Chair Lee questions Comptroller on rainy day fund rules and deposit formula

It's funny.

So that's the perfect segue to my next question, which is about the rainy day funds.

So the administration's preliminary plan included a drawdown of the city's rainy day fund, and the city council and comptroller were in agreement that such an action would be detrimental to the city's fiscal stability.

The new charter commission created by Mayor Mamdani is considering the proposals that would provide more guidance.

And so I know you had spoken about this, but what rules would you suggest for the usage of the rainy day fund?

And do you have any recommendations as to how deposits into the reserve fund should be managed?

Yes.

I mean.

Big picture here, we're coming off a very long run of

A successful economy of New York.

Other than COVID, essentially going back to the financial crisis, we've had a 16-year bull market, and we basically have nothing to show for it in our reserves.

We have a rainy day fund of $2 billion against a city budget of $125.

So it's just a crying shame that we've had all those good years go by, and we didn't save enough.

And the first thing that the formula we're calling for would do would set targets so that when you have a good year in the economy, when tax revenue is growing, that you are required to put more money in or deposit into the fund.

We call for 20% of what's over a 3% growth to go into the fund, plus a look back, an average over the last six years, 40% from the look back.

So that we're putting money in every year.

And to give you a sense of the scale, that would mean this year, when our economy, as at the moment, very strong, we would have to put about $830 million in, give or take a little.

But there also needs to be rules about when you can take out.

Because we were about to take out now when the economy is good, which is not the purpose of a rainy day fund.

This is not a rainy day.

From an economic perspective, the sun is shining.

So the condition should be either a recession, which is a little bit hard to measure in real time, but we define it as two consecutive quarters of job loss, or some

Sort of catastrophe.

A natural disaster, a pandemic, God forbid, a massive terrorist attack.

Now, what we called for in our report is we should add major AI disruption to the list, and that probably requires a change to the state legislation.

How big do we want it to be?

So we believe it should be 16% of our annual tax revenue.

That's not an arbitrary number.

That's the amount that we would need to cover in a normal recession so we didn't have to cut services.

Right, that's our goal.

If we enter a recession, we want to protect services.

If we have a reserve fund of 16% of our tax receipts, that would allow us to avoid, and I think that's...

About $12 billion now, $13 billion?

$13.5 by today's budget.

Got it.

Okay.

And then in terms of the floor, of the minimum amount that the city should be...

10% would be our floor.

Again, we're at $2 billion in the rainy day fund, which is, I don't know, 1.7% or something, so we're way below the target.

10% would give us essentially the first half of the recession, the first two years, so it would give us some time to cushion the blow.

Okay.