Comptroller Levine: Inadequate reserves and credit rating downgrade risk
Levine highlights that the $2 billion rainy day fund ranks NYC ninth of the ten largest cities in reserves relative to revenue, ahead only of Chicago. He notes Moody's, Fitch, and Kroll lowered the city's credit outlook to negative, warning that structural gaps, low reserves, and repeated one-shots increase downgrade risk.
Any of those assumptions can break.
If we do hit turbulence ahead, our reserves are nowhere near.
year adequate.
The city will finish this year with just $2 billion in the Revenue Stabilization Fund, aka our rainy day fund.
This leaves us with an extremely thin financial cushion relative to the scale of our budget.
Even if you count the $5.2 billion in our Retiree Health Benefit Trust, which I'll remind you is an offset to roughly $100 billion long-term liabilities in health care for retirees, though it's been used as a de facto rainy day reserve,
we're still far below the amount we need to weather a typical recession.
And among the 10 largest cities in the nation, our reserves relative to revenue rank us ninth, ahead only of Chicago.
Looming over all of this are our credit rating agencies.
Moody's, Fitch, and Kroll sent us a warning sign when they lowered the outlook for the city's credit from stable to negative.
I don't expect any immediate further actions from them, but the risk of a downgrade in the months ahead remains.
The structural gap, the low level of reserves, and the repeated reliance on one-shot measures all increase the risk of future credit rating downgrades.