The Cuomo administration is about to begin running up charges on that $11 billion credit card the Legislature handed the governor in the new budget.
Under the budget’s Education, Labor and Family Assistance bill, Cuomo is authorized to borrow up to $11 billion this year in the form of up to $8 billion in bond anticipation notes (BANs) and $3 billion from “line of credit facilities and other similar revolving financing arrangements.”
This is an installment in a special series of #NYCoronavirus chronicles by Empire Center analysts, focused on New York’s state and local policy response to the Coronavirus pandemic.
The board of every governor’s favorite bond bank, the Dormitory Authority of the State of New York (DASNY), yesterday approved two resolutions stemming from the budget borrowing language.
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.