From the Right: DiNapoli issues roadmap for state debt reform

From the Right: DiNapoli issues roadmap for state debt reform
George Marlin


In New York there are 294 state agencies that have issued 97% of state-supported debt.

And it is taxpayers who must pay off that long-term “backdoor borrowing” that presently totals $60 billion and is expected to hit $88 billion in 2026.

Compare those staggering numbers to New York’s voter-approved debt, which is only $2 billion.

The debt service payment on the backdoor borrowing is $6 billion this year and is projected to exceed $ 8.5 billion in 2026.

Over the years, billions of proceeds from that bonded debt were expended to fund pork barrel projects and to balance the state’s operating budget In lieu of financing bona fide capital projects needed to improve the state’s aging infrastructure.

This year, for example, various state agencies forked over $260 million to the state’s general fund for Gov. Kathy Hochul to hand out to allies in the state Legislature.

Then there’s the $600 million of state funds Hochul secured to build a new Bills football stadium in her hometown of Buffalo.

The consequences of this reckless spending:  the rating agencies have criticized the state’s history of inappropriately using debt.

Standard & Poor’s, the rating agency, has stated that New York’s “moderately high and growing debt levels are a key factor that will preclude a higher credit rating.” Moody’s ranks the state “as having the second largest total debt of all states following California.”

One New York statewide elected official, who has been calling for meaningful affordability limits on the state debt levels and for establishing “modernized best practices for the proper use of limited state capital and resources, all while enhancing accountability to state residents,” is Comptroller Thomas DiNapoli.

Last week DiNapoli issued a very thoughtful and practical “Roadmap for State Debt Reform.”

In his analysis of New York’s spending practices, DiNapoli says bluntly that the state “has a history of misusing debt for inappropriate purposes, including burdening future generations with the cost of repaying money borrowed to pay for current operating expenses.”

“Debt limits,” he added, “have been circumvented too easily with little consideration or public debate of the long-term impacts.”

DiNapoli is also critical of the N.Y. Debt Reform Act of 2000 which contains numerous loopholes to caps on state debt that permitted $18 billion in new borrowing “as if it did not impact the overall burden on taxpayers.”

To restore prudent debt practices and the long-term affordability of state debt levels, DiNapoli calls for a constitutional amendment that includes “a binding constitutional cap on all existing and future state debt outstanding that covers backdoor borrowing.”

The cap would be 5% of state personal income. The calculation would be “based on a rolling 10-year average of personal income growth.”

This sound approach would provide stability in forecasting debt limitation, particularly during recessionary periods when personal income often declines.

DiNapoli’s plan also calls for revising the constitutional limits on the issuance of general obligation bonds supported by the full faith and credit of the state that require voter approval.

The current amendment was designed in the 1800s when the primary modes of transportation were horses, canals and railroads.

DiNapoli’s proposal would permit state bonds to address infrastructure needs for airports, mass transit, roads, bridges and water and sewer lines.

The issuance of debt for emergencies without voter approval must also be updated. Presently, constitutional exceptions include invasion, insurrection and the suppression of forest fires. New exceptions for the issuance of debt outside the cap should be permitted to respond to terrorist attacks and public health emergencies.

However, to prevent gubernatorial overreach during a crisis (i.e., Andrew Cuomo during the COVID pandemic), DiNapoli’s plan would require that a declaration of emergency “be limited to debt being issued in no more than three years after such declaration, not exceed a maximum amount of specified in the declaration, and have a final maturity of no more than 10 years.”

To curb Albany’s never-ending spending spree that is taking the state down the road to financial perdition, constitutional debt reform is imperative.

The comprehensive DiNapoli plan, if implemented, will meet that need by restoring voter accountability and ensuring outstanding debt will be affordable and properly expended.

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