Should cities rely on “rainy-day” funds to balance their books?

New York City social service advocates last fall decried roughly $1 billion in spending cuts that would shut down fire stations, nix city-sponsored child care for low income families and slash library spending.

And with yet another multi-billion budget deficit projected for next fiscal year, starting July 1, many residents were bracing for a whole other round of cuts.

But in a budget plan announced late last week, New York City Mayor Michael Bloomberg proposed using the last of the city’s “rainy day” funds in order to balance next year’s budget without higher taxes or additional cuts to city services, according to the Associated Press.

“We spent years planning ahead, making government more efficient and saving for a rainy day,” the mayor said of the $6 billion the city put aside in the more flush days of his administration. “Thank goodness we had the reserve.”

While this is good news for New York City residents in the short-term, it still leaves unanswered how the city will balance the books in future years.

During his budget unveiling, Bloomberg said that there would still be rough roads ahead, according to the article.

Bloomberg warned that the city would have no reserve funds to depend on in future years. Estimates put the budget deficit at $3 billion in the fiscal year beginning July 2013, $3.5 billion the following year and $3.4 billion the year after that.

Using rainy day funds now is like putting a band-aid on a gushing wound — eventually it’s going to need more serious measures. Such major future deficits mean that city officials will ultimately have to raise taxes, cut services or both.

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