The first resolution authorized DASNY to issue up to $1 billion in BANs backed by a pledge of personal income tax receipts “to reimburse itself or the State, from the proceeds of such bonds, for all or a portion of the Expenditures made on or after February 8, 2020.” Additional PIT-backed BAN issuances will surely follow.
The second authorizes DASNY to “enter into commitments with financial institutions for the establishment of one or more Line of Credit Facilities” totaling up to $3 billion.
And in a market flooded with public debt, who will loan the state billions of dollars? Expect DASNY to turn first to the Federal Reserve and its newly authorized $500 billion Municipal Liquidity Facility, which was authorized by the $2 trillion CARES Act stimulus bill.
Both forms of borrowing can be renewed or reissued for up to two years and ultimately converted into long-term at the discretion of Cuomo’s budget director. This, in turn, would open the door to a form of long-term deficit borrowing to cover operating expenses, which is generally regarded as the ultimate fiscal sin.