(The Center Square) — New York City Mayor Zohran Mamdani’s plan to raid reserve funds to plug a $5.4 billion budget gap could be blocked by proposed rules by the city’s top bean counter.
City Comptroller Mark Levine rolled out a new proposal to strengthen the city’s so-called ‘rainy day’ fund by setting a minimum for reserve balances, deposit rules, and limiting drawdowns from the fund.
“New York City can’t take a make-it-up-as-we-go approach to preparing for tough times,” Levine said in a statement. “We need a well-structured rainy-day fund with clear savings goals, consistent rules for deposits and withdrawals, and strong safeguards against political interference.”
The comptroller’s report calls for a rule requiring the Revenue Stabilization Fund’s balance to be a minimum of 10%-16% of the city’s tax revenues; setting a formula to make regular contributions to the fund and limiting withdrawals to no more than 5% of tax revenues during times of economic uncertainty.
The proposal was praised by the Citizens Budget Commission, a non-partisan fiscal watchdog group, which has criticized Mamdani’s plans to raid the reserves to balance the city’s budget.
“Comptroller Levine is right — New York City needs to strengthen its Rainy Day Fund so it can protect New Yorkers from potentially devastating service cuts during a recession,” Andrew Rein, the commission’s president, said in a statement. “We have long supported the critical elements the Comptroller identifies are needed for a well-designed Fund.”
Mamdani unveiled his $127 billion preliminary budget proposal in February. He has called on state lawmakers to increase income taxes on New York City’s wealthy and corporations to help plug a projected $5.4 billion budget gap. He has threatened to increase city property taxes by 9.5% if lawmakers and Gov. Kathy Hochul don’t approve his plan.
But Mamdani’s plans to tap into the reserves have raised concerns among bond raters and other financial analysts who warn it could negatively impact the city’s long-term fiscal health.
Two of the nation’s credit rating agencies have already put City Hall on notice that they may downgrade the city’s rating, citing chronic budget gaps and Mamdani’s plans to fill them with reserves.
“We believe the use of reserves for baseline budget management in the near term rather than developing other corrective measures to close the structural gap could expose New York City to risks if adverse financial or economic conditions were to materialize,” S&P Global Ratings wrote in a March report.
In his report, Levine noted that the city’s reserves and budget stabilization funds peaked at $14.5 billion at the beginning of FY 2023 but are projected to fall to $6.6 billion in next fiscal year’s budget. He said that would mark the lowest level since FY 2015, despite growing expenditures in the city’s budget.
The Democratic-controlled New York City Council released its preliminary budget plan last week that calls for reducing a projected $6 billion revenue shortfall through cost and revenue “re-estimates, efficiencies and reforms” and “additional revenue-raisers” over the next two years.
Council Speaker Julie Menin criticized Mamdani’s plans to increase taxes, saying in a statement that she won’t support a plan that balances the city’s budget “on the backs of homeowners or renters, by digging into emergency reserves, or by cutting essential programs.”
