ALBANY – New York’s state-funded debt is projected to reach $63.7 billion at the end of the current fiscal year, and to increase over the following four years by over $8 billion, according to a report issued Thursday by New York State Comptroller Thomas P. DiNapoli.
The comptroller is calling for reforms to New York’s use of debt, including voter approval of borrowing and better capital planning for infrastructure projects.
“New York faces tremendous infrastructure challenges and the wise use of debt can be an essential part of the financing picture,” DiNapoli said. “Still, backdoor borrowing imposes significant costs on taxpayers, lacks transparency and may limit flexibility in providing important services and programs. My debt reform proposal would help ensure effective capital planning and manageable debt levels.”
The Debt Reform Act of 2000 imposed statutory limits on the levels of debt outstanding and debt service. DiNapoli says current projections indicate the state’s available borrowing capacity under the limit on debt outstanding will shrink to only $58 million in SFY 2020-21.
The act added restrictions to provisions in the state constitution that prohibit the state from issuing debt without voter approval. However, the state has used various mechanisms, including public authorities, to circumvent both the constitutional and statutory restrictions on borrowing.
New York’s per capita debt is $3,116 or three times the median for all states according to the Comptroller. The annual debt service payments are reportedly projected to exceed $8.2 billion by the end of State Fiscal Year 2021-22.
New York’s debt reportedly includes (as of March 31, 2017):
- $61.4 billion in state-funded debt outstanding, an increase of $8.9 billion, or 17 percent, from SFY 2007-08.
- $2.46 billion in voter-approved, General Obligation debt, representing 4 percent of state-funded debt outstanding at the end of SFY 2016-17. That’s down from 6.1 percent 10 years earlier.
- $47.2 billion of state-supported debt issued by public authorities, which increased $6 billion, or 14.5 percent, over the same period.
- $11.7 billion of debt which is not counted as state-supported debt but is part of total state-funded debt outstanding. For example, this debt includes the Dormitory of the State of New York’s Secured Hospital program bonds for which the state is paying debt service on behalf of certain hospitals based on a contingent contractual obligation, but is not defined under the law as state-supported.
State-funded debt is a measure developed by the Office of the State Comptroller to provide a more comprehensive description of the state’s debt burden than the statutory measure of state-supported debt. The $61.4 billion in state-funded debt outstanding at the end of SFY 2016-17 included $49.6 billion of state-supported debt. Examples of such additional debt include bonds issued by the Tobacco Settlement Financing Corp. and certain bonds issued in recent years to pay for State University of New York dormitories.
Total state-funded debt is projected to increase by $10.4 billion, or 17 percent, over the state’s current five-year capital plan period.
DiNapoli’s report notes:
- New York’s current debt total is second only to California’s $87 billion.
- New York’s debt as a percentage of personal income, at 5.1 percent, was second only to New Jersey within its peer group and more than two times the national median of 2.5 percent;
- New York’s debt per capita of $3,116 was again second to New Jersey within its peer group and three times the national median of $1,025;
- New York’s debt as a percentage of state GDP (4.1 percent) is nearly twice the median of its peers and the national median of 2.2 percent; and
- New York follows Illinois with the second highest debt service as a percentage of All Funds receipts in the peer group.
DiNapoli’s proposal for debt reform includes statutory and constitutional provisions that would:
- Amend the state constitution to limit all state-funded debt to 5 percent of personal income, starting in SFY 2027-28 to allow appropriate time for planning purposes, and to prohibit the use of state-funded debt for non-capital purposes.
- Amend the constitution to ban the issuance of state-funded debt by public authorities and other entities, to allow multiple General Obligation Bond acts to be considered by voters in the same year, and to require all state-funded debt to be issued by the Comptroller, following voter approval. A limited amount of debt could be issued without voter approval annually, along with emergency debt to be issued only under extraordinary circumstances and within strict guidelines.
- Create a New York State Capital Asset and Infrastructure Council to provide an inventory and monitor the status of all capital assets of the state and its public authorities, as well as, in its discretion, local authority and municipal corporation capital assets which receive a significant state investment; and
- Establish a Statewide Capital Needs Assessment and require a comprehensive 20-year long-term strategic plan to guide the five-year Capital Plan.
Read the report, or go to: http://osc.state.ny.us/reports/debt/debt-impact-study-2017.pdf