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

State Offers Taxpayer-Funded Health Coverage to Unionized Home Care Workers

In a new subsidy for the health-care union 1199 SEIU, the Hochul administration is allowing the union's benefit fund for home care aides to shift some members into taxpayer-funded health coverage through the Essential Plan. Read More

A Closer Look at $4 Billion in State Capital Grants to Health Providers

[Editor's note: This post was corrected after it came to light that records supplied by the Health Department gave wrong addresses for 44 grant recipients. The statistics and tables below were updated on July 18.] Read More

NY’s net taxpayer migration loss dropped a bit in 2021-22, latest IRS data show

The outflow of New York taxpayers to the rest of the country subsided from the previous year's record high during the second tax-filing period following the March 2020 COVID-19 outbreak, according to the latest (IRS). Read More

Hochul’s Pandemic Study Is a $4.3 Million Flop

The newly released study of New York's coronavirus pandemic response falls far short of what Governor Hochul promised – and the state urgently needs – in the aftermath of its worst natural disaster in modern history. Read More

NY’s biggest public pension fund gained nearly 12% in FY 2024

Rebounding from its biggest loss since the Global Financial Crisis, New York's Common Retirement Fund realized a strong investment gain of 11.55 percent in fiscal year 2024, state Comptroller Thomas DiNapoli announced. The Fund, which now stands just below $268 billion, supports pensions paid to members of the New York State and Local Retirement System (NYSLRS). Read More

82 Questions Hochul’s Pandemic Report Should Answer

This is the month when New Yorkers are due to finally receive an official report on the state's response to the Covid-19 pandemic, one of the deadliest disasters in state history. T Read More

The Real Lack of Courage Driving NYC Congestion Pricing

Governor Hochul is taking heat after postponing the state’s years-old plan to charge drivers to enter lower Manhattan. As critics slam her for lacking “political courage,” it’s an appropriate time to examine some of the underlying issues that congestion pricing was meant to indirectly mitigate—because many if not most advocates were afraid to touch those issues themselves. And if congestion pricing proponents are to be taken at their word about their concern for MTA finances, or traffic, or air quality, they must show some of the same courage they’ve accused the governor of lacking. Read More

To Encourage Recycling, Pols Move To Trash The Legislature

New York state lawmakers in recent years have surrendered some of their policymaking and taxing powers to the executive branch. With the 2024 legislative session coming to close, they’re poised to go even further and turn those powers over to an organization outside of government entirely. Read More