Institutional Federal Compliance Report 2021

______________________________________________________________________________________________ STATE OF NEW YORK • 87

Fund. Under current State statute, any issuance of bonds by LGAC in the future will be for refunding purposes only. Chapter 62 and Chapter 63 of the Laws of 2003 enacted, among other provisions, the Municipal Assis- tance Refinancing Act (Refinancing Act), effective July 1, 2003 and deemed repealed July 1, 2034. The Refi- nancing Act created an incentive for the State to seek an appropriation to provide $170 million per year, from Other Governmental Funds (Local Government Assistance Tax Fund (Fund)) to the City of New York (City) for each of the City’s fiscal years beginning July 1, 2003 and ending June 30, 2034. The Refinancing Act requires LGAC to annually certify $170 million so that the State, subject to annual State appropriation by the Legislature, can provide for a series of payments to the City or the Mayor’s assignee in each City fiscal year, beginning July 1, 2003 and ending June 30, 2034, totaling $5.3 billion. Based on current law, until the Legislature enacts an appropriation of $170 million, LGAC certifies the release of the funds, the $170 million State payment is made, and LGAC receives the amount it has certified for its needs, no excess sales tax receipts can be transferred from the Fund to the State’s General Fund. During the fiscal year ended March 31, 2019, LGAC certified the release for the State payment of $170 million to the City. Pur- suant to Chapter 54 of the Laws of 2016, the State will receive $16.7 million monthly, not to exceed $200 million annually, from City sales tax collected from April 1, 2016 through March 31, 2019. This amount represents a portion of the savings the City realized from a 2014 refunding of Sales Tax Asset Receivable Corporation (STARC) bonds for which the City assigned the $170 million State payment. Chapter 56 of the Laws of 1993 authorized the New York State Thruway Authority to issue up to $2.93 billion in bonds for State highway and bridge projects (the amount of authorized bonds has been raised three times, most recently in 2005, up to $16.5 billion). The bonds are secured and funded by a dedication of por- tions of the State’s petroleum business tax, motor fuel tax, highway and fuel use tax, motor vehicle registra- tion fees, auto rental tax, transmission and transporta- tion tax and certain miscellaneous revenues. In 2001, the State enacted legislation providing for the issuance of State Personal Income Tax Revenue Bonds (PIT bonds) to be issued by several State public benefit corporations. The original legislation provided that 25 percent of personal income tax receipts, excluding refunds owed to taxpayers, be deposited to the Revenue Bond Tax Fund (RBTF) which is an account of the General Debt Service Fund. These deposits are used to make debt service payments on PIT bonds, with excess amounts returned to the General Fund. In the event that the State Legislature fails to appropriate amounts required to make debt service payments on the PIT bonds, or if required payments have not been made when due, the original

In 2003, the State enacted legislation creating the TSFC to finance a portion of its future revenues expected to be received under the 1998 Master Set- tlement Agreement (MSA) with the settling cigarette manufacturers. The MSA revenues were intended to compensate the State for all claims for past, present and future health care costs originating from health care expenses incurred by the State from the effects of cigarette smoking by its citizens. In accordance with the legislation, TSFC issued $4.6 billion in bonds to finance a payment of $4.2 billion to the State’s General Fund, enabling the State to finance a portion of the budget deficits occurring in fiscal years ending March 31, 2003 through March 31, 2005, to establish $449 million in debt service reserves, and to provide $129 million to finance a portion of the first debt service payments due on TSFC bonds. In accordance with the legislation, all future revenues from the 1998 MSA would be used to repay the debt until it was fully retired, after which all MSA revenues would revert to the State. The State agreed to make additional pay- ments for TSFC debt service, subject to annual appro- priation, from other sources if the future revenues proved insufficient to meet TSFC debt service require- ments of the State. However, the State was never called upon to make any payments related to this contingency agreement. In fiscal year ended March 31, 2018, bonds secured by annual payments from tobacco manufac- turers under the MSA were retired, with no remaining debt service requirements to be paid on these bonds. The fiscal year 2018 Enacted Budget authorized and directed MSA payments be used to help defray costs of the State’s takeover of Medicaid costs for counties and New York City. During the fiscal year, pledged MSA revenues of $315 million were recognized and $444 million of Medicaid payments were made. Prior to 1996, certain payments due to the State’s local government units in the first quarter of the State’s fiscal year exceeded available State funds. To meet these payments in the past, the State issued short- term tax and revenue anticipation notes called the annual “Spring Borrowing.” LGAC was established in 1990 to issue up to $4.7 billion in long-term debt to finance certain local assistance aid payments, plus amounts necessary to fund a capital reserve fund and other issuance costs. Issuance of the entire $4.7 billion bond authorization as of March 31, 1996 eliminated the need for the State’s annual Spring Borrowing. Pursuant to the legislation establishing LGAC, the State deposits an amount equal to a 1 percent rate of taxation of the total State sales and use tax collected into Other Governmental Funds (Local Government Assistance Tax Fund) to make payments to LGAC for debt service on its bonds and other expenses of LGAC. Amounts in excess of LGAC’s needs are subsequently transferred to the General Fund. Payments to LGAC are subject to annual appropriations by the Legislature. LGAC’s bondholders do not have a lien on monies deposited in the Local Government Assistance Tax