The Commonwealth's borrowing needs are regular and recurring, consistent with the borrowing patterns of most large states. The State Treasurer’s Office, which acts as the public finance office of Massachusetts state government, is responsible for all of the borrowing that the Commonwealth must do annually to ensure it operates in an efficient manner in order to properly serve its citizens and taxpayers. The State Treasurer’s Office borrows by selling bonds and notes and is responsible for accounting for the resulting debt.
Long-term borrowings conducted by the State Treasurer’s Office are done to finance the state's capital budget, which is developed as part of a five-year capital improvement plan by the governor’s Office. The capital budget is made up of very expensive infrastructure projects which require large up-front outlays. Examples of these projects include roads, bridges, higher education campuses, state office buildings, prisons, etc. The amount of borrowing done annually and how bond proceeds are spent is determined by the Executive Office for Administration & Finance. Debt financing allows the Commonwealth to make capital investments in long-term public infrastructure with repayment occurring over the useful life of the asset; this spreads the burden of repayment over the numerous state budgets during which the asset was utilized.
Based on recent legislative bond authorizations and the Administration's five-year Capital Investment Program, the Debt Management Department expects to issue approximately $2 billion in new bonds per year over the next five years. Cash flow requirements for the state's operating budget will also require the sale of roughly $1.5 billion to $2 billion per year in short-term notes and commercial paper to ensure that the Commonwealth's liquidity remains strong.
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