State of Texas Debt Issuance Guidelines
Introduction
The 77th Legislature passed HB 2190 (Junell) requiring the Texas Bond Review Board to develop and adopt debt issuance guidelines and policies for state issuers and to ensure that state debt is prudently managed.
The following policies were created by the Bond Review Board per the requirements of HB 2190, in an effort to standardize and rationalize the issuance and management of debt by the State of Texas. The primary objective of the guidelines is to establish conditions for the use of debt and to create procedures and policies that minimize the State’s debt service and issuance costs, retain the highest possible credit rating, and maintain full and complete financial disclosure and reporting. The policies apply to all debt issued by the State, including leases and any other forms of indebtedness supported by state general revenues. However, all state issuers regardless of the type of debt issued, should develop and maintain their own debt policies based on their unique goals and programs.
Regular, updated debt policies can be an important tool to ensure the use of the State’s limited resources to meet its commitments to provide needed services to the citizens of Texas and to maintain sound financial management practices. These policies are therefore guidelines for general use, and allow flexibility for Issuers to be able to respond to changed economic conditions.
One function of these debt policies is to stimulate discussion and broaden appreciation of debt issues. These policies should be reviewed as a guideline once every biennium.
Creditworthiness Objectives
Policy 1: Credit Ratings
The State of Texas seeks to maintain the highest possible credit ratings for all categories of short- and long-term General Obligation debt that can be achieved without compromising delivery of basic services and programs and achievement of adopted policy objectives.
The State recognizes that external economic, natural, or other events may, from time to time, affect the creditworthiness of its debt. Nevertheless, the Executive and Legislative branches of State Government are committed to ensuring that actions within their control are prudent and necessary to maintain the creditworthiness objectives of the State.
Policy 2: Financial Disclosure
The State of Texas is committed to full and complete financial disclosure, and to cooperating fully with rating agencies, institutional and individual investors, State departments and agencies, other levels of government, and the general public to share clear, comprehensible, and accurate financial information. The State of Texas is committed to meeting secondary disclosure requirements on a timely and comprehensive basis.
Official statements accompanying debt issues, Comprehensive Annual Financial Reports, and continuing disclosure statements will strive to meet the minimum standards (to the extent applicable to each debt issue) promulgated by regulatory bodies and professional organizations such as the Securities and Exchange Commission (SEC), Municipal Securities Rulemaking Board (MSRB), the Governmental Accounting Standards Board (GASB), and follow Generally Accepted Accounting Principles (GAAP).
The State Comptroller of Public Accounts, in conjunction with individual issuers, shall be responsible for ongoing disclosure to established state and national information repositories and for maintaining compliance with disclosure standards promulgated by national regulatory bodies.
Policy 3: Capital Planning
To enhance creditworthiness and prudent financial management, the State will prepare a systematic capital plan and conduct long-term financial planning. This planning process will involve the co-operation and coordination of data and information among all state agencies and oversight bodies, including the Bond Review Board and the Legislative Budget Board. The result of the planning process will be a Comprehensive Capital Expenditures Plan prepared by the Bond Review Board and submitted to the state leadership, pursuant to SB1, Article 9, Section 6.38, 77th Regular Session. This plan will be updated and adjusted periodically as necessary. The plan will be implemented via the adoption of biennial capital budget items through the Legislative Appropriations Request process.
Policy 4: Debt Limits
The State will keep outstanding debt within the limits prescribed by the State’s constitution, specifically Article 3, Section 49-j; and at levels consistent with its creditworthiness objectives.