What's happening
This bill establishes a New York State Debt Management Board, requires surplus funds to reduce state debt, and imposes new limits and regulations on state-funded and public authority debt.
Why it matters
Shifts more budget surplus toward debt reduction. By mandating that a portion of any annual cash surplus is transferred to a dedicated debt reduction fund, the bill restricts the use of surplus funds and prioritizes paying down existing state-funded debt rather than expanding government programs or services.
Introduces new, enforceable debt ceilings tied to state income. The bill creates a hard cap on state-funded debt based on 5% of New York’s total personal income, making it harder for the state to issue new debt during periods of economic stagnation or decline, and tightening fiscal discipline.
Empowers an independent board to oversee and set debt policy. With the establishment of a three-member Debt Management Board (including the Governor, Comptroller, and an appointed expert), debt-related decisions become more transparent and subject to regular review, limiting unilateral executive or legislative expansion of borrowing.
Imposes stricter controls on public authorities’ borrowing. By requiring public authorities to adhere to board-approved policy standards and subjecting their debt to tighter oversight (including annual reporting and Comptroller approval), the bill aims to curb off-budget borrowing and enhance public accountability for quasi-governmental agencies.
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Create State Debt Board
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History
- Referred to finance
- Referred to finance
Full text
10 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
4303
2017-2018 Regular Sessions
IN SENATE
February 8, 2017
Introduced by Sen. AKSHAR -- read twice and ordered printed, and when printed to be committed to the Committee on Finance
AN ACT to amend the state finance law, in relation to the creation of a debt management board, using surplus moneys to reduce outstanding state funded debt and limiting the amount of state funded debt that may be incurred; to amend the public authorities law,… Show allHide
AN ACT to amend the state finance law, in relation to the creation of a debt management board, using surplus moneys to reduce outstanding state funded debt and limiting the amount of state funded debt that may be incurred; to amend the public authorities law, in relation to defining and listing public authorities, limiting the debt of public authorities, the approval by the comptroller of the terms and conditions of bonds or notes issued by public authorities, the powers and duties of the public authorities control board, and the issuance of bonds and notes of the New York state thruway authority; and to repeal article 5-B of the state finance law relating to limitations on statesupported debt
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Article 5-B of the state finance law is REPEALED and a new article 5-B is added to read as follows:
ARTICLE 5-B
DEBT MANAGEMENT BOARD
AND
LIMITATIONS ON STATE FUNDED DEBT Section 67-a. Definitions.
67-b. Use of surplus moneys to reduce outstanding state funded
debt.
67-c. New York state debt management board; creation; procedure.
67-d. Powers and duties of the board.
67-e. Comptroller's duties with respect to board.
67-f. Limitations on state funded debt and state debt service
payments.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD06528-01-7
S. 4303 2
§ 67-a. Definitions. As used in this article and article five-C of this chapter the following terms shall have the meanings set forth below:
1. "Board" shall mean the New York state debt management board established by section sixty-seven-c of this article.
2. "Capital purpose" shall mean any project involving:
(a) the acquisition, construction, demolition or replacement of a fixed asset;
(b) the major repair or renovation of a fixed asset, which materially extends its useful life or materially improves or increases its capacity;
(c) the planning or design of the acquisition, construction, demolition, replacement, major repair or renovation of a fixed asset, including the preparation and review of plans and specifications including engineering and other services, field surveys and sub-surface investigations incidental thereto; or
(d) the costs of issuing debt obligations to finance a capital purpose.
3. "Cash surplus" shall mean the amount by which general fund receipts in a fiscal year exceed general fund expenditures in such fiscal year.
4. "Conduit debt obligations" shall mean a debt obligation issued by a public authority (hereinafter referred to in this subdivision as the "conduit issuer") on behalf of a third party (hereinafter referred to in this subdivision as the "conduit borrower") other than the state or a political subdivision of the state, where payment of the obligation is to be made from funds of the conduit borrower, the security for the obligation is the credit of the conduit borrower and no funds of the conduit issuer, the state or a political subdivision of the state are pledged to secure the obligation, whether or not the obligation of the conduit issuer, the state or political subdivision of the state is subject to appropriation or is otherwise contingent.
5. "State backed debt" shall mean any debt or obligation, other than state debt, that is supported in whole or in part by any financing arrangement whereby the state agrees or has in the past agreed, whether by law, contract or otherwise, to make payments which will be used, directly or indirectly, for the payment of principal, interest or related payments on indebtedness incurred or contracted by the state itself for any purpose, or by any state agency, municipality, individual, public authority or other public or private corporation or any other entity for state capital or operating purposes or to finance grants, loans or other assistance payments made or to be made by or on behalf of the state for any purpose. If the state agrees to make future revenues from a specific state source available for the purpose of supporting debt of any municipality, individual, public authority or other public or private corporation or any other entity, such debt shall be considered to be a debt for the purpose of financing a state grant, loan or other assistance payment and shall be a "state backed debt" for the purposes of this article. The term "state backed debt" applies to all debt or obligations described in this subdivision for which the state agrees, or has in the past agreed, to make payments (a) whether or not the obligation of the state to make payments is subject to appropriation or is otherwise contingent, or (b) whether or not debt service is to be paid from a revenue stream transferred by the state to another party that is responsible for making such payments.
6. "State funded debt" shall mean the combined total of all state debt and all state backed debt, except short term debt incurred in accordance
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with section nine of article seven of the constitution, emergency debt incurred in accordance with section ten of article seven of the constitution, and refunding debt incurred in accordance with section thirteen of article seven of the constitution.
7. "State debt" shall mean all bonds and bond anticipation notes issued by the state comptroller pursuant to article five of this chapter.
8. "Total personal income of the state" shall mean the most recently published estimated dollar amount determined as total personal income of the state by the United States department of commerce or any successor agency for the four most recent successive calendar quarters for which information is available prior to October thirty-first of each year. Subsequent revisions of the published estimated dollar amount for such calendar quarters shall not affect the validity of the determination made by the board for any fiscal year.
§ 67-b. Use of surplus moneys to reduce outstanding state funded debt. At the close of each fiscal year, a portion of any cash surplus remaining in the general fund after the transfer pursuant to section ninetytwo of this chapter shall be transferred to the debt reduction reserve fund established by section ninety-seven-rrr of this chapter, as added by section thirty-six of part B of chapter fifty-seven of the laws of nineteen hundred ninety-eight. The portion to be transferred shall be equal to the projected ratio of total debt service disbursements for the fiscal year to total governmental funds disbursements for state agency operations for the fiscal year.
§ 67-c. New York state debt management board; creation; procedure. 1. The New York state debt management board is hereby established to have and exercise the powers, duties and prerogatives provided by the provisions of this article and any other provision of law.
2. The membership of the board shall consist of three persons, including the governor, the comptroller and a third person who shall be jointly appointed by the governor and the comptroller. The term of office of the members of the board shall be the same as the terms of office of the governor and the comptroller. If the third member of the board resigns, becomes incapacitated, is jointly removed by the governor and the comptroller or is otherwise unable to serve, the governor and the comptroller shall jointly appoint a successor to serve the remainder of the unexpired term. The governor shall be the chairperson of the board. The board shall act by majority of all of the members of the board, except that changing the debt affordability level previously established by the board shall require unanimous approval by all the members of the board. Any action by the board shall be evidenced by a certification thereof signed by a majority of all the members, except that all members shall sign a certification of any action requiring unanimous approval. Each member of the board shall be entitled to designate a representative to attend meetings of the board in his or her place and to vote or otherwise act on his or her behalf in his or her absence. Notice of such designation shall be furnished in writing to the board by the designating member. A representative shall serve at the pleasure of the designating member during the member's term of office. A representative shall not be authorized to delegate any of his or her duties or powers to any other person.
3. The third member jointly appointed by the governor and the comptroller shall be a financial expert with experience in public finance, economics, academics or government.
S. 4303 4
4. All the members of the board and their representatives shall be entitled to reimbursement for their actual and necessary expenses incurred in the performance of their official duties pursuant to this section or any other provision of law.
5. The board shall meet semi-annually or more frequently at the call of the chairperson. Meetings of the board shall be subject to the open meetings law established by article seven of the public officers law.
§ 67-d. Powers and duties of the board. 1. The board shall have the power and the duty to (a) annually determine the total debt limit of the state by calculating the dollar amount equivalent to five percent of the total personal income of the state, as defined in section sixty-seven-a of this article, and (b) annually prescribe a debt affordability level, which on and after April first, two thousand twenty-six shall be no higher than the total debt limit of the state.
2. On or before October thirty-first of each year, the board shall determine the total debt limit of the state for the next fiscal year, and report the limit to the temporary president of the senate, the speaker of the assembly, the chairperson and ranking minority member of the senate finance committee, and the chairperson and ranking minority member of the assembly ways and means committee. On or before the same date, the board shall issue a public announcement of such limit.
3. On or before October thirty-first of each year, the board shall prescribe the debt affordability level of the state for the next fiscal year, and report the level to the temporary president of the senate, the speaker of the assembly, the chairperson and ranking minority member of the senate finance committee, and the chairperson and ranking minority member of the assembly ways and means committee. On or before the same date, the board shall issue a public announcement of such level. Within the limitation established by the total debt limit of the state, the debt affordability level of the state shall be based upon the board's evaluation of the total amount of additional debt that may be incurred and the total debt service obligations and related payments that may be undertaken by the state without overburdening present or future generations, taking into account the current and expected revenues and expenses of the state, the current and expected trends affecting the economy of the state, and such other factors as the board deems relevant. In addition to the debt affordability level of the state for the next fiscal year, the board's report to the legislature and announcement to the public shall include the board's forecast of the debt affordability levels expected for the two succeeding fiscal years. Following the board's establishment of a debt affordability level of the state for a fiscal year, there shall be no change in such level (other than a debt affordability level forecast for a fiscal year after the next fiscal year) except with the unanimous approval of the members of the board.
4. The board shall have the power and it shall be its duty to make recommendations to the governor and the legislature of policies to govern the issuance of all state funded debt and other capital financing matters.
5. The board shall adopt policy standards relating to the issuance of all state funded debt and for capital financing. Such standards shall require the unanimous approval of all three members of the board, and shall cover, among other items, the following:
(a) structures for state funded debt, such as rate of amortization of principal, the use of premiums and capitalization of interest on state funded debt;
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(b) criteria for refunding outstanding state funded debt including, but not limited to, such matters as extension of the term of outstanding debt, present value savings and distribution of actual savings;
(c) the use of credit enhancements, derivative instruments and variable or fixed rate debt obligations with respect to state funded debt;
(d) goals for the proportion of state capital spending to be financed with debt and the proportion to be financed with current appropriations;
(e) the method of sale, such as competitive or negotiated, of state funded debt obligations;
(f) criteria to be used in selecting state funded debt obligations to be retired or defeased by the use of the portion of any cash surplus, determined pursuant to section sixty-seven-b of this article, that shall be dedicated to the exclusive purpose of reducing the aggregate amount of outstanding state funded debt obligations;
(g) the definition of non-recurring revenues which shall be used for the funding of capital projects which have been authorized by law to be financed through the issuance of state funded debt or for the purpose of retiring or defeasing bonds or notes previously issued;
(h) such other policy matters relating to the issuance of state funded debt as the board may determine to be appropriate; and
(i) policy standards to be followed by state authorities, as defined in section two of the public authorities law, in relation to the issuance by such public authorities of debt obligations other than conduit debt obligations. In the discretion of the comptroller, such policy standards may be applied by the comptroller in the exercise of his or her constitutional authority to supervise the accounts of public authorities, as defined in section two of the public authorities law, and political subdivisions.
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the state finance law, in relation to the creation of a debt management board, using surplus moneys to reduce outstanding state funded debt and limiting the amount of state funded debt that may be incurred; to amend the public authorities law, in relation to defining and listing public authorities, limiting the debt of public authorities, the approval by the comptroller of the terms and conditions of bonds or notes issued by public authorities, the powers and duties of the public authorities control board, and the issuance of bonds and notes of the New York state thruway authority; and to repeal article 5-B of the state finance law relating to limitations on state-supported debt
Purpose
To impose discipline on the State's borrowing practices by establishing a State Debt Management Board and strict limitations on State and public authority debt.
Summary of provisions
Section 1 adds a new Article 5-8 ("Debt Management Board and Limitations on State Funded Debt") to the State Finance Law, including six sections:
Read the full memo (2,153 words)
Section 67-a defines the terms "State debt," "State backed debt" and "State funded debt" to clarify the full scope of the State's debt obligation.
Section 67-a also defines the terms "Board" (i.e., the New York State Debt Management Board), "Total personal income of the state, "capital purpose," "conduit debt obligation" and "cash surplus."
Section 67-b requires, after any transfer to the Tax Stabilization Reserve Fund, that a portion of any cash surplus accumulated in the General Fund as of the end of any fiscal year, be deposited in the Debt Reduction Reserve Fund for the exclusive purpose of reducing the aggregate amount of outstanding State funded debt obligations.
Section 67-c creates the New York. State Debt Management Board consisting of the Governor, the Comptroller, and a third person, who shall be a financial expert jointly selected by the Governor and the Comptroller.
Section 67-d sets forth the powers and duties of the Board, which include monitoring all debt of the State and public authorities, establishing an annual debt affordability level, and adopting debt policy standards addressing:
* structure for State funded debt;
* criteria for refunding, including extending debt and use of savings;
*use of credit enhancements and derivative instruments;
*goals for the proportion of state capital spending to be financed with debt and the proportion to be financed with current appropriations;
*methods of sale;
*criteria for selecting State funded obligations to be retired or defeased by the use of a portion of any cash surplus;
*the definition of non-recurring revenues to be used for the funding of capital projects or for the purpose of retiring or defeating bonds or notes previously issued;
*other policy standards the Board may determine to be appropriate; and
*policy standards for the issuance of debt obligations by Class A and Class B public authorities.
Section 67-e requires the Comptroller to annually report to the Debt Management Board on the amount of State funded debt outstanding.
Section 67-f sets forth general limitations on State funded debt and State debt service payments, including:
*implementation of an overall debt cap, effective on and after April 1, 2015, on all State funded debt to limit debt to no more than 5% of the total personal income in the State;
*implementation of the annual debt affordability level established by the Debt Management Board;
*prohibiting the use of State funded debt for any purpose other than a capital purpose;
*requiring all State funded debt to be in the form of obligations issued by the Comptroller, beginning with the fiscal year that is at least one year after the effective date of an amendment to the Constitution;
*prohibiting the issuance of any state funded debt obligation with a final maturity exceeding the probable life of the capital project financed by such debt, as well as prohibiting any maturity longer than 30 years;
*up to and including State fiscal year 2018-2019, limiting the issuance of new State funded debt obligations in any fiscal year to no more than 9596 of the amount of the State funded debt incurred in the last complete fiscal year.
*Prohibiting the issuance of new debt supported by a state agreement to make payments only if expected debt service sources fall short.
Section 2 amends subdivision 2 of section 6B-a of Article 5-C ("Revenue Bond Financing Program") of the State Finance Law to conform the definition of "authorized purpose" to the definition of "state funded debt" set forth in new State Finance Law Article 5-B, as added by this bill.
Section 3 amends subdivision 6 and adds a new subdivision 7 to section 68-c of the State Finance Law to prohibit, on a contingent basis, the issuance of revenue bonds when and if the Constitution is amended to eliminate backdoor borrowing.
Section 4 amends section 97-rrr of the State Finance Law to dedicate the moneys of the Debt Reduction Reserve Fund to the purpose of retiring or defeasing State funded debt obligations.
Section 5 adds a new subdivision 4 to section 24 of the State Finance Law to require the inclusion in the budget bills submitted with each year's Executive Budget an appropriation of the available balance from the Debt Reduction Reserve Fund to be used exclusively for the purpose of retiring or defeasing State funded debt obligations.
Section 6 adds a new section 2 to the Public Authorities Law to establish a new comprehensive definition of a public authority. The term "public authority' is defined as:
(i) any public authority, public benefit corporation, or commission created by or existing under the Public Authorities Law or any other law;
(ii) a public authority or a public benefit corporation, at least one of whose members is appointed by the governor or who serves by virtue of holding a civil office of the State;
(iii) a not-for-profit corporation affiliated with, sponsored by, or created by a State agency;
(iv) a not-for-profit corporation created by or existing under article 2 of the racing, pari-mutuel wagering and breeding law and operating under an exclusive franchise granted by the state;
(v) a local industrial development agency or other local public benefit corporation; or
(vi) a subsidiary or affiliate of such a public authority.
Section 6 also adds definitions of the terms "affiliate," "affiliated with," "subsidiary" and "other debt obligations." This section categorizes all current or future public authorities into four classes: Class A: major public authorities with statewide or regional significance and their subsidiaries; Class B: entities affiliated with a State agency or created by the State that have limited jurisdiction but a majority of board members appointed by the Governor or other State officials; Class C: entities with local jurisdiction; and Class D: entities with interstate or international jurisdiction. Classes A, B, C and D include, but are not limited to, the more than 720 public authorities specified by name in the bill.
Section 7 adds a new section 3 to the Public Authorities Law imposing limitations on the terms and conditions of any Class A or Class B public authority debt obligations issued after the effective date of this legislation. No Class A or Class B public authority may include in a bond covenant or other debt instrument a requirement or guarantee that the public authority will remain in existence until the debt is repaid. Unless (i) permitted under a statutory debt cap applicable to a Class A or Class B Public authority, or (ii) specifically authorized by an act of the Legislature, no Class A or Class B public authority can issue any bonds or notes, nor incur any other similar debt. Refundings or refinancings would be permitted if they achieve cost savings without extending the maturity of any existing debt. Further, no Class A or Class B public authority can include any provision having the effect of extending the life of the authority when refunding or refinancing any current debt obligation.
Section 8 amends subdivision 1 of section 51 of the Public Authorities Law to expand the jurisdiction of the Public Authorities Control Board to approving the financing and construction of projects of all Class A and Class B public authorities.
Section 9 adds a new subdivision 6 to section 51 of the Public Authorities Law to require an annual report by the Public Authorities Control Board detailing (i) the aggregate amount of debt approved by the Board during the fiscal year, (ii) a list of the individual projects approved by the Board for each public authority during the fiscal year, and (iii) the total amount of new debt obligations the Board has approved during the fiscal year for issuance by each public authority.
Section 10 amends subdivision 2 of section 365 of the Public Authorities Law to delete the requirement that Thruway Authority bonds and notes sold at public sale must be issued by the Comptroller.
Section 11 provides for an immediate effective date.
Justification
The construction of roads, bridges, canals, housing developments, hospitals, universities mass transit and other. government facilities has made New York the Empire State. Debt is a tool that, when used prudently, helps governments plan and pay for such large public works projects. Borrowing in moderation allows those who will benefit from necessary, worthwhile capital investment to pay the costs.
This bill proposes major reforms that should be enacted into law to restore accountability, and transparency and limit debt to an affordable level. It is long past time for effective reform that will decrease the State's propensity to utilize debt financing, recognize the value of pay as-you-go spending and open the process to the public. Successful reforms must implement debt management policy that balances need with capacity and intergenerational equity. To be competitive with other states, New York must continue to make needed, affordable capital investments.
Establishing a new, all-inclusive definition of "State funded debt" will provide a more comprehensive accounting of the State's debt portfolio, eliminate loopholes in the current statutes and insure that all State funded debt is subject to the cap equal to 5 percent of the State's personal income. As New York's outstanding debt is currently equal to 6.5 percent of personal income, steps will have to be taken to bring down the debt to 5 percent.
To force discipline and reach the proposed Constitutional debt cap of 5 percent by State Fiscal Year 2018-19, the legislation limits annual debt issuance to 95 percent of the last complete fiscal year's issuance starting immediately and continuing through March 31, 2019. The establishment of a Debt Management Board will provide coordinated policy direction, monitoring and reporting for all debt, including debt issued by public authorities. The three-person Debt Management Board made up of the Governor, the State Comptroller, and a financial expert, selected jointly by the Governor and Comptroller, would be vested with the responsibility to issue a binding debt affordability study, annually by October 31. Additionally, the board would forecast the debt affordability level expected for the two succeeding fiscal years based on multiyear projections of State revenues and spending. With this structure, the State's chief executive and the State's chief fiscal officer jointly would be responsible for controlling, planning, implementing, reporting and managing the State's borrowing from beginning to end. Beginning in, the issuance of State debt will be subject to the Board's debt affordability level.
Additional oversight of public authority debt is provided by expanding the responsibilities of the Public Authorities Control Board (RACE) to include the oversight of all major State and regional authorities, requiring an annual report from the PACB and requiring that all public authority negotiated bond sales be submitted to the Comptroller for approval of their terms and conditions.
There is a suitable time and an inappropriate time to utilize debt. In New York State, debt has been utilized all too often, for objectionable purposes, and has become an easy answer to solving the State's fiscal problems. With no sign of this harmful trend ceasing anytime in the future, it is time for reform. Fox the foregoing reasons, the Comptroller respectfully urges passage of this legislation. PRIOR LEGISLATIVE HISTORY :
S.8175 of 2006: Referred to Rules S.1303 of 2007: Referred to Finance S.1303 of 2008: Referred to Finance S.521 of 2010: Referred to Finance S.2392A of 2012: Referred to Finance S.1925 of 2014: Referred to Finance.
Effective date
This act shall take effect immediately, provided, however, that paragraph a of subdivision 3 and subdivision 6 of section 67-f of the state finance law, as added by section one of this act, and section three of this act, shall take effect on the same date as a concurrent resolution of the Senate and Assembly entitled "proposing amendments to article 7 of the state constitution, in relation to the authorization of debt in times of public emergency, a limit on the total amount of state debt, the establishment of a debt management board, and refunding of state debts", takes effect.
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