In dining halls, meeting rooms and other public forums throughout New York, Gov. Mario M. Cuomo and Comptroller Edward V. Regan have spent the past six weeks waging a fierce public debate over the merits of a jobs-creating bond act proposed by the governor during his State of the State Message in January.
For Cuomo, a Democrat, the Jobs for the New, New York Bond Act is the centerpiece of his economic development agenda. Under the proposal, the state will sell $800 million in general obligation bonds to finance infrastructure projects throughout the state.
The act, he says, will create as much as 35,000 immediate construction jobs and between 78,000 and 106,000 permanent, private sector jobs before the end of the century. The bond act, he argues, is self supporting, because the increased economic activity will generate enough tax revenues to easily pay the debt service on the securities.
If voters approve the measure, the state has targeted money for 387 projects across the state. These include improvements and construction of sewer lines, water lines, parking lots, and other infrastructure the state says it needs to provide a base for economic growth during the next eight years and beyond.
So far, the bond act has received approval from groups representing the state's construction trades as well as municipal lobbyists such as the New York State Association of Counties and the New York State Conference of Mayors. The proposal has also received support from Republicans like Senate Majority Leader Ralph Marino, R-Muttontown, and the Republican county executives from Long Island's Nassau and Suffolk counties.
For Regan, the bond act represents a chance to dramatize the state's fiscal problems and to promote his plan to reform the state's borrowing practices. Regan, who is a Republican, has said the bond act looks toward "a laudable goal," but he warns that voters should not approve the measure unless lawmakers endorse his fiscal reform plan before election day. Cuomo himself has endorsed the Regan plan, but at the moment the two parties' legislative leaders have not.
The plan would try to slow the growth of what is known as non-taxpayer debt, or bonds that are approved by the Legislature instead of by popular vote. These securities are sold through the state bonding authorities and are not backed by the full faith and credit of New York. At the moment, the state has $17.5 billion outstanding in appropriated debt, compared with $5.8 billion, in tax-payer supported, general obligation debt.
The proposed legislation will also strictly limit the types of borrowing conducted by the bonding authorities. For example, the comptroller said, under the legislation the Urban Development Corp. could issue bonds, but only to finance projects that involve the development of the state's urban centers.
Regan said the growth of debt that is appropriated by the Legislature has hurt New York's credit rating and eroded the fiscal condition of the state. His plan if enacted by the Legislature, would force the Legislature to wait 30 days before voting to appropriate debt non-voter approved debt. The waiting period, the comptroller says, will provide enough time for taxpayers and the press to analyze the merits of the bonding.
In separate interviews with Bond Buyer reporter Charles Gasparino, Cuomo and Regan laid out their arguments for supporting or opposing the bond act.
Q: Do you think the voters' anti-incumbent mood will doom the bond act despite your best efforts to promote it?
A: There is a negative mood in the country because of the recession, because of what is perceived as government's ineptitude. That does not make it easier for this bond issue to pass, but I think we will survive it.
Q: Many analysis I speak with say the Cuomo administration should reform the state's fiscal practices before saddling taxpayers with more debt. Do you agree?
A: As far as debt reform is concerned, we have made some changes, and I'm willing to make others. The comptroller and I have joined on this issue, and we both say the same thing about this bond issue.
But even if we adopted all [his] debt reforms, it wouldn't change the merits of this bond issue. I have said I will not do more bond issues after this one unless the [the legislators] give us debt reform. So we do not have to sacrifice this bond issue because the Legislature won't give us the debt reforms.
Q: If the bond issue has so much merit and if it wouldn't hurt state finances, why didn't you propose a bigger issue? Wouldn't that have made a much larger dent in the recession?
A: a larger issue would have been too hard to sell politically, and as you know, I'm satisfied that $800 million will be a good solid investment.
I'm also satisfied that a bond issue under $1 billion is salable to a public that is negative in its mood.
I'm not sure how they would vote if we proposed a larger bond issue. They might be frightened just by the size of the number, and as result, you might lose their attention on the merits of the issue.
Q: Why do you need a bond act when the state can sell bonds for infrastructure improvements through the bonding authorities?
A: We don't have $800 million to spend. I proposed the bond act for the same reason my father eventually took out a mortgage and borrowed money to buy a house.
Q: You mean the state couldn't have issued debt through the authorities for the same reasons?
A: I'm saying that I couldn't have done what we are proposing here without borrowing, and this is the most honest way to borrow. So I'm going to the people, telling them what's good about it, and let them make the judgment.
Q: What do you think about the comptroller's position that voters should not approve the bond act without the Legislature approving his fiscal reform package?
A: I know why he's doing it. It's obviously not because he thinks he's going to get. He keeps telling us he knows it's not going to happen. So he's doing it to get his point out there.
Q: Would you say it's political motivated?
A: Well, I'm not going to judge his intent. That's entirely up to the comptroller. But the reason for his opposition is certainly not because he wants to get the reforms, because he keeps saying every day that he knows the Legislature will not enact the reforms. And he knows I can't deliver either the Republicans or the Democrats needed to pass the measure. They don't want to reform the system.
Q: Do you know the level of public support for the bond act? What do the polls show?
A: I don't like polls. But based on our experience, polls on bond issues are not very useful because the information level among the public is so low.
Q: Is the bond act really useful given the fact that the U.S. economy is moving away from traditional blue-collar employment like construction and toward information based, high-tech industries?
A: New York leads the U.S. in high-tech development. We have nine centers of advanced technology, we are leaders in fiber optics, we have great university centers, we have the science and technology foundations that lend and invest millions and millions of dollars, so we're way ahead in high tech.
It is foolish to say you shouldn't do infrastructure and you cannot avoid doing infrastructure if you want to develop the economy. You must have the sewer systems, the water systems. They're not, luxuries. They're not options. They're essential.
Q: What's your major objection to the bond act?
A: The way the state currently borrows, it just can't afford it. The bond act is not affordable in the context of the state's present borrowing practices and the tax and spending environment in the state.
Q: But the governor says the state is well under the rating agencies' debt service limits and that it needs the increase in employment before the recession gets worse. Do you agree?
A: That's just one statistic. He says that the state uses 7% of its tax revenues for debt service purposes, and Moody's Investors Service says that 10% is the danger point.
That's terrific. You want to make it 6% of our tax revenues? Want to make it 5%? Raise taxes.
The only reason we're low is because our taxes are so high. It's as simple as that. On any of the other indicators, such as debt to personal income, New York State is among the highest in the nation.
Q: Is there any environment that would make a bond act like this affordable?
A: It's affordable only with disciplines.
Q: Such as your fiscal reform package? You're saying the package is more important than the bond act?
A: By far, because it will create more jobs. By changing the whole corrosive process in New York State, which disguises spending and taxing and has created our low credit rating, you will firm up New York State's financial health and impose discipline and fiscal reputation.
The present system and borrowing, the present fiscal situation in New York State, costs New Yorkers far more jobs than the bond act can possibly create. So of course it's much more important.
Q: But how does the state's borrowing practices cost New Yorkers more jobs?
A: Because the way the state borrows erodes our economic environment. Having the lowest state credit rating from Standard & Poor's Corp. is something any business looking to expand here would know of. The whole atmosphere of taxing, spending, and borrowing in this state is so shabby.
Q: Are you saying the borrowings play a major role in contributing to the high tax rates that exist in the state?
A: Of course, because you spend before the election and you tax after the election.
Q: But the state government says it is taxing and spending money for services that people need and want.
A: These are services which government thinks people need. Let's be very clear about that. We can just take one service alone, Medicaid. We spend twice per capita as any other state. That's not required. That doesn't give us a better Medicaid program.
We have a staffing pattern in mental hospitals that in some cases amounts to four times the levels found in other states. And you can go right on down the line in New York State's spending patterns and find excess after excess after excess. The government simply refuses to come to grips with it.
Q: So you're saying the state's fiscal situation is so foul that the bond act will make little difference in creating jobs.
A: That's basically what's involved here. Because of the economy's condition, no $800 million bond act can possibly make up for it. And to try to fool the people into thinking that it can is totally wrong.
Obviously, it will add jobs. Obviously, if they reform their borrowing practices the way I want them to, I'll be for the bond act. And that would also create jobs.
Q: Can you point to any example in the country where a bond act has created permanent employment, as the governor says the bond act will do?
A: No. The only certainty is that if you put somebody at the end of a shovel it's creating a job. There is no question about that. But if borrowings work, New York State would be a lush garden of job opportunities.
Borrowing doesn't create jobs. Borrowing, when you do it to excess, hurts your economy, as it clearly has done in this state. We've lost 400,000 jobs in the last couple of years. So if borrowing worked, we'd look a lot better. Nonetheless, if I can get fiscal reform out of them, I'm for the bond act. The governor says it's holding hostage. He's correct.