeting was called to order at 1:02 pm

Board members comprising a quorum: 

Kaitlyn Connors, Chair, Executive Office for Administration & Finance

Martin Benison, Appointee of the Treasurer

Pauline Lieu, Office of the Comptroller

Sue Perez, Office of the Treasurer and Receiver-General

Michelle Scott, Massachusetts Department of Transportation

Catherine Walsh, Appointee of the Governor

Others in attendance:

Representative Michael Finn, Chair of Bonding, Capital Expenditures, and State Assets Joint Committee Senator Paul Mark, Vice Chair of Bonding, Capital Expenditures, and State Assets Joint Committee

Aidan Bettencourt, Office of State Representative Michael Finn

Joshua Tavares, Office of Senator Ryan Fattman

Thomas Skehill, Office of Senator Patrick O’Connor

Gita Swamy, Office of Senator Paul Mark

Cory Bannon, Office of the Treasurer and Receiver-General

Daniel Aldridge, Office of the Treasurer and Receiver-General

Timur Kaya Yontar, Executive Office for Administration and Finance

Minutes:

Ms. Connors called the meeting to order and conducted the roll to establish quorum.  She then moved to the first item of business which was approval of the minutes from December 13, 2024, committee meeting.  Upon a motion moved by Mr. Bennison, and duly seconded by Ms. Perez, the minutes were approved unanimously.

Ms. Connors then moved on to the next item on the agenda: Debt Affordability Committee (DAC) overview and workplan for the upcoming Committee cycle.  She noted the DAC was established in 2012 for the purpose of reviewing the amount and condition of the Commonwealth’s tax-supported debt, as well as the debt of certain authorities.  She also noted that the Committee is responsible for providing an estimate of the total amount of new capital spending supported by general obligation debt (“bond cap”) that can prudently be issued by Massachusetts for the next fiscal year to the Governor and Legislature by December 15^th of each year and that this estimate is advisory and does not bind the Governor or the Legislature in any way.

She then summarized the policies and credit considerations the committee considers when developing its recommendation which includes the state’s statutory direct debt limit, administrative borrowing policies that limit annual debt service payments to less than 8 percent of budgeted revenues, as well as other criteria including credit ratings and debt ratios.  

Ms. Connors then provided a recap of highlights from the prior year, including an overview of the historical recommendations the Committee has made over the last decade pointing out that the FY 2026 Bond Cap Recommendation was $3.227 billion, which is a 3.5% increase over prior year’s bond cap and that the average annual Bond Cap growth over the past decade has been 4.2%

Staff from the Office of the State Treasurer provided an overview of the Commonwealth’s existing debt portfolio and then walked through key Commonwealth credit factors.   Mr. Cory Bannon provided an overview of the Commonwealth’s current outstanding debt, consisting of approximately $30 billion of general obligation (GO) debt, $5.6 billion of special obligation debt, and $96 million in federal grant anticipation notes (GANs), noting that nearly all (99%) outstanding debt was fixed rate debt.  Mr. Bannon also reported on other related liabilities including Commonwealth contract assistance and other contingent liabilities. Mr. Bannon noted that approximately 41% of outstanding general obligation debt is set to amortize over the next ten years.    

Mr. Dan Aldridge then walked the Committee through various credit factors that it uses to help inform its final recommendation.  He reported the Commonwealth’s long-term ratings from all three ratings agencies have remained the same since last year at Aa1/AA+/AA+ - at the high investment grade level and then walked the Committee through the Commonwealths credit profile, noting that the rating agencies have consistently given the Commonwealth high marks across all credit factors, except for exiting long-term liabilities which include debt and pension/OPEB.  

Mr. Aldridge reviewed the factors rating agencies had reported as those that could lead to an upgrade or a downgrade.  In general, factors that could lead to an upgrade centered on the reduction of long-term liabilities (e.g. debt, pension, and OPEB) while maintaining strong reserves and structural budgetary balance.  Factors that could lead to a downgrade included structural budget imbalances, decreased reserve levels, and significant increases in debt or other fixed costs. 

Mr. Aldridge provided an overview of key credit highlights, noting the Commonwealth receives strong marks for its broad and diverse economy, historically solid financial performance and strong governance.  However, it scores less favorably when it comes to leverage, given its elevated debt and long-term liabilities.

Mr. Aldridge then walked the Committee through a series of slides with data on the composition of the Commonwealth’s economic base.  He noted that the Commonwealth has a robust and diverse economy rooted in relatively high-paying, stable industries, calling out the significant presence of education, healthcare, professional, and business services within the state.  This mix of industry has supported relatively low levels of unemployment and strong labor participation rates, in addition to relatively high income levels. Mr. Aldridge noted the Commonwealth has one of the highest per capita income rates in the country. 

Mr. Aldridge then provided an update on the state’s stabilization fund, whose balance has increased by roughly 330% since 2018, growing from $2.0 billion to a preliminary $8.6 billionin FY2025.  He then spent some time discussing Commonwealth governance and how certain features of the state’s governance framework help support the Commonwealth’s strong credit rating – including the state’s approach to growing and managing the budget stabilization fund - before turning to an overview of key debt ratios. 

Mr. Aldridge reported the Commonwealth has been proactive in reinvesting in capital assets over the past decade, noting its capital asset depreciation ratio (“CADR”)  is in line with or better than many comparably or higher rated states.  A state’s CADR compares accumulated depreciation to gross depreciable assets and is one way to measure the likelihood it may need to issue debt to finance capital investments

He reported that the Commonwealth has the second highest debt levels compared to all other states and used charts to illustrate how the state’s debt levels far exceed those of its Aa1 peer states.  Although he noted that the state’s relatively high levels are in part driven by the fact that the state uses debt to support investments that are funded at the local level in other states.  Mr. Aldridge then discussed overall long-term liabilities – which include debt, as well as pension and OBEB.  He reported overall levels have remained relatively flat in recent years.

Ms. Connors asked if anyone on the call had questions.

Ms. Swamy asked if there was a plan was to bring down pension liabilities. Ms. Connors responded state law requires unfunded actuarial accrued liabilities to be reduced to zero by 2040 and that the Commonwealth’s current pension schedule, which is updated every three years, has the state hitting that milestone ahead of the 2040 deadline. Ms. Perez confirmed the current schedule has the state meeting the milestone in 2036 and noted that the pension schedule will be updated in January 2026.

Ms. Connors stated that from a big picture standpoint little has changed from the previous year with respect to the Commonwealth’s overall debt portfolio and credit factors.  Ms. Perez agreed and said the credit rating agencies are watching to see how states respond to federal cuts and how they use their reserves.

Ms. Connors noted that the CADR information presented by Mr. Aldrige was new information for the Committee, which she appreciated as it helped illustrate the nexus between Commonwealth debt (and its relatively elevated debt levels) and maintaining assets in a state of good repair, which generally leads to less overall capital needs. She asked if the rating agencies gave the state credit for this or used the CADR at all.  Ms. Perez replied that they do not.

Ms. Connors then asked how rating agencies were considering resiliency, climate change and overall ESG factors in their analysis and whether investment in assets are taken into consideration from that perspective.  Ms. Perez noted that the rating agencies are paying attention to it and are assessing and reporting on a state’s ESG, however at this time those scores are not impacting actual ratings, but they could in the future. With Boston being on the water, the rating agencies have recognized that the state does have climate change exposure.

Ms. Connors asked if there were any more questions.  There were none.

On a motion made by Ms. Scott and duly seconded by Ms. Perez,  the meeting was adjourned at 1:42 pm.  

1. Administrative Matters
   • Introductions
   • Adoption of meeting minutes from December 13, 2024 (Vote)
2. Debt Affordability Committee (DAC) Introduction & Workplan
3. Commonwealth Debt Portfolio Overview
4. Adjournment