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Tags: state debt | new york

Can Albany's Reckless Spending Ever Be Curbed?

Can Albany's Reckless Spending Ever Be Curbed?
Comptroller Thomas DiNapoli (Getty Images)

George J. Marlin By Monday, 06 February 2023 12:06 PM EST Current | Bio | Archive

For over 70 years, New York governors have circumvented the state’s constitutional debt limits to the tune of hundreds of billions of dollars by “backdoor borrowing” through public authorities.

This practice began in earnest during Nelson Rockefeller’s tenure as governor (1959-1973).

Frustrated that voters were regularly rejecting his finance schemes at the ballot box, Rockefeller created scores of public authorities that were designed to issue debt without voter approval and to avoid constitutional restrictions. The genius behind this “backdoor borrowing” was a brilliant municipal bond lawyer named John N. Mitchell — future U.S. attorney general scorched by the Watergate scandal.

When asked in a 1984 Bond Buyer interview if backdoor borrowing gimmicks “are a form of political elitism that bypass the voters right to referendum or initiative,” Mitchell’s response was, “That’s exactly the purpose of them.”

Today there are 294 state agencies that have issued 97% of state-supported debt.

Taxpayers must pay off the long-term debt that presently totals $60 billion and it’s 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.

And 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 in her hometown of Buffalo, a new Bills football stadium.

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

Standard & Poor’s 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 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.

This 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.

George J. Marlin, a former executive director of the Port Authority of New York and New Jersey, is the author of "The American Catholic Voter: Two Hundred Years of Political Impact," and "Christian Persecutions in the Middle East: A 21st Century Tragedy." Read George J. Marlin's Reports — More Here.

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For over 70 years, New York governors have circumvented the state's constitutional debt limits to the tune of hundreds of billions of dollars by "backdoor borrowing" through public authorities.
state debt, new york
Monday, 06 February 2023 12:06 PM
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