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NYS Comptroller

THOMAS P. DiNAPOLI

2016 FINANCIAL CONDITION REPORT

Debt


State-Funded Debt Outstanding

The debt burden of a governmental entity directly affects its ability to provide current services, as well as its long-term fiscal health. Existence of high levels of government borrowing may:

  • indicate that the government is unable to support current programs with current revenues.
  • force future program reductions, increased taxation or additional borrowing when future resources are needed to repay debt.
  • limit capacity to finance capital assets, budgetary deficits and
    capital grants.

The State Ranks Second Highest in Nation in Outstanding Debt

  • At the end of State Fiscal Year (SFY) 2015-16, the State reported the following categories of debt:
    • $2.7 billion in constitutionally recognized (voter-approved) general obligation debt, a decrease of 21.9 percent since SFY 2011-12.
    • $50.2 billion in State-Supported debt as statutorily defined in the Debt Reform Act of 2000, a decrease of 4.8 percent since SFY 2011-12.
    • $56.7 billion in debt reported in accordance with full accrual accounting under Generally Accepted Accounting Principles (GAAP), a decrease of 2.4 percent since SFY 2011-12.
    • $63 billion in State-Funded debt, a decrease of 0.5 percent since SFY 2011-12. This category has been defined by the State Comptroller as a comprehensive measurement of the State’s debt burden. It includes instances where the State makes payments with State resources, directly or indirectly, to a public authority, bank trustee or municipal issuer to enable them to make payments on debt issued for State purposes. Approximately 96 percent of the State-Funded debt was issued by public authorities and without voter approval.
  • In 2015, New York State was the second most-indebted state behind California, and had nearly 1.5 times as much debt as the third most-indebted state (New Jersey). New York State also ranked fifth among all states in debt per capita.
  • At the end of SFY 2015-16, State-Funded debt outstanding per capita was $3,183, which was equal to 5.5 percent of Personal Income.

State Projects Issuing More Debt Than It Will Retire in the Coming Years

StatevDebt Issuance and Retirement Debt Service Expenditures in New York
  • For the next five years, the SFY 2016-17 Enacted Budget Five-Year Capital Program and Financing Plan projects that the State will issue 50 percent more debt than it will retire, with:
    • $30.7 billion in new State-Supported debt issuance; and
    • $20 billion in State-Supported debt retirement.
  • The State is experiencing a period of reduced debt capacity due in part to excessive use of debt in the past, as well as recent economic conditions.
  • Based upon scheduled repayment dates, the State’s accumulated deficit financing ($3.7 billion at the end of SFY 2015-16) will not be fully repaid until fiscal year 2026. The amount outstanding includes bonds issued by the:
    • New York Local Government Assistance Corporation (LGAC);
    • Municipal Bond Bank Agency (MBBA); and
    • Tobacco Settlement Financing Corporation (TSFC).
  • An additional $2 billion in debt outstanding is associated with:
    • issuances by the Sales Tax Asset Receivable Corporation (STARC), which will not be fully repaid until 2034; and
    • the sale of Attica Correctional Facility in 1991.
  • At times, New York has issued State-Supported debt to fund capital purpose grants to other entities. This practice results in liabilities for the State without creating offsetting State assets.
  • In SFY 2015-16, $710 million in State-Supported debt service initially planned for SFY 2016-17 was paid early. With such prepayments, the State sends funds earlier than otherwise planned to the fiscal agent or trustee, who then retains such funds until the regularly scheduled debt service payment is due. Such prepayments do not reduce the State’s interest costs. Prepayments that shift spending from one fiscal year to the next deflate reported year-over-year growth in debt service and overall spending.
  • In SFY 2015-16, State-Funded debt service totaled almost $6.9 billion. This is expected to grow to $8.4 billion by 2021, based on projected issuance and retirement amounts from New York State and New York City.

State-Funded Debt Differs from Debt Reported Under GAAP

  • Significant differences exist between debt reported under the State-Funded category for cash reporting and debt reported under GAAP:
    • State-Funded debt includes certain obligations that are not recognized as a State liability under GAAP, including:
      • $2 billion in STARC bonds originally issued in fiscal year 2005 that will be repaid from future sales tax revenues of the State; and
      • $8 billion in Building Aid Revenue bonds issued by New York City’s Transitional Finance Authority (TFA) for education needs since fiscal year 2007 that will be repaid with pledged local assistance payments from the State.
    • State-Funded debt also includes:
      • $985 million in obligations for State University of New York dormitory facilities paid with rental fees assigned to the Dormitory Authority and reported as collateralized borrowing under GAAP; and
      • $181 million for certain contingent-contractual obligations associated with the Secured Hospital Program reported as accrued liabilities under GAAP.*
    • Debt reported under GAAP but not counted in the State-Funded debt measurement includes:
      • $4.4 billion in bond premiums;
      • $17 million in accumulated accretion on capital appreciation bonds; and
      • $275 million in certain vendor-financed capital lease obligations and mortgage loan commitments.

State’s Bond Ratings

  • At the end of SFY 2015-16, the State’s general obligation bond ratings were assigned as follows:
    • Aa1 by Moody’s Investors Service;
    • AA+ by Fitch Ratings;
    • AA+ by Standard & Poor’s (S&P) Rating Services; and
    • AA+ by Kroll Bond Rating Agency, Inc.

These ratings are one step below AAA, the highest investment grade rating.


*In SFY 2013-14, the State was called on to make approximately $12 million in payments on certain contingent-contractual bonds from the Secured Hospital Program that was enacted in 1985 in which the State issued bonds for certain distressed hospitals. The required payment increased to $24 million in SFY 2014-15 and then decreased to $19 million in SFY 2015-16. As of March 31, 2016, the Secured Hospital Program included contingent-contractual debt obligations totaling approximately $256.5 million, including $181 million related to certain distressed hospitals where the State has previously been called on to make debt service payments.


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