NY state comptroller warns against more borrowing

NEW YORK (Reuters) - New York should avoid borrowing as a way to plug the state's deficit because the state already has too much debt, the comptroller said on Wednesday, as he sounded the alarm on talks in Albany already under way on more borrowing.

"More borrowing would become part of the problem, not the solution," state Comptroller Thomas DiNapoli said in a statement.

With less than a month left in the fiscal year that ends March 31, revenue collections are unlikely to meet estimates, adding to the deficit for fiscal 2011 and creating a cash flow shortage in the first quarter, he said.

"The governor and legislative leaders have reached consensus on revenue," DiNapoli said. "But it's alarming that discussions have already begun to focus on more state borrowing, before any real (budget) negotiations have begun."

Lieutenant Governor Richard Ravitch said earlier this month that the state could use short-term borrowing of about $2 billion a year to help close a five-year deficit that is expected to total $60 billion.

Other states that have used deficit borrowing to plug budget holes include Illinois, which in January sold $3.46 billion of taxable five-year bonds to make a fiscal 2010 payment to state pension funds.

Detroit in March sold nearly $250 million of fiscal stabilization bonds, and Ohio's two-year budget relied on $736 million in cash-flow relief produced by a series of recent restructurings of state debt.

A bill currently in the Massachusetts Legislature would allow the cash-strapped city of Lawrence to issue up to $35 million of debt with state oversight to deal with its deficit.

DiNapoli said New York's general fund receipts totaled $45.2 billion through the end of February, $232 million above projections in the financial plan but $3 billion below the year-earlier level.

Personal income tax collections totaled $20.8 billion in the first 11 months of the fiscal year, $167 million above projections but $1.2 billion below the year earlier.

Consumption taxes, including sales taxes, came to $7.4 billion, $287.5 million below the year earlier level. Business tax collections of $3.7 billion were $332.8 million below the year-earlier level.

A tax amnesty program has collected just $13.5 million since it was enacted in December, he said. The program was expected to generate $250 million by end March.

(Reporting by Ciara Linnane; Editing by Leslie Adler)