New York City needs a strong Rainy Day Fund to protect New Yorkers and city workers from devastating service cuts and layoffs when bad times strike.
Just like any family, the city should save in good times to have money to lessen the pain of the hard ones. Those funds also should be saved for short, unexpected emergencies, not drained to pay the first few bills when more are coming.
When early voting starts on Saturday, New Yorkers will see Ballot Proposal 5, which would amend the City Charter’s Rainy Day Fund requirements. Citizens Budget Commission was perhaps the staunchest advocate for creating the Fund, yet we recommend a No vote.
An amendment should be adopted only if it strengthens the Fund. Proposal 5 fails that test, instead allowing the city to enshrine the failing status quo in policy — while the illusion of progress saps momentum for desperately-needed improvements.
The status quo doesn’t require the city to deposit money in the Fund when times are good; deposits are entirely voluntary. Predictably, despite years of strong revenue growth since the Fund’s creation in 2020, the city has made only one deposit, bringing the Fund to $2 billion when nearly $14 billion is needed to cover revenue losses during two years of a typical recession.
The status quo also allows the Fund to be used for virtually any reason; just look back to January’s Preliminary Budget to see the problem there. It proposed using nearly $1 billion from the Fund to help fix a recurring budget shortfall and leaving New Yorkers even more vulnerable to the next recession — without solving the underlying budget imbalance. Mayor Mamdani was right to drop the idea.
Unfortunately, Proposal 5 would not require the city to fix these fundamental flaws.
The proposal would require the city to develop a policy on deposits, establish a reserve target of 12% of tax revenues, and allow half the Fund to be used without restriction and the rest if the mayor declares a fiscal emergency however they define one.
In truth, the proposal would not require deposits even when a great economy drives gangbuster revenues; the city could use that money for anything it chooses, leaving nothing to put in the Fund. There will always be desires to spend more — that’s understandable. Without requiring deposits, the city won’t save and will have a paltry account when the next storm hits, leading to service cuts and possibly layoffs.
While 12% may seem like a good target, the proposal could essentially cap the Fund at 6% of tax revenues by counting non-Rainy Day Funds — like the annual budget cushion or money saved to pay retiree health benefits — toward the target. This amount would cover only eight months, while a typical recession usually depresses revenues for two to three years.
The city can develop a strong Rainy Day Fund without the proposed Charter change. We all — the mayor, Council, stakeholders — just need the will.
The city should adopt a policy that mandates a portion of extraordinary revenue growth be deposited, based on defined economic criteria. It should set the Rainy Day Fund target at 16% of tax revenues, allowing the city to save what it may need to weather a storm, not just a cloudburst — and it should limit withdrawals to clearly-defined recessions and severe emergencies.
Voting no on Proposal 5 does not oppose strengthening the Rainy Day Fund. It is a vote declaring the status quo is not good enough, and the city should do better.
In a recession or emergency, New Yorkers’ services and the jobs of city and nonprofit workers are at risk. A strong Rainy Day Fund that protects all of us is in every New Yorker’s interest.
Rein is president of the Citizens Budget Commission.