Officials explain 'cash fund' pay‑as‑you‑go approach for capital projects to Appropriations panel

Emily Byrne of the Joint Fiscal Office and Scott Moore, a finance manager at JFO, briefed the House Appropriations Committee on May 20 about the state's cash fund approach for capital projects — the pay‑as‑you‑go alternative to traditional general obligation bonding.

Byrne said the fund was established in the 2022 appropriations act to provide cash for capital projects rather than issuing bonds and paying long‑term interest. “Cash fund is kind of an interesting name for this,” she said, noting that the statute codifies two subaccounts and that transfers to the cash fund have occurred in recent budgets when the general fund had available one‑time resources.

The Nut Graf: Committee members pressed presenters on the fund’s policy intent and guardrails — whether the cash fund should substitute for bonding on traditional capital needs, how transfers should be scheduled, and what constraints should apply to avoid using the account for ad hoc or politically driven projects.

Byrne summarized the two statutory subaccounts: a capital‑infrastructure subaccount for projects that would otherwise be bond‑funded (tangible assets with anticipated useful lives of 20 years or more) and an “infrastructure/essential investments and reserves” subaccount that the presenters described as broader and more flexible. Byrne said the administration has recommended a transfer method tied to “4% of prior-year general fund appropriations less debt service,” which would scale transfers to the state’s fiscal capacity and outstanding debt burden.

Scott Moore and other staff explained how recent appropriations used the fund. Byrne and Moore said the FY 2026 budget included transfers and appropriations from the cash fund for agency projects, and they noted an FY‑26 debt‑service figure of about $81 million that is subtracted in the 4% transfer calculation. Byrne said the fund has no permanent dedicated revenue stream; transfers are at the discretion of the general assembly and the governor’s budget proposal.

Committee members asked whether cash funding reduces purchasing power (paying cash for one project instead of borrowing to do several) and how pay‑go compares with issuing bonds, especially given changing interest rates and CDAC (Capital Debt Affordability Committee) recommendations on recommended bonding levels. Byrne said the cash‑fund approach was intended to avoid interest costs and to create a reserve for capital work over time; members noted tradeoffs between doing fewer projects with cash now versus leveraging borrowing to do more projects sooner.

Members also sought practical guardrails. Several said the statute’s language about the two subaccounts is not sufficiently explicit and asked for clearer legislative definitions and prioritization criteria so future transfers are transparent and defensible. The Joint Fiscal Office agreed to provide reports and to work with committees on clarifying the policy intent and appropriate uses of each subaccount.

Ending: Committee members asked staff for follow‑up analyses, including the annual finance-and‑management report on the cash fund and modeling of scenarios that compare pay‑go transfers versus borrowing under varying interest‑rate and debt‑service projections. Staff said they would circulate the finance and management report and that continued oversight would be appropriate as the program develops.