Administration outlines FY26–27 capital budget, highlights cash-fund formula and declining bonding capacity

Nick Kramer, chief operating officer at the Agency of Administration, told the House Committee on Corrections & Institutions on Jan. 28 that the governor’s proposed FY26–27 capital budget pairs a $100 million Capital Debt Affordability Advisory Committee (CDAC) bonding authorization with smaller cash and prior‑year balances.

Kramer said the administration’s package includes $50 million of bonding in each fiscal year, $6.8 million in bond premium from a recent issuance and roughly $3.1 million in prior‑year reallocations, producing about $60 million available in FY26 and a $50 million authorization in FY27. He also said the statutory cash fund transfer for this cycle calculates to $14.8 million.

The nut of the administration’s recommendation is the cash‑fund concept: rather than relying solely on general obligation bonds, the state would lock a statutory transfer equal to 4% of the last completed fiscal year’s general fund appropriations minus estimated current debt service, and use that difference as up‑front cash for capital projects. Kramer said the formula is codified in statute (identified in the committee materials as “32 BSA 1,000 and 1 B is the cash fund statute”) and that the transfer this year is $14,800,000.

Kramer walked members through the spreadsheet columns that underlie the proposal — bonded appropriations for FY26 and FY27, cash fund appropriations, and totals. He described bond premium (extra investor payments that do not count against authorized bonding) and prior‑year reallocations as additional near‑term resources. Kramer said the treasurer’s office was able to generate $6.8 million in premium on the latest issuance, and that about $3.1 million of prior appropriations were available for reallocation.

Kramer and staff stressed why the mix matters: CDAC analyzes how much debt the state can responsibly carry while protecting its credit ratings; over the past decade CDAC’s recommended authorizations have declined (Kramer noted a historical peak in the early 2010s and the current authorization of $100 million for the biennium). At the same time, inflation and higher construction costs have increased the real price of projects, producing a gap that the cash fund aims to address.

Kramer said using cash can reduce interest costs (he offered a market example that issuing $1 in bonds could cost $1.50 over 20 years at current rates) and that the administration favors a diversified portfolio of funding sources. He emphasized the administration’s intent to place the cash appropriations in the capital bill to preserve committee jurisdiction while the statutory transfer would continue to be made in the general fund process.

The committee and administration staff agreed the spreadsheet and accompanying capital booklet contain line‑by‑line narratives for each project and that members should use those materials when asking questions in upcoming hearings. Kramer and fiscal staff offered to provide a short history showing past years’ proposed cash usage, actual appropriations, and bonding to help the committee track the interplay of cash and debt over time.

At the end of the session Kramer said the administration would return with department‑level testimony and that the committee should expect line‑by‑line discussions and potential reallocations during markup as project readiness and federal matches become clearer.