Treasurer's office recommends school construction aid flow through bond bank to protect state credit

Ashley Goian, director of policy in the state treasurer’s office, told the Finance committee the office supports restarting a state aid for school construction program but recommends structuring awards through the Vermont Bond Bank (or similar fiscal agent) and using a debt-service subsidy model so the support does not count as the state’s net tax-supported debt.

“The intent in presenting this proposed amendment from the treasurer’s office is to fortify what we think is already the intent in this school construction section while at the same time protecting the state's bond ratings,” Goian said. She described the state’s debt metrics (debt per capita, debt as a share of personal income and GDP) as central to the state’s bond ratings and to borrowing costs for a range of public entities.

Goian reviewed the mechanics of the recommendation: state awards would be proportional debt-service subsidies rather than direct state-guaranteed debt, and the Vermont Bond Bank would act as fiscal agent so loans do not appear on the state’s general ledger. The treasurer’s office recommended preserving and, where necessary, strengthening the bond bank’s “state intercept” credit-enhancement tool so lenders see a reliable repayment mechanism without adding net tax-supported debt to the state’s books.

Committee members raised three main concerns: where the special fund money would come from (the bill currently relies on annual appropriations and an undefined special fund source), the long-term state commitment required if subsidies layer year after year, and whether all districts would use the bond bank or pursue alternative lenders (which can sometimes yield better terms).

Goian showed a model illustrating a hypothetical 20% state subsidy for $100 million of projects in a year and how debt-service subsidy commitments would accumulate over time. She cautioned the committee that the bill’s current language does not route money through the bond bank and that legislative counsel and the treasurer’s office would need to rewrite sections to accomplish that flow; she recommended further consultation with the Agency of Education and bond bank staff to finalize technical language.

The committee did not take a formal vote. Members asked the treasurer’s office and legislative counsel to provide draft language for bond-bank routing, to consult with the Agency of Education on program criteria, and to return with the bond bank’s suggested technical amendments.