BILL NUMBER:  S4925

 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.

 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.