NYC Comptroller Levine Presents Strategy to Strengthen Rainy Day Fund, Urges Immediate Adoption 

New York, NY — Comptroller Mark Levine today issued a proposal for the City of New York to create a framework for its major “rainy day fund,” including a targeted balance, regular replenishment, and stronger guardrails for drawing it down. The suggested parameters, outlined in a new report, come amid a budget season that has seen a proposed drawdown of the key Revenue Stabilization Fund – also known as the Rainy Day Fund – by as much as half to balance the City’s finances. The use of reserves during an otherwise strong revenue year for New York City has contributed to several major credit rating agencies changing their economic outlook for New York City from “stable” to “negative.”

“New York City can’t take a make-it-up-as-we-go approach to preparing for tough times,” said Comptroller Mark Levine. “We need a well-structured rainy-day fund with clear savings goals, consistent rules for deposits and withdrawals, and strong safeguards against political interference. I look forward to working with the Mayor and City Council to put this in place.”

“Comptroller Levine is right — New York City needs to strengthen its Rainy Day Fund so it can protect New Yorkers from potentially devastating service cuts during a recession,” said Andrew Rein, President of the Citizens Budget Commission. “We have long supported the critical elements the Comptroller identifies are needed for a well-designed Fund. We welcome the opportunity to work with him, the Mayor, and the City Council to bolster and codify the budgetary safety net New Yorkers need.”

The Revenue Stabilization Fund (RSF) was first created through a 2019 Charter Amendment and enabled by the State Legislature the following year. Since 2020, however, the RSF has never had a target balance nor mandated deposits — unlike other major U.S. cities. Its coffers have largely been filled through pre-existing General Fund surpluses, as well as one-time deposits. While other reserves exist, the RSF was the City’s first dedicated mechanism to set aside money in case an economic downturn occurs.

But few safeguards exist to ensure this vital tool is as sharp as possible to weather economic headwinds.

Specifically, Comptroller Levine made the following recommendations:

• Targeted Balance. The RSF’s balance should at a minimum be 10% of the City’s tax revenues, with the ultimate goal of hitting 16%. That higher target would enable New York to sufficiently withstand a downturn, based on an analysis of past economic cycles.

• Set Deposit Rules. Deposits are currently at the discretion of the Mayor and the City Council during the budgeting process, with no set formula to make regular contributions. The Comptroller’s Office suggested a formula be adopted whenever the RSF is below its targeted 16% of tax revenues, with mandated deposits equal to 20% of total tax revenue growth above 3% and 40% of non-property tax revenues growth above the 6-year trailing average.

• Set Withdrawals Rules. RSF’s statutory rules allow a drawdown of no more than 50% in a single year, unless the Mayor certifies a “compelling fiscal need,” which could be a recession, a total decrease in revenues, or a natural disaster. The Comptroller suggested new criteria for withdrawals, such as two consecutive quarters of total nonfarm employment losses in New York City or a “catastrophic event” similar to those set by the State’s rainy day fund legislation. Even then, the withdrawal amount should be no more than 5% of tax revenues in the year before said downturn or event.

• Adopt Formal Policies. Finally, the Comptroller’s Office recommended a published, clear policy that incorporates the targeted balance, deposit rules, and withdrawal triggers. That would require the Mayor’s Office of Management and Budget to include a section on the RSF in each financial plan, with details on the gap between the current and targeted balances, the deposit formula, and whether the triggers for a withdrawal have been met, among other metrics.

To read the full report, Strengthening the City’s Rainy Day Fund, click here: https://comptroller.nyc.gov/reports/strengthening-the-citys-rainy-day-fund

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