January 7, 2013
DiNapoli: State's High Debt Limiting Options
Renews Call for Comprehensive Debt Reform
State Comptroller Thomas P. DiNapoli today warned in an analysis that New York State’s heavy debt burden could jeopardize critical infrastructure projects and other capital needs. 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. New York’s state-funded debt totaled $63.3 billion as of March 31, second only to California and 80 percent higher than New Jersey, the state with the third highest level. 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, state-funded 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:
DiNapoli is renewing his call for comprehensive reforms to New York’s debt and capital planning practices, including:
The Executive and the Legislature have taken steps to improve capital planning by creating the New York Works Task Force as part of the SFY 2012-13 Enacted Budget. An implementation council has also been created, comprising all major state agencies and public authorities, to assist the task force in coordinating the state’s capital investment planning process.
New York’s debt limit applies to state-supported debt. The Office of the State Comptroller uses a broader measure of state borrowing – state-funded debt – to provide the most complete gauge of the state’s debt burden. While both measures include most public authority debt issued on behalf of the state, as well as the state’s general obligation bonds, state-funded debt includes debt supported by any financing arrangement whereby the state agrees to make payments which will be used, directly or indirectly, for the payment of debt service. In contrast, the narrower state-supported debt only includes debt in which payments from the state are used to pay debt service on bonds issued by the state and public authorities.
For a copy of the report visit: http://www.osc.state.ny.us/reports/debt/debtimpact2013.pdf