State using interest income to pay down $105 million in debt
BOSTON (SHNS) – State finance officials are taking advantage of a new law and a quarter of the interest generated by the state's bulging Stabilization Fund last year to pay off $105 million of the state's debt.
Administration and Finance Secretary Matthew Gorzkowicz alerted the House and Senate clerks last Monday that his office 'intends to make an expenditure in the amount of approximately $105,000,000 in funds from the Commonwealth Federal Matching and Debt Reduction Fund (the 'Fund') to retire eligible outstanding Commonwealth General Obligation Bonds, which is within the authorized use of the Fund.' He noted that the expenditure does not require further legislative involvement.
As of Jan. 31, Massachusetts had $28.5 billion in general obligation bonds outstanding, according to a new financial report published last week. Almost all of that debt — $28.2 billion or 99.1% — was fixed-rate debt while just $256 million or 0.9% carried a variable rate.
A law Gov. Maura Healey signed in September lets her administration leverage up to $750 million in Stabilization Fund interest for grant-matching purposes through November 2026, as well as to pay down state debt. Fiscal year 2024's interest earnings contributed $420.8 million to that new fund, a state financial report confirmed in February.
Gorzkowicz said when Healey signed the law that its debt reduction power was 'not something we're looking at now,' but the state is now poised to use it for a second time.
The secretary's March 24 letter to the clerks served as the required 30-day notice to the Legislature before an expenditure from the fund, an A&F spokesman said. The administration submitted a similar notice dated Feb. 10 before using $96.5 million from the fund to pay off the MBTA's outstanding legacy debt, a move that Healey announced in January as part of her transportation package.
Between the two expenditures, the state will have pulled $201.5 million from the Stabilization Fund interest pool to reduce its debt burden. Meanwhile, A&F spokesman Matthew Murphy said the administration has identified $307.8 million in 'match commitments from the fund,' made in connection to applications seeking more than $2.4 billion in potential federal grant dollars. Some awards have been approved and some remain pending, he said.
Gorzkowicz said in February that the Healey administration has 'used those funds for aggressively pursuing federal funds,' and told the Comptroller Advisory Board that the state is 'utilizing that towards a lot of good matching of federal funds.'
The new fund has allowed for a $40 million state commitment toward a $400 million federal grant for the Northeast Microelectronics Coalition Hub run by MassTech, an $18.4 million state match commitment to leverage $24.4 million in federal dollars for infrastructure work at the Port of New Bedford, and a $2.5 million match for a $10.2 million federal Safe Streets for All grant through the Department of Transportation, among other projects, Murphy said.
The state's recent debt reduction efforts are just some of the moving parts that Gorzkowicz and others monitor as the state attempts to stretch the resources available to it as far as possible while bracing for a potential slowdown in federal government support and warning that Beacon Hill will not be able to fill all the gaps. Reducing the state's overall debt liability will, in turn, free up money for the operating budget, Murphy said.
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