Fifty Shades of Pay

NY’s risky, hidden debt burden

What are you doing for the summer? New York state’s public authorities are borrowing — nearly $1.9 billion in new debt from now ’til September.

In a decade, this debt has soared 35 percent, to $141.9 billion. And it’s not just the amount that’s a danger — the confusing structure of the debt could sow a panic.

New York’s public authorities are like dozens of mini-Fannies and Freddies — that is, investors think that the state would step in to rescue them in a crisis. But if a crisis does seem to be coming, uncertainty about that question would soar. And that’s bad for bondholders and taxpayers.

New York’s debt smorgasbord is the result of good-government restrictions coupled with political cravenness. Under the state Constitution, Albany can’t issue debt without voter approval — a limit the politicians regularly end-run.

So if you look just at official, "general obligation," debt, New York is a model of prudence. The Empire State has $3.5 billion in general-obligation bonds backed by "full faith and credit," down from $4.1 billion in 2002.

But governors have gotten around this restriction with financing tricks every bit as "creative" as the worst of Wall Street.

Over the years, the state has built up a collection of 46 "public authorities" — state-created corporations that issue debt. These outfits range from the Metropolitan Transportation Authority and the Thruway Authority, which pay for trains and bridges, to the Dormitory Authority, which issues debt so that colleges and hospitals can build room for new beds.

And the state has massively ramped up spending via these authorities. The MTA, for one, has more than doubled its debt from $14 billion a decade ago to $31 billion — mostly thanks to then-Gov. George Pataki’s failure to stand up to powerful labor unions. Thruway debt has gone from $1.3 billion to $2.3 billion. Albany’s "authorities budget office" noted last week that more than half of the state’s public authorities ended last year in deficit.

On top of that, towns and counties have set up another 507 smaller authorities to borrow another $91.4 billion.

Some build stuff, like stadiums. But other local authorities’ sole purpose is to borrow. For example, they’ve borrowed $2.1 billion against money that comes in every year from Big Tobacco under the 1998 settlement with the states.

And the picture may be worse: The budget office noted "significant data inaccuracies in more than 18 percent of ’authorities’ annual reports," including "incorrect reporting of outstanding debt."

This piece originally appeared in New York Post

This piece originally appeared in New York Post