ADVERTISEMENT

New York City Voters Weigh ‘Rainy Day Fund’ to Gird for Next Recession

New York City Voters Weigh ‘Rainy Day Fund’ to Gird for Next Recession

(Bloomberg) -- More than a decade after the last recession, New Yorkers are being asked whether their city should better prepare for the next one.

A measure on the ballot Tuesday would allow the most-populous U.S. city to create a so-called rainy-day fund -- a type of savings account that many states and cities set up to soften the need for budget cuts or tax increases when economic downturns cause revenue collections to plunge.

The approval of the measure would mark a first step toward giving New York City a formal place to stash surplus revenue to help cover its more than $90 billion budget when growth slows. While 48 U.S. states and more than a dozen cities have such funds, New York City doesn’t because of budget-balancing requirements imposed on it by the state as part of its financial rescue in 1975, according to the Citizens Budget Commission.

Strengthening New York’s reserve policies is one factor that could help it win a higher bond rating, Moody’s Investors Service said in a report this year. Even though the credit rating company said the city’s reserves have continued to grow and by 2018 were enough to cover about 10% of its annual revenue, the budget commission says a repeat of the 2008 recession could leave a $20 billion shortfall.

The ballot measure doesn’t detail the specifics for such fund, like a target amount or the conditions on when it can be tapped. That would be up to local and state officials to agree upon later.

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, William Selway

©2019 Bloomberg L.P.