Coronavirus and government budgets

Two weeks ago, U.S. markets responded to the mushrooming coronavirus crisis by dropping more than 7%. It was Wall Street’s worst singleday performance since 2008. That is until three days later when they plunged nearly 10%.

Economists have warned us for months that a recession was looming, but we had no idea a pandemic would shock us into a global crisis. The last time we faced a recession, we had to cut essential city services to make it through. Right now the state requires New York City to balance the budget, so every dollar we make as a city we have to spend.

The amount of money we have put aside for a situation like this is $0. This is precisely why I’ve introduced legislation to allow the city to hold cash reserves in a Rainy Day Fund, to make funds available for times when the city’s income takes a hit because of unforeseeable circumstances.

As I write this, schools are closed, restaurants are closed, theaters are shuttered, jobs are hemorrhaging and people are being strongly encouraged to practice social distancing by staying home as much as possible. All of this is necessary to protect public health as we work to stop the spread of COVID-19, but it has obvious economic effects — especially for our most vulnerable neighbors who are already fighting an uphill battle against economic inequality.

For the residents of my district, I know that Wall Street trading can seem like something that happens downtown and doesn’t really affect us. Many of us don’t have stocks and our life savings are either nonexistent or in cash-based accounts. But if you have a pension or retirement plan a lot of your financial future is probably linked to the health of the market. Furthermore, the city’s personal income tax collections depend greatly on the strength of Wall Street.

City Controller Scott Stringer predicts we may see a $3.2 billion gap over the next six months. If we had an operational Rainy Day Fund, which I believe should hold about 10% of the city’s annual spending, we would be better able to help cover this funding gap while continuing to pay for the essential services that we rely on.

Think of all the things we depend on city employees to do for us every day. There’s the visible stuff you probably think of right away: the police; fire and emergency medical services responding to calls for help in our communities; or the dedicated doctors and medical staff at city hospitals. We also depend on teachers and library staff helping our children remotely to make sure our kids stay on track educationally. And of course, we would be in a world of trouble without the people who focus on the vital task of keeping the city livable — the sanitation workers, the people who run the water and wastewater systems, the transportation system workers.

All of this is at risk without an adequately resourced Rainy Day Fund. During past recessions, police and ambulance staffing were reduced, libraries were closed more frequently and recycling was suspended. In order to close the funding gap, New York City had to also increase personal income taxes, city sales taxes and property taxes to balance the city budget. As a result, the city faced spending cuts as well as increased taxes in excess of what would have been necessary if we had planned ahead.

I know we will get through this crisis as we have gotten through every other crisis because New Yorkers are tough. But we don’t need to make doing so any harder for ourselves than we have to. We shouldn’t have to bear the burden of decreased services and higher taxes because we failed to plan, and that’s why I’m committed to passing the Rainy Day Fund legislation so this never happens again.

Benjamin represents Harlem, East Harlem and the Upper West Side in the state Senate.