Tuesday, May 13, 2014

so if our GO bonds are rated junk?

If Moodys and Standard & Poors rate our bonds as junk after a 38 studios  default , one question might be why was it AA? to begin with. Below is a table that shows ,once again ,Rhode Island has a very high and destabilizing  cost of debt  under any interest rate scenario.
      Here is what the Governors Budget said in 2013 about interest expense relative to revenues:

"Tax Supported Debt should not exceed 5.0 to 6.0
percent of personal income, and annual debt
service for Tax Supported Debt should not
exceed 7.5 percent of state general revenues."

Interest Expense Revenue Interest/Revenue Ratio
Rhode Island 2009 437,293 4,710,553 9.28%
U.S. 47,243,967   1,123,226,058    4.21%


            Here is word for word  Governor Chafee's Fiscal 2014 Budget Commentary. pg 33

General Obligation Debt Authorization
The State of Rhode Island has $244.6 million of
authorized but unissued general obligation debt as
of January 1, 2013. These authorizations have
been approved by the voters at various referenda.
Under the Constitution of Rhode Island, the
General Assembly has no power to incur debts in
excess of $50,000 without consent of the people,
except in the case of war, insurrection or invasion
or to pledge the faith of the state to the payment
of obligations of others without such consent.
judicial interpretation, the limitation stated above
has been judged to include all debts of the state
for which its full faith and credit are pledged,
including general obligation bonds and notes,
bonds and notes guaranteed by the state and debts
or loans insured by agencies of the state such as
the Industrial-Recreational Building Authority.


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