Financing Infrastructure with State Funds—Are We in Trouble?
Despite the fact that State of California bonds remain investment grade, the state’s continued reliance on debt financing for infrastructure could place its bond rating in jeopardy and result in higher interest rates. This was one of several points made by Steven Spears of the SAER Group in a lecture to the USC Keston Institute for Infrastructure on February 25, 2005. Mr. Spears, a former California Deputy State Treasurer for Public Finance cited “dramatically increasing outstanding bonds, bond sales, and debt service” along with the ongoing state budget crisis as factors that will likely prevent the upgrading of California’s credit in the near future. At the same time, the resultant higher debt service costs place more pressure on other general fund expenditure categories. To escape from this debt spiral, the state needs to look to other options for financing infrastructure in the future.
To view Mr. Spears’ presentation please follow the link below.