Treasurer's office and Bond Bank warn program could raise long-term costs, urge appropriation language and Bond Bank role

Members of the House Ways & Means Committee heard an overview April 17 of the school construction section folded into House bill H.454 and were warned that a state debt-service subsidy could create rising, multi-decade budget obligations and risk the state's credit rating unless the law is carefully structured.

Ashlyn Duan, director of policy in the Vermont State Treasurer's Office, told the panel the proposal in H.454 largely tracks recommendations from the school construction task force and uses a debt-service subsidy model similar to Rhode Island's program. Duan said the bill contemplates a 20% base subsidy with bonus points that could raise the subsidy to as much as 40% for projects meeting certain criteria.

The stakes, Duan said, are financial as well as programmatic: "We are hoping to add in bold, that the annual amounts are subject to annual appropriation and do not constitute a pledge of faith and credit or taxing power of the state," language her office recommends to reduce the risk that rating agencies count the program as net tax-supported debt.

Why it matters: If the subsidy were treated as a state debt obligation, Duan said, rating agencies could consider the liabilities "net tax supported debt," pushing up…