In 1975 the Urban Development Corporation (UDC), a public authority created in the late 1960s by the New York State Legislature, achieved a dubious distinction: it became the first major issuer of municipal bonds since the Great Depression to default on its obligations. The results were catastrophic. Private capital markets shut the door on the state virtually overnight, and New York City was thrown into a fiscal crisis whose destructive effects can still be seen today.
Unfortunately, when it comes to debt, New York has a dangerously short memory. Just two decades after the UDC fiasco, no other state can begin to match our borrowing. According to 1995 figures (the latest available), New York’s debt burden of $68.5 billion outstrips that of (much more populous) California by 50 percent; as a percentage of overall personal income, it exceeds the debt burden of Texas by 400 percent. Worse, New York’s appetite for borrowing shows every sign of growing. Since 1985 the state’s debt burden has shot up an astounding 241 percent, a fact that goes a long way toward explaining why the respected Moody’s Investor Services gives New York’s bonds the second-lowest investment rating in the nation, only a notch above that of Louisiana.Â
Who is to blame for this staggering load of debt and the threat that it poses to the state’s economic health? The chief culprits are all-too-familiar: New York’s ever-expanding public authorities and the politicians and interest groups in Albany who benefit from their profligate ways.