New York state will be close to hitting its own debt ceiling in fiscal 2014, when it will be able to borrow only a projected $509 million more before hitting a statutory limit, New York State Comptroller Thomas DiNapoli said in a report on Monday.

The squeeze could hurt the ability of the state, hit hard by Superstorm Sandy in October, to finance critical infrastructure projects, DiNapoli said.

“New York’s past borrowing is limiting our future options,” DiNapoli said in a statement.

New York’s Debt Reform Act of 2000 limited state-supported debt, which includes general obligation bonds, to 4 percent of the total personal income of all New Yorkers – – income that plummeted after the recession.

Debt capacity, likewise, has fallen over the past few years. For the current 2013 fiscal year, which ends March 31, the state’s debt capacity is an estimated $1.5 billion.

Based on personal income levels in fiscal 2012, the cap for state-supported outstanding debt was $39.8 billion. That year, the state borrowed $35.8 billion that applied toward the cap, leaving $4 billion of available debt capacity.

In fiscal 2009, the state had room to issue up to an additional $9.2 billion of debt, the report said.

But the state’s debt problem is even bigger when all state-funded debt is included, though it doesn’t all count towards the debt limit.

State-funded debt includes grants and loans made by the state to municipalities, and to public and private companies. It also includes the state’s other financing promises, such as tobacco bonds, as well as sales tax bonds issued to refinance debt that helped rescue New York City from its 1975 financial crisis.

When other state-funded debt was included, New York had the second highest level of outstanding debt in the United States in fiscal 2012 with $63.3 billion.

Only California, with $96.4 billion, had more outstanding debt by that broader measure. New York’s level was also 80 percent higher than third-ranked New Jersey, the report found.

That leaves New York’s total outstanding debt at an average of $3,253 per resident, nearly three times the national median, the comptroller’s report said.

It also means that debt service payments are crowding out other expenditures, with New York paying $6.8 billion in state-funded debt service in fiscal 2012.

The state’s debt service payments have grown at an average annual rate of 9.4 percent over the past decade, outpacing the growth in state spending during the same period on education and Medicaid, at 5.3 percent and 5.1 percent respectively.

DiNapoli, a Democrat who is up for re-election in 2014, recommended changing the cap to account for all state-funded debt, with the limit set at 5 percent of personal income.

He also said that long-term debt should only be used for capital funding purposes, among other recommendations.

(Reuters)