Report Shows Local Debt Nearly Doubled Between 1995 and 2005
DiNapoli: New York Needs a New Approach to Debt Management
New York State Comptroller Thomas P. DiNapoli today released a report detailing a soaring increase in local government debt. DiNapoli’s report found that local government debt has grown to $32.8 billion in 2005 from $16.9 billion in 1995, a 94 percent increase that underscores the need for changes in the way state and local governments fund operations and capital projects. DiNapoli’s report is the first comprehensive look at local debt in New York State.
“This is a troubling trend that we have to pay attention to,” DiNapoli said. “Much of this local debt is driven by school construction, and we need to build better classrooms. But there’s no overarching plan to manage capital finance needs at the state and local levels.
“We need to rethink the consequences of borrowing policies and practices at the State and local levels. It doesn’t matter if it’s state debt or local debt, it’s all taxpayer debt. The answer can’t always be to just borrow more. There are no easy answers and no easy solutions, but inaction is not an option.”
DiNapoli said he would in the coming weeks release a comprehensive reform agenda to address the complex, interrelated challenges in budgeting, bonding, and public authorities.
The DiNapoli report — which provides an in-depth look at how the layered costs of debt impact all taxpayers — shows that total per capita indebtedness in New York trails only Alaska and Massachusetts. The combined State and local government debt burden on residents outside New York City has reached $5,536; for New York City residents, that figure is $10,677.
The DiNapoli report also indicates that borrowing for school construction during the 10-year review period simply exploded, increasing by 266 percent — to $15.6 billion in 2005 from $4.3 billion in 1995 — to represent almost half of all local government debt. This increase was largely fueled by state aid formulas that encourage greater school district bonding.
The report made several other notable observations, including:
- While local government debt between 1995 and 2005 increased by 94 percent, revenues accruing to local governments, whether tax or fee revenue, grew by only 54 percent over the same time period;
- Village debt more than doubled during the review period, increasing to $1.7 billion in 2005 from $800 million in 1995;
- The rate of growth in debt levels between 1995 and 2005 was more moderate for counties, cities and towns. Total outstanding debt for counties, cities and towns increased by $1.7 billion (26 percent), $0.7 billion (33 percent) and $1.3 billion (41 percent), respectively;
- New York City’s outstanding debt increased 79 percent during the review period, rising to $66.8 billion in 2005 from $37.2 billion in 1995;
- Local governments are increasingly utilizing debt for non-capital purposes, leaving future generations to pay costs from which they will not benefit. For example, since 1994, the State Legislature has authorized 36 bond issuances to finance operating deficits totaling $296 million. In addition, local governments have issued debt to cover large property tax certiorari payments and to generate one-shot revenue by “securitizing” tobacco settlement payments
- At the State level, the school building aid formula and other aid programs that encourage the use of debt need to be reexamined. Debt impacts taxpayers whether paid for by the state or local governments.
Click here for a copy of the full report.