Provides for the development of a capital needs plan as part of the state budget process; removes limitations on the time of submission of debt propositions

Section 2 amends section two of Article 7 to require annual submission of a detailed multi-year capital program and financing by the Governor.

Section 3 amends section eleven of Article 7 of the Constitution to eliminate the prohibition against submitting multiple bonds acts for consideration by the voters in a single year.

Section 4 amends paragraph six of section twelve of Article 7, the rule proscribing that funds borrowed by the State shall be used for the work or purpose specified in the authorizing act or for the payment of such debt. The amendment specifies that the term work or purpose is limited to capital projects.

Justification

The failure of the November 1995 referendum on the concurrent resolution passed by the Legislature in 1994 and 1995, to amend the New York State Constitution to reform the State's borrowing practices, was attributed to the public's perception that it contained too many "loopholes." There appeared to be no significant objections to the parts of the amendment that related to the State's capital planning process and that authorized more than one bond issue to be submitted to the voters in a single year. Accordingly, this proposed amendment addresses those subjects.

The requirements for submission of a detailed capital plan and public hearing on the State's capital needs are prerequisites for a responsible State Debt policy. A detailed multi-year capital plan prepared by the Governor, would provide valuable information about proposed capital projects and the sources from which they would be funded. The amendment is broadly worded, as appropriate for constitutional requirements. The Legislature has already prescribed in Chapter 204 of the Laws of 1994, the specific details of a capital program and financing plan, which include among other things the State' s long-term capital strategy and details of project financing (borrowing and/or pay as you go), along with a schedule of expected debt services cost. The Governor has issued capital plans pursuant to this provision since it has been enacted. Future legislation could make this requirement more or less comprehensive, but the requirement itself should be constitutional to guard the basic integrity of the capital planning process. The proposed authority of the Legislature to obtain from the Governor periodic updates on the State's capital assets and needs would improve its ability to oversee implementation of the plan.

Public hearings on the capital program and financing plan would provide the opportunity for review and comment on the plan and give the Legislature important input for its review, modification and oversight of the plan. Public hearings would help diminish the perception that decision-making occurs behind closed doors, without informed public participation.

The provision of the amendment clarifying that the "work or purpose" for which general obligation bond proceeds may be spent includes only capital works or purposes would preclude long-term financing of operating expenses, practice at odds with good budget practices and one that certainly conflicts with the spirit, if not the letter, of the Constitution.

Eliminating the constitutional provision preventing more than one bond act from appearing on a ballot would allow voters to pick and chose those types of projects to which they think the allocation of general tax revenues is more important. Permitting multiple issues on the ballot in any year would encourage the use of voter-approved debt because there would be a greater chance of voter approval of some projects, if voters could choose among discrete, well-defined purposes. Voter-approved debt, is, of course far preferable to "backdoor" borrowing from a purely economic viewpoint, since voter approved debt generally has a lower interest rate. In addition, with backdoor borrowing, there is little accountability to the electorate, which breeds suspicion and distrust in a public that sees the circumvention of constitutional standards, notwithstanding that the courts have pronounced backdoor borrowing legal as a technical matter.

Legislative history

2007-08: S.2886 - Referred to Judiciary 2005-06: S.1466 - Referred to Judiciary 2003-04: S.1991 - Referred to Judiciary 2001-02: S.1501 - Referred to Judiciary

Fiscal implications

Undetermined

Effective date

This resolution shall be referred to the first regular legislative session convening after the next succeeding general election of members of the assembly, and, in conformity with section 1 of article 19 of the constitution, be published for 3 months previous to the time of such election.