Lack Of Rainy Day Fund Leaves State In A Spotty Situation
It’s been 10 years since the 2008 recession — and we wonder if New York’s elected officials are forgetting the hard lessons they should have learned.
According to a January 2012 analysis by Liberty Street Economics, a blog by the New York Federal Reserve, New York saw a 13.5 percent drop in housing values, which made it difficult for local governments to maintain local funding levels. New York’s unemployment rate almost doubled, which dragged down state tax revenues 8 percent over two years.
The result — the bills were too high and there wasn’t nearly enough money coming in to pay them. To make matters worse, the state didn’t have enough rainy day reserves built up to withstand the storm. It’s one reason the continued warnings from Thomas DiNapoli, state comptroller, are worth listening to — and DiNapoli issued another warning last week about the state’s lack of desire to build its fund balance to help pay the bills if and when another economic downturn hits.
DiNapoli’s July analysis of the state’s 2018-19 enacted budget projects spending will outpace revenues over the next three years with potential cumulative gaps totaling $17.9 billion. Combine those budget gaps with a decreasing ability to finance additional debt and the possibility of federal funding cuts and one would think it would be prudent to add to the state’s rainy day reserves.
“Yet, there are no plans to add to our reserves, leaving the state with little cushion in the event of an economic downturn,” DiNapoli said.
DiNapoli says the combined balance of the state’s primary reserve funds, the Tax Stabilization Reserve Fund and Rainy Day Reserve Fund, is $1.8 billion, or less than half of the $5.2 billion they are currently authorized to hold. The last deposits to these funds were made in 2015 and DiNapoli’s report states no further deposits are projected during the four-year Financial Plan period.
As Yogi Berra once said, it’s like deja vu all over again.