New York Comptroller Thomas DiNapoli last week announced his proposal to limit the state’s bonding power at 5% of personal income, up from the current 4% ceiling, and said the Empire State should develop a long-range plan that identifies the state’s infrastructure needs, a tool that could help officials prioritize capital projects.
DiNapoli on Friday spoke about the state’s debt burdens before the Citizens Budget Commission in Manhattan in conjunction with the release of his debt impact study. The study finds that current borrowing practices for the state, including side-stepping the 4% bonding capacity limit via state authorities, must end and a realistic borrowing cap should be in place.
DiNapoli proposes limiting all state-backed debt to 5% of personal income, with that ceiling to phase in over the next nine years. New York has $51 billion of outstanding debt, or 6.45% of personal income. The debt impact study indicates that the state’s outstanding debt will reach $63.6 billion in fiscal 2012, or 5.9% of personal income.
While the amount of the state’s outstanding debt will increase over the next few years, that figure’s personal income ratio will decrease due to expectations of faster growth in personal income than in the amount of debt outstanding over the next five years, according to the report.
In 2000, lawmakers enacted debt reform legislation to restrict all state-backed borrowing issued after April 1 of that year to 4% of personal income, yet officials found loopholes around the cap. Because of a narrow definition of what constitutes as state-supported debt, $17.1 billion of new debt gained authorization. The $17.1 billion is not subject to the cap, but the state is the sole repayer of the bonds.
To help the state eventually reach the 5% cap, DiNapoli proposes legislation that would reflect a broader definition of appropriation debt so that any bonds that require state revenues for repayment constitute state-backed debt. That revised definition will force the state to borrow within its means. In addition, he suggested the state develop a long-range assessment of capital spending needs throughout the state.
“The state needs to do a better job of planning and prioritizing,” DiNapoli told the CBC on Friday. “For decades, New York has treated debt as a surrogate for wealth and we’ve used debt to buy the things we want rather than build the things we need.”
Elizabeth Lynam, deputy research director at the CBC, said DiNapoli’s proposal is a step in the right direction and will evaluate the reform plan once officials file the legislation. She stressed that the most effective way to enforce bonding caps and borrowing definitions is through constitutional change rather than statutory measures, which lawmakers could find ways to work around.