Harrisburg, Pa. – Speaker of the House of Representatives Mike Turzai (R-Allegheny) said Pennsylvania’s new debt reduction law enables the state to pay off debt more efficiently and less expensively, thereby saving taxpayer dollars.
Turzai expressed gratitude to Rep. John Lawrence (R-Chester County), author of Act 43 of 2019 (House Bill 24), for leading the way and shepherding the bill through the legislative process.
“Rep. Lawrence worked hard to make this bill become law,” Turzai said. “Thanks to him, the amount of interest paid on debt will decrease, thereby keeping Pennsylvania on a path to improving its overall bond rating. It’s a win-win for the state and our hardworking citizens.”
Specifically, Act 43 requires the principal for new state debt to be repaid in equal amounts over the term of the bond. Right now, the state uses a repayment schedule that features lower principal payments in the first few years and much higher principal payments as the loan matures.
“Since 2001, the Commonwealth has used a methodology whereby payments become more expensive as time goes on,” Turzai explained. “This new method front loads interest payments and back loads principal payments, as with a 30-year home mortgage.
“Rep. Lawrence’s law requires the state to use a better method, thereby reducing debt we pass on to future generations and the amount of tax dollars spent on interest payments servicing that debt.”