As the economy weakens, New York will cut back on its pay-as-you-go financing and sell more bonds to finance capital spending in the current fiscal year, according to a report released Friday by the state Division of Budget on the enacted budget's capital and financing plan.
Capital spending in fiscal 2009, which began on April 1, will total $9.15 billion, a 17.8% increase from $7.77 billion in the previous fiscal year. That figure includes $2 billion of "off-budget" spending directly by public authorities using bond proceeds. To finance the program, the state will reduce pay-as-you-go financing to $1.82 billion from $2.51 billion - a 27% decrease from the previous fiscal year.
At the same time, the state plans to sell $361.8 million of general obligation bonds, a 28.6% increase over the $281.31 million sold in the previous year. The biggest increase in bonding will come in the public authorities, which will sell $5.24 billion of bonds, a $2.02 billion jump compared to the previous year.
The smallest percentage change in how the state expects to finance capital projects is from federal pay-as-you-go financing that will rise 12.3%, to $1.97 billion from $1.76 billion.
New York's shift toward a greater ratio of bonding compared to pay-as-you-go spending is typical of what is going on in many states dealing with a weakening economy, said Standard & Poor's director Robin Prunty.
"I don't think its unusual where revenue growth is slowing, and it's a more difficult budgeting environment," Prunty said. "That's probably, over the next year, going to be a fairly common direction for state budgets."
In New York, transportation spending will experience the largest dollar increase. It is expected to grow by $409,887 to $4.28 billion compared to the previous year.
The capital budget also raises the cap on state-supported debt by $6.12 billion to $78.89 billion. The greatest increase is in education, which grew to $19.73 billion, a $1.89 billion increase.
Under this new plan, the state's debt service costs will rise about $200 million to $5.3 billion and the state's outstanding debt will rise $3.2 billion to $52.8 billion.
The report also announced the results of the state's competitive bond sales by public authorities in the year that ended March 31, when New York began operating under a new policy of selling some authority bonds competitively.
The state sold $2.24 billion of bonds competitively and estimated that it saved an average 50 basis points compared to comparable negotiated sales, primarily through lower underwriting costs, according to analyses by outside financial advisers. The state plans to sell at least 25% of its new-money bonds competitively in fiscal 2009.