New York’s rising debt burden underscores the need for overhauls to the state’s borrowing rules, according to State Comptroller Thomas DiNapoli.
A new report issued by DiNapoli Thursday showed that New York’s state-funded debt is projected to reach $63.7 billion at the end of the current fiscal year and increase over the next four years to $71.8 billion. The Democratic comptroller said changes are needed to the state’s use of debt including requiring voter approval of borrowing and better planning for capital projects.
“New York faces tremendous infrastructure challenges and the wise use of debt can be an essential part of the financing picture,” DiNapoli said. “My debt reform proposal would help ensure effective capital planning and manageable debt levels.”
DiNapoli said current projections indicate the state’s available borrowing capacity under Debt Reform Act of 2000 will shrink to only $58 million for the 2021 fiscal year. He said while the legislation added restrictions to provisions in the state constitution prohibiting the state from issuing debt without voter approval, various other borrowing mechanisms have been used to get around the process such as the use of public authorities. These entities issued $47.2 billion of state-supported debt for the 2017 fiscal year, a 14.5% jump over the year-earlier period.
“Backdoor borrowing imposes significant costs on taxpayers, lacks transparency and may limit flexibility in providing important services and programs,” said DiNapoli.
New York’s current debt total is second only to California’s $87 billion, according to DiNapoli. The Empire State’s per capita debt is $3,116 or three times the median for all states. Annual debt service payments are expected to exceed $8.2 billion by the end of the 2022 fiscal year, the report states.
“This report does not adhere to generally accepted accounting principles and includes debt that is not recognized as the responsibility of the State on OSC’s own financial statements," said a statement from New York State Division of the Budget spokesman Morris Peters. "The fact is, New York’s debt has declined for five consecutive years for the first time in history and our debt to personal income ratio is at the lowest level since the 1960s.”
DiNapoli is proposing amending the state constitution to limit all state-funded debt to 5% of personal income starting in the 2028 fiscal year and prohibiting state borrowing for non-capital purposes. The comptroller also wants to ban issuance of state-funded debt by public authorities and allow multiple General Obligation Bond acts to be considered by voters in the same year. His proposal would enable a limited amount of debt without voter approval annually along with emergency borrowing “under extraordinary circumstances and within strict guidelines.”
The debt changes outlined in DiNapoli’s report also include the creation of a New York State Capital Asset and Infrastructure Council that would monitor the status of all the state’s capital assets and its public authorities. He also wants to establish a Statewide Capital Needs Assessment.
A Nov. 1 report issued by DiNapoli warned of a looming $4.1 billion budget deficit before budget adjustments for next year that combined with lower-than-expected tax revenues and federal funding cuts create a “triple threat” to the state's overall finances. New York State has general obligation bond ratings of Aa1 from Moody’s Investors Service and AA-plus from S&P Global Ratings, Fitch Ratings and Kroll Bond Rating Agency.