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History
- Referred to cities
- Referred to cities
Full text
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Sponsor's memo
Title of bill
An act to amend the New York state financial emergency act for the city of New York, in relation to providing for a revenue stabilization fund
Purpose of bill
Establishes, as a separate unit of appropriation in the expense budget, a rainy day fund which the NYC Council, together with the Mayor, could make payments into or from either at the time of adoption of a budget or its modification.
Summary of specific provisions
Section 1 amends the State Financial Emergency Act to allow the City to establish, as a separate unit of appropriation in the expense budget, a rainy day fund (the "Fund"). Permits the Council, together with the Mayor, to make payments into or from the Fund either at the time of adoption of a budget or its modification. Provides that the procedures for payments into or from the Fund would be the same for funding any unit of appropriation on the expense side of the budget, not to be deemed an expense forcing the budget out of balance. Permits the Council, at adoption, to make payments into or from the Fund pursuant to the budget adoption provisions of the Charter, subject to Mayoral veto. During the year, permits the Council to make payments to and from the Fund, and where authorized make withdrawals, pursuant to the expense and revenue modification procedures of Charter section 107.
Read the full memo (682 words)
Justification
Following New York City's fiscal crisis in 1975, New York State passed the Financial Emergency Act of 1975 (FEA) to enforce fiscal discipline on the City. One key provision in the FEA is that the City both adopt and end the year with a balanced budget according to generally accepted accounting principles (GAAP). Under GAAP, the City is required to match revenues with expenditures so that it does not rim into the kind of problems that lead to a fiscal crisis. As a result, the City cannot establish a true rainy day fund without State authorization because such fund would allow the City to carry forward funds from one fiscal year to the next. A meaningful rainy day fund would promote fiscal stability and allow the City to engage in long-term planning. City tax revenues change from year to year with the ups and downs of the City's economy and with business cycles. Because of Wall Street's booms and busts in the City economy, these revenues are highly cyclical. Expenses, on the other hand, grow with fewer ups and downs. Starting in the early 1980's, the City created mechanisms to roll forward the surplus of revenues from one year to the next. Simply put, it is the City's savings, accumulated over past years, added to or subtracted from each year. In order to comply with FEA, the City prepays debt service and makes use of various off-the-balance-sheet techniques to move funds into the next year. The City has been using this 'roll' like a rainy day fund -reducing the amount rolled forward in 1995 to help deal with the recession and again in 2002-2003 to ameliorate the budget impacts of 9/11. In good years, such as Fiscal Year 1997-2000 or Fiscal Year 2003-2006, the City added to the annual amounts that were rolled forward. However, the problem with using the surplus roll as a rainy day fund is its lack of transparency. Many of the mechanisms that allow the City to roll the surplus are not subject to the budget process or regulation. Including these amounts in a separate unit of appropriation would meet the goals of transparency and accountability in the budget process. This legislation would create a Revenue Stabilization Fund in the City's expense budget that would allow the City, in a more transparent way, to save money in good economic times that could be used to
maintain essential services, pay obligations of the City and/or ameliorate the need for tax increases during bad financial times.
Legislative history
2007-2008: S.5466 - Died in Committee
Fiscal implications
None to the State.
Effective date
This act shall take effect immediately.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.