ALBANY, N.Y. (AP) — New York’s top financial officer called Friday for the state to set hundreds of millions more dollars aside in case of a financial downturn.
The state should fully fund its rainy day reserves within five years, Democratic Comptroller Thomas DiNapoli said in a report released Friday.
The economy is booming, but the comptroller said in an interview that New York must be better prepared for economic trouble.
The rainy day fund, he said, must be a high priority during ongoing state budget negotiations, especially at a time when state revenues are up but hard to predict and long-term health care costs are driving Medicaid spending above budgeted expectations.
"A concern that many have is that the recovery just has been defying historic trends," he said. "At some point there will be a correction in the economy."
Lawmakers and Democratic Gov. Andrew Cuomo this year moved to add $250 million to rainy day funds. And the state plans to add another $428 million this spring. That would leave New York with $2.5 billion in rainy day funds.
But that’s less than half of what New York can set aside under state law: $5.9 billion, DiNapoli said.
New York has resorted to budget cuts following market collapses in the past two decades, he said.
"The reality is the reserves weren’t built up to a significant amount to draw them down or have an impact," he said.
Elected officials, he said, should also allow the state to set aside up to 10% of general fund revenues — up from 7% currently. The comptroller is also pressing New York to require the state to regularly deposit money in rainy day funds.
A spokesman for Cuomo’s budget office pointed to the administration’s efforts to rein in spending and said the state is "well-positioned for economic turbulence."
The administration says it could also tap into $1.1 billion from monetary settlements, $500 million set aside for debt management and $900 million from another reserve account meant for economic uncertainty.
"For nine consecutive years, this administration has capped state spending growth at 2%, creating flexibility in the budget that has made lowering taxes for every New Yorker possible while closing billions of dollars in budget gaps," New York State Division of the Budget spokesman Freeman Klopott said.
But E.J. McMahon, research director for the conservative Empire Center for Public Policy, said the state wouldn’t have to repay such money, unlike that set aside as rainy day funds. And, he said, the state already has plans to spend settlement money, which comes from over $12 billion in civil penalty settlements from banks.
"There’s no governor in the post-World War II history of New York who has presided over this long an economic expansion," said McMahon, who said Cuomo should have put more settlement money in rainy day funds.
DiNapoli said New York’s reserves are low compared with states like California, which has $17.8 billion in reserves, and Texas, which has $11.8 billion. Another fiscally conservative group, the Citizens Budget Commission, has called for New York to follow California’s lead to help ensure a recession wouldn’t lead to tax hikes or drastic cuts.
"Our analysis has shown a recession is likely to cause a revenue loss of around $35 billion over three years," said David Friedfel, director of state studies.
Still, McMahon said, it’s unlikely DiNapoli’s report will move the needle as budget negotiations continue. Cuomo’s administration quietly delayed a $1.7 billion Medicaid payment this year to balance the budget — a maneuver that has helped fuel a $6 billion budget gap facing New York in the budget year starting in April.
"Unfortunately, it’s fated to be ignored," McMahon said. "These things generally aren’t done unless a governor insists on it. The Legislature is least likely to care."
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