Your guide to NYC's public proceedings.
Q&A
Discussion on NYC's reserves and rainy day fund
0:17:36
·
3 min
Council Member Restler inquires about NYC's reserves and rainy day fund, with IBO representatives providing a detailed explanation of the city's various reserve accounts and their purposes. The discussion covers the general fund reserve, the rainy day fund (reserve stabilization fund), and the retiree health benefits trust.
- Current reserves total about $8.2 billion, spread across different accounts
- The rainy day fund contains about $2 billion and was created to help the city manage economic downturns
- The retiree health benefits trust has about $5 billion in liquid assets
Lincoln Restler
0:17:36
I wanted to ask about reserves in the rainy day fund.
0:17:42
According to OMB's calculations, reserves for FY '20 '6 are at 8,600,000,000.0.
0:17:47
Do you think that we should be increasing reserve that the administration should be increasing reserves in the executive budget?
0:17:53
And, also, has IBO considered under what scenarios you think it's appropriate to spend down the rainy day fund?
Sarah Parker
0:18:01
Good morning.
0:18:04
I'm really glad we have this opportunity to talk about the reserves that the city currently has.
0:18:10
There is about $8,200,000,000 in reserves, but they are in different forms, different accounts.
0:18:17
So first, just for the the general public, I'd like to explain a little bit about what each of these reserves are.
0:18:23
We have about 1,500,000,000 in a general fund reserve, and this is split between a general reserve and a capital stabilization reserve.
0:18:33
This is money that we park in the budget, and as the year winds down, we start spending it.
0:18:38
So that year to year will be spent down in the budget.
0:18:42
Separately, and this is, I think, going to be the focus of what we're talking about today, the city has something called the colloquially known as the rainy day fund, which also goes by the technical name of the reserve stabilization fund.
0:18:55
So in OMB documents, that's how it's referred to.
0:18:57
And this is about currently about $2,000,000,000.
0:19:01
This allows the city to take surplus money and separate it from the general fund in a way that previously to this being created under the de Blasio administration with Albany passing legislation, the city had to have a balanced budget and was much more limited on its ability to have a reserve account.
0:19:20
Before we created the Rainy Day Fund, the city largely used the retiree health benefits trust, which is another place that we have money that could be considered a type of reserve.
0:19:33
Essentially, trust is is how we pay for retiree health benefits.
0:19:38
It acts similar to a pension and that it's investments.
0:19:41
But currently, it has roughly about $5,000,000,000 in liquid assets.
0:19:46
And annually, the retiree health benefits cost about $3,500,000,000 So in theory, we could the city could put less money into the retiree health benefit trust and therefore free up money to use elsewhere.
0:20:00
All this to say, the city has a cushion.
0:20:04
But right now, at least as of the preliminary budget, the administration, the independent budget office, city council finance all projected a surplus for the current fiscal year.
0:20:16
The size varied.
0:20:18
But the question is, right now, what are we going to do with that surplus?
0:20:22
And as our testimony focused, there is the option to prepay next year's expenses, so to use it to create a cushion for next year, or the option to put some or all of it into the rainy day fund.
0:20:37
I think the question at hand, you put some or all of it into either of those options, to be clear.
0:20:45
The question at hand is right now we're facing what we know is going to be fall.
0:20:52
There's going to be a cliff in funding.
0:20:55
And the question is how much of a cushion are we able to build right now?
0:21:01
The Rainy Day Fund, when it was authorized in Albany through legislation, was for periods of economic turmoil and a loss of revenues.
0:21:11
That was the discussion around how it was created.
0:21:16
When it was created, I don't think anyone foresaw a world in which federal dollars were going to be part of this equation.
0:21:24
But I think it was four times when the city was facing unforeseen circumstances and needed a cushion to rely on, and it created that mechanism.