LEGISLATIVE AFFAIRS: Spending on the New York City Budget Surges 20%
Philip Weiden | December 2017
Depending on your outlook, New York City government either has a spending problem or a revenue problem. In the last four years the New York City budget has gone from around $72.7 billion to approximately $86 billion. A good economy has caused revenues to the city government to surge, but a downturn in the economy would likely reverse that surge.
Many initiatives could slow down in view of the federal repeal of the state and local tax deduction for income and property. Another issue always on the horizon is a recession. It has been nine years since the last recession, which is a longer than the average time span. The mayor and the City Council may ultimately have to choose to raise property and/or income taxes.
The city currently has $1.2 billion in reserves, which may sound like a lot of money, but those funds could evaporate very quickly in a downturn. If the SALT deductions are repealed there will be pressure from local residents not to raise taxes. In this event either of two things may happen, taxes have to go up for spending or programs have to be cut.
Hiring additional personnel along with the concomitant costs for pension contributions and healthcare costs creates long term fiscal issues which neither New York State nor New York City have dealt with in the past resulting in layoffs when downturns in the economy occur.
The Mayor has brought financial certainty with union contracts all negotiated in his first two years in office which in turn has brought predictability to the financial well being of the city but new initiatives that the city has taken on will cost more money.
The key is to prepare now for a downturn or a massive budget cut at the federal and state levels, thus ensuring any downturn is mild. Finally with the state and local tax deduction in jeopardy, all levels of government must think of new ways to create revenue possibly through public private partnerships.
Editor’s Note: The statistics in this article are from the Wall Street Journal. https://www.wsj.com/articles/nyc-spending-balloons-under-bill-de-blasios-administration-1512406929