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Proposed NY state borrowing for construction work raises concerns

ALBANY — Gov. Andrew M. Cuomo’s proposed budget now being negotiated in Albany includes massive borrowing for major construction to rebuild New York after decades of neglect, but some analysts warn the plan narrowly avoids busting a legal borrowing cap, while masking the state’s true fiscal outlook.

Cuomo hasn’t talked much about debt that would be incurred in this building boom in his more than a dozen rallies statewide since January. He has focused on his popular priorities of paid family leave and raising the minimum wage to $15 an hour. But the borrowing plan in his 2016-17 budget proposal now being negotiated with the State Legislature is a turnaround after five years of declining debt in New York, which has long been one of the most heavily indebted states per capita in the nation.

By the Cuomo’s administration own numbers, the available room under the debt cap, which is now $4.4 billion, would shrink to $189 million in 2020 after borrowing for major transportation and economic development projects.

Even after $20 billion of debt is paid off on schedule over the next five years, Cuomo’s five-year plan would increase debt by a net $10 billion, or almost by 20 percent through 2021, to $60.8 billion, according to an analysis by state Comptroller Thomas DiNapoli. The new borrowing would wipe out the debt reduction Cuomo led over the last five years, DiNapoli’s staff said.

Cuomo’s plan includes rebuilding the rails, trains and stations of the Metropolitan Transportation Authority, begin a process that could lead to better service on the Long Island Rail Road, replacing the aged Tappan Zee bridge in the northern suburbs, and rehabilitating the state Thruway.

Morris Peters, spokesman for Cuomo’s Division of Budget, said the governor’s budget proposal and five-year capital is fully funded because of conservative projections of what the state borrowing cap will allow in coming years, five years of fiscal restraint, and health reserves for the first time in years.

Peters said Cuomo’s plan is drawing fire in part because it so fully details the borrowing plan. He said previous comptroller’s analyses criticized past governors for failing to provide “realistic assumptions” of future spending in “out-years.”

“In the interest of more accurate forecasting and transparency, during this administration we began to include out-year capital spending assumptions that reflect typical spending patterns,” Peters said. “If anything, we’re conservative.”

Cuomo points to the upgrades in the state’s credit rating to defend his recent debt management. Standard & Poor’s Ratings Services said the capital plan “stays within all of New York’s affordability measures. However, there is some potential for budgetary pressure as the state-related debt service . . . will have a significant jump.” The agency said the increased borrowing “will likely be manageable, but something that Standard & Poor’s will be monitoring.”

Cuomo’s budget due April 1 also moves some debt “off budget” in proposals that “lower the appearance of state spending and obscure the state’s debt burden,” according to the comptroller’s budget analysis. Cuomo and the legislature agreed in 2013 to exempt borrowing by the state Dormitory Authority, which is controlled by Cuomo appointees, from being counted against the state’s legal borrowing cap because they said taxpayers won’t be liable for the debt.

“Off-budget spending artificially makes spending for state-related purposes appear lower, and eliminates important oversight, transparency and accountability measures,” according to the comptroller’s analysis. DiNapoli contends Cuomo’s action circumvents the intent of the 2000 Debt Reform Act, which aimed to make the state’s indebtedness transparent to the public and to rein in borrowing.

“It’s not state debt,” responded Peters of Cuomo’s budget office. “There is no possibility no matter what happens that state taxpayers would be responsible . . . the investors who buy the bonds would pay for” any default.

David Friedfel of the independent Citizens Budget Commission disputes the Cuomo administration’s view that borrowing through the Dormitory Authority doesn’t put taxpayers on the hook because in the event of any default, the state would “at the very least” feel political pressure to cover the costs.

“We think they borrow too much,” Friedfel said.

Cuomo said the state can afford the borrowing because of his fiscally conservative actions over five years and, in the event of an economic slump, the state has health reserves and enough flexibility to scale back or delay some borrowing and building.

“We have reserves . . . that’s all factored in,” Cuomo said. “The forecasts and the reserves — reserves upon the reserves — and that what the credit agencies look at that’s what they said has greatly improved under our administration and that’s why our credit rating went up.”

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