NYC’s budget needs robust savings for a rainy day

Dear New Yorkers,

NYC is entering budget season from a position of strength. Property values have rebounded, job growth continues, personal and business income taxes are reaching new peaks, and the sales tax grew as we reopened oureconomy. My office forecasts a $3.1 billion surplus at the end of this fiscal year in June.

Yet despite much better-than-anticipated FY 2022 tax collection, this year’s Executive Budget only adds drops to the Rainy Day Fund bucket. With rising inflation, still-too-high unemployment, a declining stock market, and so much long-term uncertainty, our economy is facing headwinds. New York City will need strong reserves to weather future fiscal storms.

This afternoon, I will speak with the City Council about the proposed Executive Budget, and I will stress the importance of bolstering our Rainy Day Fund while we have robust budget surpluses to prevent future cuts to services when New Yorkers will need them most. Read about why I’m calling for a deposit of $1.8 billion into the Rainy Day Fund this year. ([link removed])

State legislation authorized the “Rainy Day Fund” in 2020, but there is no target size for the fund or guidelines for annual deposits of withdrawals. In a detailed report released yesterday, I called for establishing a target of 16% of the City’s annual tax revenue to be added to the “Rainy Day Fund” in order to weather the full length of a recession. I’m proposing a policy framework to guide deposits based on above average non-property tax revenues.

Currently the Executive Budget adds $700 million to the Rainy Day Fund. Based on this year’s tax revenues, our formula calls for $2.5 billion to be deposited this year, $1.8 billion above what is already budgeted. That’s a big number, but this year’s surplus and economic uncertainty makes it feasible and prudent. Saving now will help prevent budget cuts in the next economic downturn that would disproportionately impact the most vulnerable among us.

Rather than allowing our reserves to be dictated by the vagaries of annual politics, as we have done for too long, we should establish and hold ourselves accountable to clear rules for savings in times of growth to ensure we have enough to fund critical services in times of hardship. The lesson of this pandemic and its economic ramifications is that we must be prepared to lessen the harm of future crises.

New Yorkers are resilient, our City’s reserves should be resilient as well.
Read about our Rainy Day Fund Proposal ([link removed])

We cannot take the improved fiscal outlook for granted. Having an unexpected budget surplus in a moment of economic uncertainty is the right time to prioritize long-term fiscal stability. New Yorkers need and deserve a government that is able to provide for them during the darkest hours. Now is the time to make sure we are ready for whatever the future holds.

Brad

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