States with revenue-restricting measures similar to the one contained in Amendment 5 saw downgraded bond ratings
LAKE MARY, FL – Large-scale projects like construction and maintenance of Florida schools, bridges, roads and water and sewage systems require significant state investment. Such infrastructure is funded through bonds that investors purchase from the state. Amendment 5’s supermajority requirement would threaten Florida’s AAA bond rating, making investors less likely to buy bonds and subsequently endangering state investment in communities, according to a new brief from the nonpartisan Florida Policy Institute.
On November 6, voters in Florida will decide on a legislatively-referred constitutional amendment that would require a two-thirds (supermajority) vote of the state Legislature to raise state revenues, taxes and fees and eliminate tax breaks and loopholes.
The Institute pointed to the most recent Infrastructure Report Card published by the American Society of Civil Engineers (ASCE), noting that the Florida section of the ASCE gave the Sunshine State grades of “C” or below in numerous areas, including energy, roads, schools, storm-water, transit and wastewater. These grades would likely decline, according to the Institute, if legislators were forced to cut programs and services under a revenue-restricting supermajority requirement.
The brief also warned that Amendment 5 would threaten Florida’s AAA bond rating. General obligation bonds are backed by a state’s ability to raise revenue through taxes to pay back investors. The methodology used by Moody’s Investors Service, which issues bond ratings, assesses a state’s revenue and expenditure flexibility. Arizona and Nevada saw downgraded credit ratings in 2010 and 2011, respectively, with Moody’s explicitly stating that supermajority requirements played a role in both cases.
“Florida, like many other states, has to make vital infrastructure improvements to ensure the safety of its residents,” said Joseph Pennisi, executive director of the Institute. “Lawmakers will be unable to invest the funds necessary to modernize schools, roads, bridges and other facilities, however, if they are unable to raise revenue. Amendment 5 empowers a small number of legislators to block budget bills that invest in our communities.”
“The 2016 Report Card for Florida’s Infrastructure found the infrastructure systems Floridians use every day – including our roads, transit, and drinking water systems – are not prepared to meet the growing needs of our state,” said Rachel Haeseler, PE, 2017-2018 president of the ASCE Florida Section. “ASCE advocates for thoughtful infrastructure investment to maintain our current infrastructure systems and to prepare for the future. In November, we have the opportunity to head to the polls and make infrastructure a priority in Florida.”
The Florida Policy Institute’s mission is to advance state policies and budgets that improve the economic mobility and quality of life for all Floridians.