New York comptroller Thomas DiNapoli has said that his state’s high debt burden “could jeopardize critical infrastructure projects and other capital needs.”
“We spend billions each year to repay existing debt, so fewer resources are available for more pressing needs,” DiNapoli said. “ This comes at a challenging time when our state needs to rebuild and repair critical infrastructure and has growing capital needs.”
New York’s outstanding state-funded debt is $3,253 per resident, almost three times the 50 state median. In inflation-adjusted dollars, this debt per resident has gone up by 24% since 2003. The 2012 level is the fifth highest among the states, according to Moody’s credit analyst Emily Raimes.
Other debt measures are also concerning, DiNapoli wrote in a report. For example New York’s state-funded debt as a percent of personal income went to 6.4% in fiscal year 2012 from 5.7% in fiscal year 2008. The state-funded debt as a percent of gross state product grew to 5.5% in fiscal year 2012 from 4.5% in fiscal year 2008.
“New York’s debt as a percentage of [total] personal income, at 6.4 percent, was second only to New Jersey within its peer group and more than two times the national median of 2.8 percent … New York’s debt as a percentage of gross state product is more than two times higher than the median of its peers and 2.3 times higher than the national median,” DiNapoli wrote.
“The balance between pay-as-you-go financing and borrowing has increasingly shifted toward more borrowing,” DiNapoli wrote. “During the second half of the 1980s, the state used pay-as-you-go financing for an average of 55% of non-federally funded capital expenditures. In contrast, over the last 10 years, pay-as-you-go has hovered around 31%.”
Total state-funded debt was $63.3 billion as of March 31, 2012. This was the second highest state total in the country, DiNapoli wrote. It was also an inflation-adjusted 30% increase from 2003.
New York enacted the Debt Reform Act of 2000 to put a limit on state debt. Due to this and the state’s rapid borrowing, the state is expected to have a comparatively limited borrowing capacity of $509 million by the end of fiscal year 2013-2014, DiNapoli reported.
The state’s debt limit applies to state supported debt. DiNapoli’s office uses a broader measure of debt, “state-funded debt.”
“The report … notes that the state is approaching its debt limit,” Raimes noted. “However, … the state has for years issued a significant amount of debt that is not subject to their cap. We would expect that they would continue to use this type of financing as they get closer and closer to their debt limits.”
DiNapoli suggested four steps to address the state’s debt and capital planning practices.
• “Impose a real debt cap on all state-funded debt. Amend the constitution to limit all state-funded debt to 5.0% of personal income, on a phased-in basis, and to prohibit the use of state-funded debt of non-capital purposes.”
• “Ban backdoor borrowing.” Change the state constitution to bar the selling of state-funded debt by the state’s public authorities and other entities. All state debt would be issued by the comptroller following voter approval. There would be a $250 million annual exemption and a provision for the emergency sale of debt.
This would not prevent the authorities from issuing debt in which state funds are not going to be used for debt service.
• Establish a statewide capital needs assessment and require a comprehensive 20 year long-term strategic plan to guide a five year capital plan.
• Found a New York State capital asset and infrastructure council to inventory and monitor capital assets that get substantial state investment. DiNapoli noted that the executive and legislative branches have recently founded a New York Works task force that may be a good substitute for the proposed council.