1. State of Florida Debt Overview Taxation And Budget Reform Commission Governmental Procedures And Structure Committee July 20, 2007 Presented by The Division of Bond Finance

2. Organization of the State Constitutional framework for debt –General Principles State general obligation bonds (full faith and credit) may only be issued when approved by voters – Article VII '11(a) –Bonds secured by taxes may be issued when authorized by Constitutional amendment (voter approval) No pledge of taxes without voter approval –Revenue Bonds secured by non-tax revenues may be issued without voter approval – Article VII'11(d) 2

3. Constitutional Authority for State Bond Programs PECO Bonds Article XII, § 9 (a)(2) Education Capital Outlay Bonds Article XII, § 9 (d) Right-of-Way and Bridge Bonds Article VII, § 17 Florida Forever and Everglades Bonds Article VII, § 11 (e) County Road Bonds Article XII, § 9 (c) Housing Bonds Article VII, § 16 Pollution Control Bonds Article VII, § 14 Scholarship Loan Bonds Article VII, § 15 Bond Program Constitutional Authority 3

4. Types of Debt General Obligation or Full Faith and Credit Bonds (Constitutionally authorized) Examples: Public Education Capital Outlay (PECO) Right-of-Way Acquisition and Bridge Construction (ROW) Bonds secured by specified taxes (Constitutionally authorized) -- Article VII '11(e) Example: Preservation 2000/Florida Forever 4

5. Types of Debt – continued Revenue Bonds secured by non-tax revenues -- Article VII '11(d) Examples:Turnpike Bonds Lottery Bonds University Auxiliary Facilities (Dormitories and Parking Facilities) Bonds subject to annual appropriation of debt service or Certificates of Participation (COPs) Examples:Facilities Pool Prison Bonds 5

6. Limitations on Debt Limits on debt imposed in various ways (1)Constitutional limits on individual programs Example: PECO – no more than 90% of gross receipts taxes for debt service – Article XII '9(a)(2) (2) Statutory limits Examples: Preservation 2000/Florida Forever – no more than $30 million in debt service in each year additional debt is authorized; Right-of-Way – no more than 7% of STTF revenues for debt service (3)Bond documents Example: Limited by enterprise revenues pledged plus additional bonds test 6

7. Authorization of Debt Legislature authorizes debt through substantive law or appropriations act –Legislature decides what to borrow for and how much to borrow –Executive Branch implements legislative authorization through Division of Bond Finance (DBF) –Governor and Cabinet are governing board of DBF –DBF performs centralized debt management function for State and oversees structuring and execution of most State debt issuance 7

8. Debt Management Principles Chapter 215.98, F.S., requires annual analysis of State’s debt position through debt affordability analysis Debt affordability analysis prepared annually for legislative leadership Debt affordability analysis designates benchmark debt ratio and establishes a target and cap Benchmark debt ratio is annual debt service to revenues available to pay –Target 6% –Cap 7% 8

9. Debt Management Principles – cont. Debt affordability analysis provides framework for State to measure, monitor and manage State’s debt position Debt affordability analysis assists the legislature in prioritizing capital spending and integrates debt authorization function (legislative branch) with debt management function (executive branch) 9

10. State Debt Outstanding Total Debt Outstanding: $23.0 billion 10

11. Debt Outstanding by Program 11

12. Growth in Debt Outstanding Total debt increased $10.7 billion, from $12.3 billion to $23.0 billion over the last ten years Debt per capita has also increased from $634 to $979 over the last ten years 12

13. Growth in Annual Debt Service Annual debt service payments total approximately $1.7 billion annually Increased debt service reduces future budgetary flexibility Annual debt service requirements have more than doubled over the last ten years 13

14. Growth in Benchmark Debt Ratio Ratio of Debt Service to Revenue Fiscal Year Benchmark Ratio 1997199819992000200120022003200420052006 4.28%4.61%5.09%5.23%5.70%5.82%6.12%5.94%5.36%5.10% Benchmark debt ratio exceeded 6% target in 2003 due to changes in revenues available caused by the 2001-2003 economic recession Benchmark debt ratio has improved over the last three years 14