March 5, 2013
DiNapoli: State and Local Public Authority Debt Nears $250 Billion
Public authority debt increased to nearly a quarter of a trillion dollars in the latest reported fiscal year, according to a report released today by State Comptroller Thomas P. DiNapoli. New York relies on authorities to undertake most borrowing on its behalf, and routinely uses authority resources to plug state budget gaps.
“Public authorities are an increasingly influential sphere of government, but they still operate in the shadows with too little accountability to the public,” DiNapoli said. “The Public Authorities Reform Act of 2009 made some progress in improving oversight but more needs to be done to curb the state’s overreliance on public authorities issuing debt without voter approval.”
DiNapoli found that authorities spent nearly $56 billion in the last reported fiscal year. State authorities accounted for $35.4 billion of these expenditures, or 63 percent of the total, while local authorities reported $20.4 billion in spending, or 37 percent.
Currently, New York has 1,169 public authorities, including 324 state authorities and their subsidiaries, 837 local authorities, and eight interstate or international authorities. In total, public authorities employed more than 150,000 people and paid nearly $10 billion in annual compensation, including almost 18,000 employees, or 11.6 percent, with total compensation of $100,000 or greater. By comparison, 8.3 percent of state employees and 13 percent of New York residents earned as much.
DiNapoli’s report found that public authorities have been repeatedly used to help close projected deficits. The state fiscal year (SFY) 2011-12 Enacted Budget anticipated budget relief from state authorities totaling more than $500 million, including revenue from transfers, cost recovery and a charge on certain debt issuances.
The largest source of expected authority-funded budget relief during SFY 2011-12 was $376 million, provided through $211 million in authorized transfers from various public authorities to the state’s General Fund and a $165 million transfer from the MTA’s Metropolitan Mass Transportation Operating Assistance fund to the state’s General Debt Service Fund to pay debt service typically paid from the state’s General Fund.
Public authorities also provide the state with revenues through the Bond Issuance Charge (BIC). In SFY 2011-12, the state collected $128 million from the BIC. Generally, public authorities pay the BIC by building the cost of this fee into the bond sale and paying for it over time with interest, driving up debt costs.
Certain public authority spending for state purposes is not included in the state budget. This is commonly referred to as off-budget spending and makes it difficult to accurately assess spending by both the state and public authorities, and to evaluate the use of authority resources for such purposes. In SFY 2011-12, the Division of the Budget estimated that total off-budget capital spending by just three authorities – DASNY, the Empire State Development Corporation, and the Thruway Authority – had totaled $1.4 billion. For that year, public authority off-budget capital spending represented 15 percent of the state’s total projected capital spending.
DiNapoli’s recent report on SFY 2013-14 executive budget found it would expand the issuance of debt through public authorities by creating a new bond financing program backed by sales tax revenues. The issuance of such bonds would increase the state’s dependence on so-called “backdoor borrowing,” rather than presenting bond act proposals to the voters for consideration, DiNapoli concluded. The budget also would expand the use of bonds backed with personal income tax revenue. DiNapoli has put forth a number of reforms to rein in state debt and put voters back in control of when debt is issued.
Public authorities’ spending and activities — including purchases, personal service expenditures and other transactions — are not subject to the same independent review, oversight and reporting requirements as state agencies. The Comptroller’s audits of public authorities’ spending have revealed numerous examples of deficient contracting practices, poor expenditure controls and inadequate oversight.
The report is based on self-reported data by public authorities to the Office of the State Comptroller. The data, which is not independently verified by OSC, represents the most recently reported fiscal year, and does not reflect a common fiscal year or the state’s fiscal year.
For a copy of the report, visit: http://www.osc.state.ny.us/reports/pubauth/public_authorities_btn_2013.pdf