State Comptroller Calls For Debt Reform
New York State has the second highest level of debt in the country and is approaching its legal borrowing limit.
The state’s debt capacity is projected to dwindle to $509 million by the end of the next fiscal year.
“New York’s past borrowing is limiting our future options,” DiNapoli said. “We spend billions each year to repay existing debt, so fewer resources are available for more pressing needs.
This comes at a challenging time when our state needs to rebuild and repair critical infrastructure and has growing capital needs.
“Taxpayers have little or no say in how much the state borrows, but they’re the ones who have to foot the bill. It is time to return to voter approval of borrowing. I have called for comprehensive reforms to New York State’s capital planning process to ensure critical infrastructure needs are met in a responsible way. Hurricane Sandy underscores the need for a serious discussion about our public infrastructure and how we pay for it.”
New York’s outstanding debt averages $3,253 per state resident, almost three times the national median. This represents an increase of $24.3 billion, or 62.2 percent, from state fiscal year (SFY) 2002-03.
In 2000, longstanding concern over New York’s debt levels and growing cost of debt service led the Legislature to enact limits on state debt and restrict the use of debt for capital purposes.
Despite those actions, there has been significant borrowing since the enactment of the Debt Reform Act of 2000 and recent weak economic conditions have combined to drive down the state’s projected borrowing capacity to a projected $509 million by the end of SFY 2013-14, according to recent estimates from the state Division of the Budget.
The timing of new construction or maintenance of state highways and bridges, education facilities, statefunded projects for the Metropolitan Transportation Authority, and capital investments funded by the state’s economic development initiatives could be affected if the state cannot borrow enough money.
Before Hurricane Sandy hit, the state was already facing revenue challenges this year. As the state’s debt service costs rise, fewer resources will be available for other important areas, such as education and health care.
The cost of borrowing is increasingly crowding out other state expenditures. New York paid $6.8 billion in state-funded debt service in SFY 2011-12, which amounted to approximately 5.1 percent of All Governmental Funds receipts.
Growth in state-funded debt service, at an average annual rate of 9.4 percent over the last 10 years, has far outpaced average annual growth in state spending on both education (5.3 percent) and Medicaid (5.1 percent) for the same period.
The report also found:
Nearly 95 percent of state borrowing over the last 10 years has been through public authorities. State-supported debt issued by authorities increased $14.2 billion, or 40.6 percent, over the period. Total voter-approved, general obligation debt represents only 5.5 percent of the state-funded debt burden, down from 10.2 percent ten years ago;
Of the $63.3 billion in debt outstanding, $8.5 billion or 13.4 percent was issued for operating and other purposes, not for capital purposes, representing the third largest source of increase in state-funded debt outstanding between SFY 2002-03 and SFY 2011-12. The growth in statefunded debt outstanding is due in part to significant increases in new debt issuance without a corresponding increase in debt retirement. Since SFY 2002-03, the state issued over $53.4 billion in new state-funded debt, while retiring only $25.7 billion.
New York spends a larger share of its annual budget repaying principal and interest on outstanding debt than similarly sized states. New York’s ratio was twice the national median and far higher than levels in most comparable states, such as California, Texas and Florida.
The state continues to pay hundreds of millions of dollars in debt service annually for imprudent borrowing choices, such as the sale of Attica prison to a public authority in 1991 and the refinancing through 2033 of certain New York City debt that originated in the 1970s.