It's pouring outside, time for the city to tap into billions in rainy-day funds and halt cuts

Juan Gonzalez - News

Wednesday, June 22nd 2011, 4:00 AM

Bryan Smith for News

Council member Letitia James is one politician urging Mayor Bloomberg to tap into rainy-day funds in order to save community programs from being cut.

If Mayor Bloomberg has his way, on July 1 New Yorkers will face some of the most drastic cuts to public services in decades.

The mayor's plan includes laying off thousands of teachers and park employees, closing firehouses, senior and day care centers, and relegating most libraries to only a few days a week of service.

Such massive cuts are necessary, the mayor claims, to stave off looming budget shortfalls. Over the next few days, City Council must decide whether to go along with Bloomberg.

You'd never guess from the doom-and-gloom scenarios we keep hearing that our city is poised to wind up with a budget surplus of more than $3 billion for the fiscal year that ends June 30.

Nor would you guess that over the past few years Bloomberg's aides have squirreled away billions more from the city's boom times into little-known "trust funds" or "rainy day funds" they created.

There is, for example, something called the "Health Insurance Retirees Trust Fund." Bloomberg started it in 2007 to provide a cushion against rising health care costs for retired city workers.

With fewer people retiring because of the recession, the fund has mushroomed to nearly $6 billion - all of it available to Bloomberg to spend any way he wants.

He's planning to tap nearly $4 billion to close next year's budget gap. Some Council members, like Brooklyn's Letitia James, are urging him to take out another half-billion to save some programs from the chopping block.

Then there's the "Pension Reserve Fund" that Bloomberg created two years ago. It set aside another pot of money in anticipation of a long-overdue study of the city's retirement system that will likely require an increase in pension contributions from the city.

The reserve fund has grown to nearly $1 billion.

"The overall cost to the city will not be known until the consultant's report is made public," Bloomberg spokesman Marc LaVorgna said. "[But] the cost of such changes could exceed the $1 billion annual reserve created by the city."

Still, the state Legislature is unlikely to approve any proposed pension changes until next year. Meanwhile, the money sits there unused.

Then there's the very real $3 billion surplus for this year. The mayor wants to use it all to prepay interest on the next year's debt service to bondholders.

All of that means setting aside money you have today to pay bills that aren't due until years from now.

"It's no use prepaying your mortgage when you can't put food on the table right now," James said.

"If the mayor wants the labor unions and Council to come up with money to prevent the cuts, he needs to show some good faith and dig deeper into those funds he controls."

In other words: No use hiding money in rainy day funds when it's pouring outside now.

jgonzalez@nydailynews.com