DiNapoli Releases Debt Study,
Urges New Cap on State Debt
31 Percent Hike in Debt Over Five Years Highlights Need for Reform
New York State Comptroller Thomas P. DiNapoli today urged State lawmakers to enact a new debt cap following the release of the 2007 Debt Impact Study, which indicates that State-funded debt grew to nearly $51 billion in the last fiscal year from $39 billion in the 2002-03 State Fiscal Year, a 31 percent increase that raises concerns about the sustainability of New York’s borrowing practices.
“The State’s increasing debt burden is a real concern,” DiNapoli said. “Debt is not a cost-free option. Every dollar we spend on paying off debt is another dollar that can’t be used for other public needs and services. The debt cap in the Debt Reform Act of 2000 simply wasn’t real. We need a meaningful cap that includes all State-funded debt and sets parameters based on how much the State can afford.”
The Debt Reform Act of 2000, which limited State-supported debt to 4 percent of personal income, has not effectively controlled the growth of State funded debt. The Act used a narrow definition of State-supported debt and does not apply to roughly $33 billion of about $51 billion of State-funded debt outstanding as of March 31, 2007. When all State funded debt is counted, current outstanding debt is 6.45 percent of personal income, more than 50 percent higher than the cap.
DiNapoli’s report found that State-funded debt outstanding had grown more than 31 percent between April 2002 and March 2007. The report also shows that annual State-funded debt service is projected to rise from $4.6 billion in the current fiscal year to nearly $7.1 billion by SFY 2012, an average annual growth of nearly 9 percent.
DiNapoli’s debt reform proposal would place all new and existing outstanding State-funded debt under the cap, and limit State-funded debt to 5 percent of personal income. DiNapoli’s cap would be phased in over a 9-year period. DiNapoli is also proposing to prohibit debt for any purpose other than capital projects.
DiNapoli’s report also found that since the passage of the Debt Reform Act of 2000, $7.6 billion in new debt has been issued for deficits or budget relief; this debt was excluded from the provisions in the Act prohibiting borrowing for non-capital purposes. Roughly $11.5 billion, or about 22.5 percent, of all State-funded debt outstanding as of March 31, 2007, was used to cover operating deficits or budget relief. Fifty-five percent of the growth in State-funded debt outstanding between SFY 2002-03 and SFY 2006-07 was issued for the non-capital purposes.
DiNapoli’s Debt Impact Study also found:
- State-funded debt as a percentage of personal income increased to 6.5 percent in SFY 2006-07 from 5.7 percent in SFY 2002-03;
- The State’s reliance on debt rather than current resources to support capital projects has increased over time. Despite various levels of budgetary surplus, New York has used cash for just 33.8 percent of its non-federal capital spending over the past decade. The current five-year capital plan projects pay as you go non-federal capital spending to average only 26.2 percent over the five-year plan period;
- Voter-approved General Obligation debt accounts for $3.3 billion of all State-funded outstanding debt or only 6.5 percent, significantly limiting the public role in determining the overall level of borrowing; and,
- The per capita State-funded debt burden has reached $2,641 by the end of SFY 2006-07 and is forecast to grow to $3,263 by SFY 2011-12, an increase of 23.6 percent.
Click here for a copy of the report..