Moody's: Pre-K Aid to N.Y. City Credit Positive

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A $300 million state allocation to New York City to finance pre-kindergarten expansion is a credit positive for the city, according to Moody's Investors Service.

New York lawmakers on March 31 approved a $138 billion budget that included the pre-K funding, but without the increase on the city personal income tax that Mayor Bill de Blasio had sought. The $300 million amounts to 0.5% of the city's estimated fiscal 2015 tax revenue, and 3.1% of the estimated fiscal 2015 education expenses from city funds.

The state budget also provides new education aid funds to other local governments.

"The new funds for New York City reflect a turnaround in state assistance from recent years," said Moody's. According to the rating company, although the city still receives almost $12 billion in formula-based state aid, the state's allocation of its general aid to local governments dropped to zero in fiscal 2011 from $328 million in fiscal 2010 as the state cut costs to balance its budget.

Moody's rates New York City's general obligation bonds Aa2. Fitch Ratings and Standard & Poor's rate them AA.

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