When did you last hear a veteran number-cruncher surprised by the size of a number he had to crunch?
Robert Megna said Tuesday “I was a bit shocked” when, after his appointment by Gov. David A. Paterson as budget director last spring, he saw the cost of debt service for the coming fiscal year.
Debt service — or the amount that must be paid back for loans — will rise in 2010-11 by a glaring 17 percent, to $5.8 billion.
This is a grim, stubborn, and perhaps underrated facet of the fiscal crisis — with New York State like a homeowner looking to juggle a heavy mortgage, rising day-to-day expenses and declining income.
Megna, who’d previously been tax commissioner, made the statement before an auditorium full of top administration officials, legislators, lobbyists and reporters.
Megna said later:
“About five years ago, we did some shortsighted borrowing techniques, which kind of pushed costs up into the future — and that future is today ... ”
“That’s a fixed cost we can’t avoid, but what we can do is try to reduce that problem in the out years and get our borrowing under control.
“So one of the things we’re proposing is to reduce our capital spending over the next five years by close to $2 billion .<EN>.<EN>. As you know, once you build up the borrowing, it’s hard to get your debt-service costs under control.”
Rough translation: The state owes big time — and now must trim its debt amid the lean years.
Usually the budget tension focuses strictly on the momentary difference between revenues, such as taxes, and spending, such as school aid and Medicaid.
Dealing with that difference — an immediate deficit pegged at $7.4 billion — will, of course, shape the upcoming wrestling match between Paterson and lawmakers.
But don’t forget about that $5.8 billion in debt service, which ranks alongside pension costs as a sprawling problem.
Concern is perennial. In 2000, lawmakers enacted a debt-reform act meant to limit unwieldy borrowing. But two years ago, Comptroller Thomas DiNapoli called for a new legal cap on debt, saying the old one wasn’t working. At the time his office reported that “state-funded debt outstanding had grown more than 31 percent between April 2002 and March 2007” — and was quickly rising.
Following Paterson’s budget speech DiNapoli again acknowledged a growing debt expense — but also cited the state’s “tremendous capital needs,” including bridges in disrepair. The state, he said, hasn’t done a good job of prioritizing those needs.
Is the state approaching some dramatic breaking point with its long-term debt? Megna said: “I don’t think we’re worried about it .... But we’re recognizing that it’s an ongoing issue and we’re trying to solve it.”
Spoken like a true numbers cruncher.