New York City Voters Approve ‘Rainy-Day Fund’ to Ease Recession

(Bloomberg) -- New York voters approved a measure to create a city savings account to help shield its 8.4 million residents from the need for tax hikes and program cuts during the next economic downturn.

The measure was winning with 71% of the vote, with 93% precincts of reporting, according to projections from the Associated Press. It will allow the most-populous U.S. city to create a so-called rainy-day fund, or a type of savings account that state and cities set up to cushion the impact of declining tax revenue during a recession.

The measure’s passage moves New York City closer to joining 48 states and a dozen cities that have such funds. The state would still need to lift fiscal controls imposed over the city in the 1970s that prevent it from establishing a formal place to stash surplus revenue in its more than $90 billion budget. After that, it’s up to city officials to agree upon the fund’s details, like a target amount to save or conditions of when it can be tapped.

“Getting the specifics right is important, this is not one of those cases where you say ‘yes’ or ‘no’ and you can turn off the switch,” said Maria Doulis, vice president of the Citizens Budget Commission, a nonprofit fiscal watchdog. “You have to pay special attention on how it’s implemented.”

The budget commission has said a repeat of the 2008 recession could leave a $20 billion shortfall in the city’s budget.

State Senator Brian Benjamin, whose district includes Harlem and the Upper West Side, introduced a bill last month to allow for the creation of a rainy-day fund.

To contact the reporter on this story: Maria Elena Vizcaino in New York at mvizcaino1@bloomberg.net

To contact the editors responsible for this story: Elizabeth Campbell at ecampbell14@bloomberg.net, Michael B. Marois

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