. . . At Least Leave 'Em With The Truth About New York's Outrageous State Debt!
In one of his last press releases before resigning as State Comptroller, Alan Hevesi points out the fiscal faults of powers even higher than himself, and gloomy prospects for all of us lest Albany change its borrow and spend ways.
Kinda makes "Driving Miss Carol" pale by comparison, doesn't it?
On January 1st, Eliot Spitzer takes office as New York's 58th Governor. As per the Governor-elect's own edict -- a promise to all New Yorkers -- "Day One, Everything Changes."
One of those "everythings" must, of necessity, be the way New York funds the operation of the State, public authorities, municipalities, and the way too many governmental subdivisions that have us not only digging deeper into nearly empty pockets, but mortgaging the future of generations of New Yorkers yet to be born.
Let us hope, as we ring in this New Year, with all of its prospects for fiscal health and taxpayer prosperity (cough, cough), that "Day One" will be viewed by the New York State Legislature with the same urgency that voters envisioned when they empowered our new Governor to act upon their mandate.
Godspeed and good luck, Eliot Spitzer. May 2007 be a happy new year, indeed, for every New Yorker!
- - -
State Debt Burden Projected to Grow by Nearly One-third in Five Years
$9.4 billion in New Debt Outside Current Debt Limit Shows Current Cap Doesn’t Work -- Hevesi Says Growth of Debt Will Impact New Administration’s Agenda
The large amounts of debt issued over the last twelve years will play a significant role in budget development during the new administration, with State-funded debt projected to grow by one-third to nearly $65 billion over the next five years, according to a report issued today by State Comptroller Alan Hevesi. Debt service alone in 2011 will grow to more than $7 billion from $4.3 billion this year.
“Probably the most significant influence the current administration will have on the new administration’s agenda is the extraordinary amount of debt it created and is leaving behind,” Hevesi said. “With debt service alone projected to grow more than 65 percent over the next five years, the new governor’s agenda will certainly be shaped by the commitments made over the last twelve years.
In a study of debt affordability that shows New York’s already high debt burden continues to grow and is high compared to its peers, Hevesi noted the Legislature last year created the potential for as much as an additional $9.4 billion of debt that is not counted in the debt limits established in the Debt Reform Act of 2000. This debt includes Building Aid Revenue Bonds (BARBs) issued by the New York City Transitional Financing Authority (TFA) to pay for school construction in New York City. The TFA has already issued $650 million of this debt and plans to issue a total of $4.7 billion through 2010. These bonds are paid for exclusively with State building aid.
“Even more troubling than the amount of debt is the $9.4 billion debt the legislature authorized to circumvent the debt limits in law, showing that the commitment to real reform of borrowing practices remains nonexistent. This isn’t the first time we’ve seen this kind of debt, but I hope it’s the last,” Hevesi said. “This shows that the need for strong reform that curbs the growth of debt is more crucial than ever.”
The study analyzes New York’s debt using three measures of debt affordability: debt per capita, debt as a percent of personal income and debt service as a percent of State All Funds revenues. It shows that according to these measures, debt will become significantly less affordable over the next four years based on current trends. The study also compares New York to a group of 10 other large states and to the national median.
Total State-funded debt grew by $11.5 billion or 31 percent since SFY 2001 for an average annual growth rate of 7.8 percent. Debt per capita has grown nearly 30 percent from $1,944 to $2,517 during the same period. Compared to its peers, New York has the second highest total debt behind California.
The report finds that plans to issue $30.5 billion in new State funded debt over the next five
years will have the following impact on the debt affordability:
Debt as a percent of personal income. Compared to its peers, New York is currently second behind New Jersey. It has more than two times the median as compared to both the nation and the 10 largest states. Debt as a percent of personal income is projected to grow from 6.5 percent in 2006 to 6.7 percent in 2011.
The national median debt as a percent of personal income is 2.5.
Debt per capita. Compared to its peers, New York is currently second to New Jersey, nearly three times the peer group of large states, which is $860. Debt per capita is projected to rise 30 percent, from $2,517 in 2006 to $3,297 in 2011. Debt per capita was $1,944 in 2001.
Debt service as a percentage of All Funds receipts. Compared to its peers, New York is currently more than one and a half times the median of the peer group and one and a quarter times the national median. Debt service as a percentage of All Funds receipts is projected to grow from 4.4 percent in 2006 to 5.6 percent in 2011.
“Debt is essential for capital construction, but taxpayers will be paying for this debt for many years to come on the more than $9 billion the state has borrowed for operating expenses and deficit financing,” Hevesi said. “Every dollar we spend on debt service is one less dollar available for all the other critical services the State provides to taxpayers. It is especially troubling when the State’s debt capacity is eroded by borrowing for operating expenses.”
Hevesi said the impact of the debt highlights the need for reform. Although the Debt Reform Act of 2000 set a cap on outstanding State-supported debt of 4 percent of personal income, the State’s debt is currently well above this cap, reaching 6.5 percent of personal income on March 31, 2006. One of the debt reduction proposals Comptroller Hevesi issued last year was restricting State-Funded debt issuance to 95 percent of the previous year’s level, which would slow the growth of outstanding debt and issuance to $61.0 billion in State-Funded debt outstanding by 2011—representing a reduction of $3.2 billion from the current plan’s projections. The State would issue $4.1 billion less over the five-year period.
Combined with other proposals the Comptroller advanced last year to control debt, including establishing a constitutional definition of State-Funded debt and a Debt Management Board, his plan will provide New York State with the ability to effectively manage the State’s burgeoning debt.
“The amount of new debt authorized in the 2006-07 Enacted Budget illustrates that the longer we wait for comprehensive reform, the more difficult it will be to achieve and sustain affordable debt levels,” Hevesi said.
- - -
Click here for a copy of Comptroller Hevesi's Report on Debt Affordability.