New York law imposes a statutory interest rate of 9 percent on money judgments. For years it has been an artificially high rate that can discourage losing parties from defending their rights in lengthy appeals. Adopting a more neutral statutory interest rate—like the rate under federal law—would address a distorting factor in the cost-benefit analysis of pursuing a meritorious appeal in the Empire State.

Under federal law (28 U.S.C. § 1961), post-judgment interest on a money judgment entered by a district court in a civil case is set “at a rate equal to the weekly average 1-year constant maturity Treasury yield, as published by the Board of Governors of the Federal Reserve System, for the calendar week preceding the date of the judgment.” 

New York’s rate was increased from 6 percent to 9 percent in 1981. And it made sense at the time. The governor signed the bill into law during a week when the 1-year constant maturity Treasury yield averaged 14.7 percent. 

Legislators in 1981 reasoned that New York’s excessively low rate encouraged dilatory litigation tactics. They argued that defendants had incentives to delay since they could earn a higher interest rate in the market than the lower statutory rate being assessed against them. Today, the reverse is true. New York’s high rate weighs in favor of parties settling cases they might otherwise defend. 

This budget season Governor Hochul carried on a tradition started by her predecessor. Every year since 2017 the governor has introduced the federal-model statutory interest rate in a budget bill. Every year the provision has been removed in the one-house budget proposals out of the Senate and Assembly. 

That would be fair enough if the Legislature made it a consistent practice to keep non-budgetary policy matters out of budget bills. Yet the houses also eliminated the Governor’s proposal to reduce the statutory interest rate for accrued claims and judgments against the state from 9 percent to the federal rate—something that does have a fiscal effect. 

A recent case in Manhattan shows the effect of New York’s 9 percent statutory interest rate when compared to the federal rate. 

Attorney General Letitia James took a victory lap last month on her $464 million civil judgment against former President Donald Trump and his co-defendants. She touted the $114,553.04 in post-judgment interest accruing daily. Trump’s portion alone is $111,678.  

The federal rate that would apply to Trump’s judgment would be 4.94 percent, or $61,299 per day. A state court judgment under New York’s statutory rate is costing Trump more than $50,000 per day extra.

The current 9 percent rate penalizes individuals for living or doing business in New York. The Legislature recognized as much when it lowered the rate for consumer debt to 2 percent in 2021.  

The federal rate is not perfect. There are arguments to be made around inflation and compound interest and the time value of money, not to mention risk. And interest rates have risen in the past few years such that New York’s statutory rate is not far off the current prime rate (a rate used by banks as the basis for borrowing and lending) of 8.5 percent. 

Yet that’s not how New York’s rate compared from the fall of 2008 when the 1-year constant maturity Treasury yield fell below 2 percent and did not rise above it until January 2018. The yield then did not rise above 3 percent until June 2022. For most of time between the fall of 2008 and January 2018 the prime rate sat at 3.25 percent and then rose to 4.5 percent. 

The statutory interest rate should be as close to neutral as possible in a party’s decision whether to litigate or to settle, or to engage in business or activity in New York at all.  

The Legislature should pass a stand-alone bill adopting a floating rate statutory rate. It should also eliminate the 2 percent rate on consumer debt that can chill the consumer credit market. It should further pass legislation placing a floating rate on accrued claims and judgments against the state and local governments and public bodies.  

Assemblymember John McDonald sponsors a bill that addresses the static 9 percent rate on the government side of the equation. It needs a companion in the Senate and an amendment to address the statutory rate for private parties. 

An interest rate pegged to the Treasury yield provides a discount to the prime rate for consumers and a reasonable rate for all others. And parties to contracts may negotiate a higher rate. A floating rate would better reflect market forces. And it would save New Yorkers from artificial incentives to settle or delay litigation from a statutory interest rate too far out of sync with market rates. 

About the Author

Cam Macdonald

Cameron J. “Cam” Macdonald is an Adjunct Fellow with the Empire Center and Executive Director and General Counsel for the Government Justice Center.

Read more by Cam Macdonald

You may also like

One of New York’s Biggest Medicaid Contractors Is Quietly Acquiring a Competitor

Author's note: This post has been updated to correct an error in the second paragraph. As state lawmakers debate the future of Medicaid home care, one of the program's bigg Read More

The Union Gave Them the Wrong Data. The Pols Cited It Anyway.

The episode shows the extent to which New York elected officials fail to question the state’s public employee unions—or look at data themselves. Read More

New York’s Home Health Workforce Jumped by 12 Percent in One Year

New York's home health workforce has continued its pattern of extraordinary growth, increasing by 62,000 jobs or 12 percent in a single year, according to newly released data from the U.S. Bureau of Labor Statistics.  Read More

While New York’s Medicaid Budget Soared, Public Health Funding Languished

Four years after a devastating pandemic, the state has made no major investment to repair or improve its public health defenses. While funding for Medicaid over the past four years Read More

Unions are pressing bogus arguments for blowing up NY’s public pension debts

New York's public employee unions are arguing, without evidence, that state lawmakers need to retroactively sweeten the pensions of workers who have been on the job for more than a decade. In fact, state and federal data show why state lawmakers shouldn't. Read More

A Medicaid Grant Recipient Sponsors a Pro-Hochul Publicity Campaign

While much of the health-care industry is attacking Governor Hochul's Medicaid budget, at least one organization is rallying to her side: Somos Community Care, a politically active medical group in the Bronx that recently r Read More

New Jersey’s Pandemic Report Shines Harsh Light on a New York Scandal

A recently published independent review of New Jersey's pandemic response holds lessons for New York on at least two levels. First, it marked the only serious attempt by any state t Read More

Senate, Assembly Budget Plans Include $4B Pension Giveaway

A little-noticed provision in lawmakers’ budget proposals would also be the most costly: their proposal to change state retirement rules would slam New York taxpayers with more than $4 billion in new debt, and immediately drive up pension costs, by retroactively sweetening the pension benefits of public employees. Read More