March 2018

Breaking the Bond Lock

Ray Noonan, Jesse Marks

The Bond Lock is a provision included in the Fiscal Year (FY) 2018-2019 budget aimed at restricting changes to Connecticut's budget rules. It stipulates that whenever Connecticut issues a bond for a two-year period beginning in May, it must vow not to change three new spending and revenue restrictions—the spending cap, volatility cap, and bond cap— for the life of the bond (typically 10 years) except in extraordinary circumstances.

Because bonds are considered contracts, Connecticut would be legally bound to maintain these spending and revenue restraints despite what future Governors or legislatures might find to be in the best interests of the state. Any effort to break the covenant would invite litigation and risk significant penalties.

The fiscal restrictions that the Bond Lock cements into place all have significant flaws, threatening state investments necessary to build thriving communities. By making it virtually impossible to change any of these restrictions for more than a decade, the Bond Lock limits the state’s ability to address both existing and unanticipated challenges, today and into the future.

Issue Area:
Budget and Tax