How will the state be able to afford the debt service to pay off the bonds, given the current budget crisis?
A. When all of the bonds are sold, which is projected to be by 2009, the debt service is estimated to be $87 million per year, which is 0.8 percent of current general fund resources. For bonds that will be issued in the current biennium, there is $14.3 million in the budget to pay the debt service. More importantly, the state can control the amount of new debt service that it incurs by controlling the rate of bonds issued. In other words, if the state determines that because of a downturn in the economy it cannot afford to incur additional debt service, it will not issue new bonds until such time as it can afford the debt service. It is important to realize that while we are experiencing an economic downturn, this condition will not be with us forever. Last year s growth of -3.8 percent was the weakest on record. And the projected growth rates for this fiscal year at 0.8 percent and the following year at 4.6 percent are not much better. However, if you look at Virginia s average annual
