Committee hears how state 'cash fund' has been used to pay capital projects, and risks tied to federal match delays

At an Appropriations Committee meeting, Joint Fiscal Office staff outlined how the state’s capital "cash fund" has been structured and used to pay for capital projects that otherwise might be funded by bonds.

The committee heard that the cash fund — formally described in the meeting materials as the cash fund for capital and essential investments and established in the 2022 Appropriations Act — has two subaccounts: a capital infrastructure subaccount for traditional capital projects and an "other infrastructure essential investments and reserves" subaccount that can be used for items such as federal-IIJA matching, transportation and revolving loan capitalization. Emily Byrne, Joint Fiscal Office staff, told the committee that about $36 million in cash was used for projects in fiscal 2024 and $9.5 million in fiscal 2025, for a combined $45.7 million appropriated to projects listed on the committee’s spreadsheet.

Why it matters: the committee discussed the trade-offs between paying for projects with cash (pay-go) and borrowing with bonds. Paying with cash avoids long-term interest costs but reduces near-term general fund balances available for other priorities. The committee was also told that the state’s annual debt service payment is a major recurring obligation; staff cited a fiscal 2025 debt service figure of about $78.24 million and noted an additional $5 million transfer in the Budget Adjustment Act related to timing of payments.

Staff described how the cash fund is financed and governed. Byrne said there is no dedicated revenue stream for the cash fund; instead, the fund receives transfers from the general fund when the General Assembly approves them. The meeting materials and staff discussion referenced a possible formula sometimes discussed in reports: taking roughly 4% of prior-year general fund appropriations and subtracting debt service to calculate a potential transfer to the capital infrastructure subaccount — but staff emphasized that the statute and practice allow transfers only as the General Assembly and governor choose (the language in the statute and reports uses permissive language such as "may").

The committee also discussed how cash fund appropriations interact with the capital bill and the Appropriations Act. Byrne explained that recent years’ cash fund appropriations have been incorporated in the Appropriations Act so that transfers and general fund allocations occur in one bill; that practice is intended to avoid sequencing problems if the capital bill and Appropriations Act pass on different schedules.

Committee members raised concerns about the cash fund’s role in matching federal Infrastructure Investment and Jobs Act (IIJA) dollars. Byrne and members noted that a substantial portion of the cash fund’s other subaccount has been set aside to match IIJA funds for water and wastewater projects; witnesses said the administration front‑loaded state match over a five‑year period. The group cautioned that an executive order or federal timing changes that pause IIJA payments could leave municipalities that already advanced bonds or planning without the expected federal match, creating uncertainty for local projects.

No formal motions or votes on the cash fund were recorded in the transcript. Committee members said the cash fund and its interaction with the capital bill and the governor’s budget will be discussed further as the committee prepares the capital bill and reviews the governor’s upcoming budget proposal. Staff said a fiscal facts booklet and other JFO materials explaining revenue sources and transfer calculations will be published and distributed to members.

The hearing closed with committee chairs and staff noting continued engagement on the capital bill and cash fund mechanics in the weeks ahead.