DiNapoli: Don’t Use Debt to Balance State Budget
State Comptroller Thomas P. DiNapoli today released an analysis showing that the current proposals for deficit financing would cost taxpayers up to $850 million in debt service annually. The additional borrowing would cost taxpayers $8 billion over the life of the debt and drive up projected out-year gaps, which are already projected to be more than $30 billion cumulatively for the next three year fiscal years. DiNapoli noted the state already pays nearly $6 billion in debt service annually.
“New York already has misused debt too often,” DiNapoli said. “When you borrow to close budget gaps, there’s nothing to show for it but the billions taxpayers pay out each year -- no roads, no schools, no bridges.
“And borrowing for this year does nothing to address next year’s budget gap. It’s time to put aside borrowing proposals and move forward with a budget that recognizes New York’s fiscal reality. Every day of delay is just more wasted time.”
New York’s current State-Funded debt level is $60.4 billion, which is projected to grow to $67 billion at the end of SFY 2014-15 even if the state doesn’t borrow to close this year’s budget gap. The state’s debt per capita is three times the national median and second highest in the nation among the largest states. Approximately $9.8 billion of outstanding debt was issued for past operating expenses and temporary budget relief. In SFY 2009-10, the state paid more than $1.1 billion in debt service for bonds that were issued for budget relief or for non-capital needs.
If the state issues $6 billion in 10-year deficit bonds, annual debt service costs for that new debt would range from $725 million to $850 million. If the debt is issued by the state’s public authorities as Personal Income Tax bonds, it would make the ratio of debt not been approved by voters even higher. DiNapoli noted that currently 94 percent of State-funded debt has been sold by public authorities without voter approval.
DiNapoli’s analysis noted the proposed borrowing could limit the state’s flexibility to address the state’s growing capital needs. In addition, any deficit financing proposal would have to be structured to circumvent the Debt Reform Act of 2000, which requires debt to be issued for capital purposes only.
DiNapoli urged the Executive and the Legislature to act on his fiscal reform proposals. DiNapoli said while it would be fiscally imprudent to borrow to close the deficit, it would be even more harmful if the Executive and the Legislature decided to borrow without any meaningful, comprehensive fiscal reforms that have been proposed.
Click here for a copy of DiNapoli’s analysis of the deficit financing proposals.
Click here for DiNapoli's fiscal reform proposals.