NYC Comptroller Urges City Act Now To Bridge Future Budget Shortfalls
Real Estate In-Depth | August 4, 2020
NEW YORK—New York City Comptroller Scott M. Stringer released a report on Aug. 3 on New York City’s Fiscal Year 2021 Adopted Budget that found an overreliance on one-time actions in the adopted budget to close the $8.33-billion shortfall brought about by the economic crisis caused by the COVID-19 pandemic.
With significant budget gaps looming next year and beyond, and numerous risks and unknowns to contend with, Comptroller Stringer urged the de Blasio Administration to begin now to take steps to bring the city’s budget into sustainable balance.
“New York City is the epicenter of the unique economic, social and health crises we face in these challenging times. The COVID-19 pandemic is ravaging the City’s tax revenues, small businesses are sustaining massive losses, and skyrocketing unemployment is disproportionately harming young people and communities of color,” said Comptroller Stringer. “We must act swiftly to get the City’s revenues and spending back on track. Every City agency must examine its spending to determine what is working and what is not and target our resources toward people and communities most in need of our help.
He added that the “federal government must step up and deliver real relief to the nation’s economic engine, and we should look to those with the most to contribute more for our economic recovery. As our country and our city look toward reopening, we need urgent action to bring our budget into balance to protect our social safety net and the programs that serve the most vulnerable New Yorkers.”
Comptroller Stringer’s report shows:
• The Fiscal Year (FY) 2021 Adopted Budget totals $88.19 billion, which is $9.57 billion less than the modified FY 2020 budget, a drop of almost 10 percent.
• Revenues are $7.1 billion less than forecasted in the Preliminary Budget released in January, which, along with state budget actions, City Council initiatives, and additional agency expenditures, opened an $8.33-billion shortfall in the FY 2021 budget.
• To bridge the shortfall, the city put forward $2.83 billion in savings proposals, less than half of which have recurring outyear value.
• Non-recurring initiatives for FY 2021 include savings from closed or cancelled programs due to COVID-19 restrictions; non-recurring savings such as the $328 million reduction in NYPD overtime; and one-time revenues such as a $137 million rental payment from the Water Board.
The city is drawing down $2.75 billion of reserves to close the FY 2021 gap. The city will draw down $1.6 billion from the Retiree Health Benefits Trust to partially pay for FY 2021 retiree health benefits, and reduced budgeted reserves by $1.15 billion—leaving just $100 million in budgeted reserves for the year, the statutory minimum.
The city is also relying on yet-to-be-determined labor savings of $1 billion annually starting this fiscal year, as well as assuming no increases in the first two years of the next round of labor contracts.
The Comptroller’s Office’s analysis of the Budget and Financial Plan shows a budget risk of $543 million in FY 2021 and larger gaps in FY 2022 through FY 2024.
Comptroller Stringer also warned that there are additional risks to the adopted budget, including a failure by the federal government to provide adequate fiscal relief to state and local governments that could upend the State budget—and by extension, the city’s budget. New York State has warned that aid to localities could be cut by as much as 20% if Congress does not appropriate additional, unrestricted aid to state and local governments. Additionally, another surge of the COVID-19 virus could lead to more business shutdowns and stay-at-home orders that would negatively impact the City’s revenues.
Comptroller Stringer urges that with these risks, and a gap of as much as $4.8 billion in FY 2022, the city must act promptly to bring the city’s revenues and spending into sustainable balance.