Missouri Gov. Mike Parson's proposed $100 million payment would reduce the amount of interest the state has to pay on more than $2.2 billion in outstanding debt.
Earlier this month, Parson announced a plan to spend $100 million in general revenue to repay the state's outstanding bond debt.
The proposal wouldn't use any of the state's allotted federal COVID-19 relief funds and instead would be entirely funded by Missouri's historic budget surplus.
"The bottom line is, Missouri's economy is strong," Parson said during his State of the State address. "With a historic budget surplus and federal dollars coming to our state, we want to build on our past momentum to capture even greater opportunities for the future of Missourians. But I want to remind you that our economy is strong despite federal funding."
Parson said he expects the investment to save Missouri taxpayers a total of $148 million as the state will be accelerating the pace it pays back bonds and, as a result, reducing the amount of interest that has to be paid.
On Wednesday morning, representatives from the Office of Administration testified before the Senate Appropriations Committee that the $100 million payment would produce the expected savings by 2040.
According to the Office of Administration's state debt report, Missouri had more than $2.2 billion in outstanding debt on July 1, 2021 -- the start of the current fiscal year. That total incorporates general obligation bonds, revenue bonds, other appropriation debt and transportation debt.
Last session, the Legislature appropriated $12.4 million -- or less than 1 percent of the state's total operating budget -- toward public debt for the current fiscal year.
According to the governor's fiscal year 2023 budget, the $100 million for public debt would come from a roughly $2.4 billion surplus in the state's general revenue fund.
"We think that is prudent to do while times are good," State Budget Director Dan Haug said. "While we have this type of funding available, pay off some of our debts so that we don't have as much debt service in the future."
Despite having enough in the general revenue fund to entirely wipe out Missouri's debts, Haug said that isn't the plan.
He said it wouldn't be responsible for the state to spend the entire general revenue surplus in one year because it has the potential to create a "cliff that we're not going to be able to afford later," so the plan is to spend the funds over the next few years.
Along with a $500 million investment in the state employee retirement pension and a $281 million deposit into the cash operating expense fund, the $100 million for public debt would reduce the general revenue surplus to $1.5 billion.
Missouri has three types of general obligation bonds: water pollution control bonds, fourth state building bonds and stormwater control bonds; and one revenue bond administered by the Board of Public Buildings.
The governor's budget doesn't specify how much of the $100 million will go toward servicing each of the different bonds and the proposal still requires General Assembly approval.
The three biggest credit rating agencies recognized by the U.S. Securities and Exchange Commission -- Moody's Investors Service, Standard and Poor's Corporation and Fitch Ratings -- have consistently given Missouri's bond issues a Triple A rating, which is the highest rating.
Missouri is one of 13 states to receive the Triple A rating from all three agencies.
Click the links below to read the 2023 budget and debt resort:
• Gov. Mike Parson’s fiscal year 2023 budget
• Office of Administration’s state debt report