City Hall
Council Considers More Flexible Rainy Day Fund Policy
As part of its ongoing budget deliberations, the city council discussed legislation this morning that would give the city a little more flexibility in how it spends money from and contributes to the city's rainy-day fund, an account the city can dip into during cash-poor budget years to offset potential budget cuts.
Instead of simply getting rid of the rainy day fund, as critics of Sen. Joseph Zarelli's conservative rainy-day fund proposal have suggested doing at the state level, the city would set aside a smaller percentage of the budget in down years and give the council more flexibility to save city programs rather than automatically replenishing reserves. (Zarelli's proposal would require the state to set aside three quarters of its excess revenues in years of "extraordinary revenue growth," on top of the one percent of total revenues it already deposits into the fund annually).
Council members expressed concern earlier this year about setting aside money at a time when the city is still cutting people's jobs.
In addition to adopting new policies, proposed by Mayor Mike McGinn, that would require the city to deposit 0.25 percent of forecast revenues, or about $1.95 million, into the fund next year and 0.5 percent of revenues, or about $4 million, annually after that, the proposal the council discussed today would:
The city can still decide to put extra money into the fund whenever it wants to, on top of the automatic contributions.
Instead of simply getting rid of the rainy day fund, as critics of Sen. Joseph Zarelli's conservative rainy-day fund proposal have suggested doing at the state level, the city would set aside a smaller percentage of the budget in down years and give the council more flexibility to save city programs rather than automatically replenishing reserves. (Zarelli's proposal would require the state to set aside three quarters of its excess revenues in years of "extraordinary revenue growth," on top of the one percent of total revenues it already deposits into the fund annually).
Council members expressed concern earlier this year about setting aside money at a time when the city is still cutting people's jobs.
In addition to adopting new policies, proposed by Mayor Mike McGinn, that would require the city to deposit 0.25 percent of forecast revenues, or about $1.95 million, into the fund next year and 0.5 percent of revenues, or about $4 million, annually after that, the proposal the council discussed today would:
• Clarify that the rainy day fund could be used for activities that would otherwise be suspended or cut because of revenue shortfalls;
• Eliminate the two-thirds supermajority requirement to spend funds from the account;
• Establish that if the account reaches its maximum balance of 5 percent of forecast revenues, the extra money will be spent on one-time needs, not ongoing programs;
• Suspend contributions to the fund in years when revenues decline;
• And establish that if the city spends money from the account, the city contribution to the fund in the following year will go back down to 0.25 percent from 0.5 percent.
The city can still decide to put extra money into the fund whenever it wants to, on top of the automatic contributions.
