Federal lawmakers voted to raise the nation's debt ceiling earlier this year, now state legislators are addressing the same issue in New York. Our Nick Reisman has a sobering report on the state's effort to increase its borrowing.

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STATEWIDE -- Believe it or not, state government does have limitations on how much it can borrow. The dreaded phrase, debt cap, may start to become an increasingly common phrase heard around Albany, because the ceiling is being approached rapidly. The cap in New York only limits borrowing for capital projects such as roads and bridges. The only problem is that Governor Cuomo is championing a massive infrastructure plan for rebuilding roads, bridges, and other projects that will all cost money.

"It's a bad time for this to be happening and certainly means that we've got to be having a real conversation about not only how do we address the debt limit and the limitation it imposes on capital investment, but more broadly how do we pay for these kinds of projects going forward," said Mike Elmendorf, President and CEO of Associated General Contractors of New York State.

The amount of money that the state can borrow was first limited in 2000, at the height of an economic boom. A law was approved that limited bonding by tying it to a percentage of personal income that would be phased in over ten years. For fiscal hawks, the debt cap back than was largely symbolic.

"It did work that a lot of credit rating agencies took it as a very positive move, and then it was pretty much forgotten about," said E.J. McMahon, Empire Center Senior Fellow.

The latest fiscal budget update from Cuomo's Division of Budget puts the issue in stark terms. The available room under the cap in fiscal year 2012 is $3.6 billion. In fiscal year 2014, that falls to $752 million.

"What this one statistic points to, is a larger issue which is a lack of capital financing capacity and an explosion of debt at various levels of government in New York at a time when there's clearly a need to do more," said McMahon.

Of course, the Legislature could simply vote to raise the cap or exceed it, but that might make some credit agencies nervous.

McMahon said, "That may at lease briefly cause some furrowed brows among credit rating agencies."

For now, the construction industry that benefits from the infrastructure investments would like to see changes to traditional financing, as well as creative approaches to funding projects.

"We've got to be looking at public-private partnerships, there's been a lot conversation about that. We've got to be looking at ways to grow the economy and generate new revenue," said Elmendorf.

The Governor's office said some projects can be delayed to avoid reaching the debt limit. They also note that certain borrowing practices have been reformed since Cuomo was elected, which should improve the outlook for the state's debt capacity after 2014.