New York Gov. Eliot Spitzer proposed selling more than $6 billion of bonds in fiscal 2009 as part of his $124.3 billion executive budget released yesterday. All funds spending would rise by 5.1% over the current fiscal year’s budget.
The budget calls for $6.28 billion of bond-financed capital spending, which includes some bond proceeds from the current fiscal year. Spitzer also proposed raising $1 billion for economic development by selling state-owned assets in New York City and another $4 billion for an endowment for education aid from a privatization of the state lottery.
The increase is over $1 billion dollars more than the $4.69 billion of bonds projected to be sold this fiscal year and somewhat higher than the $6.01 billion estimated for fiscal 2009 in last year’s budget.
The state’s fiscal year begins April 1. Spitzer’s budget now moves to the Legislature for consideration.
Most of the bonds, $5.81 billion, would be sold through public authorities, while $417.8 million would be sold as general obligations of the state. The remaining 38% of the proposed $10.1 billion of capital spending in fiscal 2009 would be financed on a pay-as-you go basis from state and federal sources.
Spitzer’s capital spending proposal is 13% higher than the current level of spending. The $10.1 billion figure includes about $2.1 billion that is considered “off budget” and not in the financial plan.
Proposed debt issuance includes $3.18 billion of personal income tax bonds that would be sold by the Empire State Development Corp., the Dormitory Authority of the State of New York, the New York State Throughway Authority, the New York State Environmental Facilities Corp., and the New York State Housing Finance Agency
The largest component of bond sales, $1.5 billion, would be sold to finance transportation. Bond proceeds would also finance $1.1 billion for economic development, $1.2 billion for higher education, and $650 million for school facilities, according to the budget.
State supported debt would increase to $53.3 billion, a $3.31 billion increase over the current fiscal year.
The budget was released as the financial markets roiled under pressure from a global sell off sparked by fears of a recession in U.S.
“I don’t think anybody can avoid the recognition that this a period of economic turmoil, economic uncertainty,” Spitzer said.
Since New York gets about 20% of its revenue from the financial services sector, it is vulnerable to the impact of troubles on economic impact of troubles on Wall Street. “It’s good in a flush year, but not so good when things tip over on the financial services industry,” the governor said.
New York state tax receipts grew at an average rate of 10.1% over the past four years, but are projected to grow by 4.2% this year, Spitzer said.
To help pay for a $2.2 billion infrastructure and economic development program that includes a $1 billion Spitzer proposed earlier this month in his State of the State speech for the financially depressed Upstate New York region, the state would generate $1 billion through the sale of “surplus properties.” Spitzer and budget director Laura Anglin said those properties included a city block owned by the Jacob Javits Convention Center Development Corp. in Manhattan that could bring in more than $800 million, and two other properties in New York City owned by the Office of Mental Health and the Office of Mental Retardation and Developmental Disabilities.
The remaining $200 million would come from $100 million of reserve funds from the New York State Mortgage Authority and $100 million of revenue from an auto insurance surcharge.
Senate Majority Leader Joseph Bruno, R-Brunswick, criticized Spitzer’s plan for increasing taxes and fees and failing to address the “real issues that impact the quality of life of New Yorkers, despite spending record amounts.”
Bruno also criticized Spitzer’s upstate plan for not addressing “the core economic conditions that are necessary to help create jobs.” Bruno did not identify those core issues in his statement.
The budget also calls for the state to create a $4 billion endowment that would provide more than $200 million of education aid annually through the monetization of the state lottery. Spitzer didn’t offer any new details on whether the state would lease or sell its lottery but Anglin said that the state will issue a request for proposals for financial adviser for the lottery sale in the next one to three weeks. The adviser would help the state to study options.
Diana Fortuna, president of the Citizen’s Budget Commission, a budget watchdog group, called Spitzer’s budget proposal “not unreasonable” but wondered whether spending increases while the economy was a good idea considering recent negative economic news.
“Albany isn’t good at handling bad news,” Fortuna said “At this point in the process, the usual dynamic is for the Legislature to add proposals, and this year that may come at a time when they need to be cutting costs.”
