Testimony of New York City Comptroller Mark Levine Before the Charter Revision Commission on Government Efficiency (COGE)

Testimony of New York City Comptroller Mark Levine Before the Charter Revision Commission on Government Efficiency (COGE)

Thank you, Chair Gaspard and members of the Charter Revision Commission, for the opportunity to testify before you today.

New York City's Charter is not only a governing document. It is also a fiscal and operational framework. It shapes how the City plans, budgets, saves, procures, contracts, and prepares for risks that extend far beyond any single budget cycle or mayoral administration. Though Charter Revision processes have seemingly become routine in recent years, they are anything but. This Charter Revision comes at a pivotal moment in our City's history, and we must seize this moment to make New York City more resilient and effective in the face of an uncertain future.

New York City is facing one of the most difficult fiscal and budget outlooks in recent memory. Technological change is accelerating, the risks posed by the federal government are growing, and the costs of housing, services, infrastructure, and climate change continue to rise. The City's tax receipts are fueled by a few highly volatile sectors and high-income individuals. These pressures demand a City government that can plan for long-term risk, protect essential services, and deliver public dollars with greater speed, integrity, and accountability. The reforms that I will share today will vastly improve New York City's ability to manage long-term fiscal risk.

Complete the governance framework for the rainy-day fund

Amend Chapter 58, Section 1528 to set a target size for the rainy-day fund, to require the adoption of a formula-based deposit mechanism, and to set conditions and size of withdrawals. The Mayor, the City Comptroller, and the City Council would jointlydetermine a policy with the parameters and features of the deposit mechanism, withdrawal triggers, and procedures necessary to implement the Charter mandate. Reporting on implementation should be required annually to the City Comptroller, the State Comptroller, the Financial Control Board, the City's Independent Budget Office, and the public. Further, the current language in Section 1528 stating that, "The city may maintain a revenue stabilization fund to serve as a year-to-year reserve account" should be changed to "The city shall maintain a revenue stabilization fund…"

The City should adopt clear rules for the Revenue Stabilization Fund, commonly known as the Rainy Day Fund.

Let me explain why.

New York City faces the most difficult fiscal outlooks since the 2008 financial crisis, with federal uncertainty, economic volatility, rising long-term risks from AI, and over-reliance on volatile economic sectors that could quickly strain the City's budget. Yet the City does not currently have enough in reserves to protect against a serious recession, major federal funding cuts, extreme weather, or other fiscal shocks.

We have a Rainy Day fund for exactly these moments. It is meant to protect New Yorkers from economic shocks and fiscal emergencies before they force sudden cuts to essential services, layoffs, or tax increases.

The Rainy Day Fund was not created overnight. New Yorkers voted via referendum in 2019 to give the City the ability to save money for future years. The State Legislature passed enabling legislation in 2020, and then-Mayor Bill de Blasio signed an executive order establishing the Revenue Stabilization Fund in 2021. For the first time, New York City had a dedicated mechanism to set aside resources for economic downturns and other major fiscal shocks.

But years after creating the fund, that framework remains incomplete. The fund has no binding target size, no formula for regular deposits, and insufficient guardrails for withdrawals. Deposits remain dependent on annual budget negotiations between the Mayor and the City Council, while withdrawals can be proposed without a sufficiently rigorous framework for determining whether the City is truly facing the kind of downturn or catastrophic event that warrants tapping emergency reserves to address temporary shocks.

The recent Preliminary Budget showed why stronger rules are needed. The Administration proposed drawing on the Rainy Day Fund to help balance the financial plan, even though the City was not facing a recession, catastrophic event, or major revenue collapse. While that withdrawal is no longer reflected in the current budget, the episode made clear how vulnerable the fund remains without stronger guardrails.

The Charter should be amended to require the adoption of a formal Rainy Day Fund policy with four core elements.

First, there must be a target balance. My Office has proposed a target of 16% of the City's tax revenues. This is the revenue shortfall experienced, on average, during previous recessions. Currently, the City holds about 2% of tax revenues in the rainy-day fund and it should find the most expeditious path to bring it to at least 10% to provide meaningful support at the beginning of a recession, if not for its entire duration. The higher 16% target would put the City in a stronger position to withstand a serious recession without resorting immediately to deep service cuts, layoffs, or tax increases.

Second, the Charter should require and a policy should establish formula-driven deposits. When the fund is below its target level, the City should be required to make regular contributions based on revenue growth. My Office proposed a formula that takes a portion of tax revenue growth above a defined threshold, as well as a portion of non-property tax revenue growth above its trailing average. This would allow the City to save more during strong revenue years, when it is most prudent and least painful to do so.

Third, there should be clear withdrawal rules. The Rainy Day Fund should be available when the City faces a genuine fiscal emergency, such as a recession, major revenue decline, natural disaster, or other catastrophic event. But withdrawals should not be used as a routine tool to balance the budget during periods of revenue strength. The Charter should establish and a policy should fully articulate objective triggers, such as sustained employment losses or a catastrophic event, and should limit the amount that may be withdrawn in a single year.

Fourth, the adopted policy and its implementation should be subject to regular public reporting. The Mayor's Office of Management and Budget should be required to include a Rainy Day Fund section in each financial plan. That section should disclose the current balance, the target balance, the gap between the two, the deposit formula, whether withdrawal triggers have been met, and the planned use of any proposed withdrawal. Reporting should be provided to the City Council, the City Comptroller, the Independent Budget Office, the State Comptroller, the Financial Control Board, and the public.

This reform is not about locking away money for its own sake. It is about protecting New Yorkers when the economy turns. A strong Rainy Day Fund is what allows the City to preserve essential services, avoid sudden layoffs, maintain market confidence, and respond to families and communities in moments of disruption.

The Charter should make clear that New York City will save in good times so that it can protect New Yorkers in hard times.

Thank you for the opportunity to testify.

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