New York City Mayor Eric Adams released a balanced $109.4 billion preliminary budget for fiscal 2025 that keeps a near-record level of reserves.
The city faced a $7.1 billion budget gap due to the growing migrant crisis, declining federal COVID-19 stimulus funding, rising expenses from labor contracts and slowing tax revenue growth.
The Adams administration implemented a citywide hiring freeze and created a
These actions helped balance the budget and stabilize the city's financial position without layoffs, tax hikes or major cuts to city services, Adams said.
The preliminary fiscal 2025 budget includes a near-record $8.2 billion in reserves, including $1.2 billion in the general reserve, $4.8 billion in the Retiree Health Benefits Trust Fund, $250 million in the Capital Stabilization Reserve and $1.96 billion in the rainy-day fund.
"Safeguarding our city's recovery and being fiscally responsible includes maintaining budget reserves to shelter us from the unexpected. In the preliminary budget we have near-record reserves of $8.2 billion," he said. "Some have called on us to use our rainy-day fund to cover asylum seeker needs. We do not agree and neither do our city and state comptrollers as well as the bond rating agencies and fiscal experts."
"Our rainy-day fund was created to address our needs during a recession. We should not use a fixed pot of money to pay for ongoing expenses," he added.
"I was pleased to see that the mayor increased funding to address some of the fiscal cliffs that my office has previously identified and that City Hall is not proposing to tap into long-term reserves," said city Comptroller Brand Lander.
"Other long-term budget issues, like the growing cost of uniformed overtime and claims against the city, remain unaddressed," Lander said. "While I was grateful to see key programs like Summer Rising and sanitation services restored, critical services, such as [the City University of New York], still face painful cuts and agency vacancies and attrition continue to jeopardize key city capacities."
Projected tax revenues exceed those in the November financial plan tax by $1.3 billion in fiscal 2024 and $1.6 billion in fiscal 2025, due to better-than-anticipated economic performance in 2023.
The city also reduced costs associated with the migrant crisis from $12.25 billion to $10.6 billion from fiscal 2023 through fiscal 2025, generating about $1.7 billion in gap-closing savings in fiscal 2024 and fiscal 2025.
Outyear gaps are now estimated at $5.2 billion in fiscal 2026, $5.1 billion in fiscal 2027 and $6.0 billion in fiscal 2028.
The Citizens Budget Commission said caution was the watchword going forward.
"While Mayor Adams leveraged strong revenues and wisely implemented two rounds of PEG savings to balance the preliminary budget, many more hard choices are still needed to stave off a fiscal reckoning," said CBC President Andrew Rein.
"Future budget gaps ranging from $5 to $6 billion understate the magnitude of the city's remaining fiscal problem," Rein said. "While this budget starts to increase transparency and accuracy by including some previously omitted funding for ongoing programs — a welcome and important start — it continues to underbudget overtime and still does not fund or explicitly end many recurring programs that are not budgeted in the future —perpetuating large fiscal cliffs."
Adams said the city has effectively managed the migrant influx without substantial federal or state aid. So far, the city has provided care for more than 170,700 asylum seekers, with over 68,000 still in the city's care.
Earlier Tuesday, Gov. Kath Hochul unveiled her fiscal 2025 executive budget, which includes $2.4 billion for the city to provide basic services to migrants and help with their resettlement.
Now that the preliminary budget has been released, the 51-member City Council will hold a series of public hearings on the plan through March.
The mayor will release his revised executive budget by the end of April; the Council will issue its response and then hold a second round of hearings in May, after which they will negotiate adjustments with the mayor and the Office of Management and Budget.
By law, the council must vote on a balanced budget by July 1.
"The preliminary budget begins the negotiations whose outcome will have a major impact on New York's and New Yorkers' future," Rein said. "Some public officials, advocates, and others will point to the savings plans and strong revenue already announced to avoid the necessary additional hard choices. That would not be wise. More is needed to align recurring expenditures for all programs and close outyear gaps, including the fiscal cliffs."
The city should further restrain spending by prioritizing programs and increasing efficiency, he said, "and all who are interested in a strong future New York should engage and support this effort."
The city is one of the biggest issuers of municipal bonds in the nation. In the second quarter of fiscal 2023, the city had about $39.3 billion of GOs outstanding.
The city's GOs are rated Aa1 by Moody's Investors Service, AA by S&P Global Ratings and Fitch Ratings and AA-plus by Kroll Bond Rating Agency.
Separately, the city's Transitional Finance Authority has about $45.1 billion of debt outstanding as of the second quarter of fiscal 2023, while the Municipal Water Finance Authority has around $32.3 billion of outstanding debt.
State Comptroller Thomas DiNapoli said the preliminary budget "shows the pathway to budgetary balance can be achieved through targeted cost savings and continued economic growth, which requires vigilant monitoring of finances and management of operations."
But, he said, the city must remain vigilant.
"Despite these positive developments, the city's fiscal position remains tenuous," he said. "Higher revenue allowed the city to take smaller agency savings in this round and to restore earlier reductions. However, the size and duration of restorations and new agency spending, including to address
He added that "continuing the delicate balance of reducing the pace of cost growth in a way that does not hurt the city's economy should remain a fundamental goal of the city's budget management."
Separately Tuesday, Adams announced that a newly formed independent budget advisory panel is helping the city identify ways to protect services, achieve efficiencies and cost savings and maximize federal and state aid.
"Throughout New York City history, those who love and care about our city's future have come together during moments of crisis to help be a part of the change. The formation of this independent Budget Advisory Panel is one of those moments," Adams said.
At the request of the Adams administration, the Partnership for New York City put together a panel consisting of independent experts. Members have a broad range of experience in federal, state and city government as well as in the private sector.
"This esteemed group of independent, cross-sector experts have come together with one goal: continue to strengthen the city's financial position and deliver on the needs of working-class New Yorkers," Adams said.
The panel has been meeting over the past six weeks with current and former city, state, and federal officials to review data on the city's current fiscal situation and consider the range of opportunities for reducing gaps and strengthening the city budget.
While the panel had no input on the fiscal 2025 preliminary budget, it was supportive of the decisions made and will have further comment during budget negotiations.
When the panel has relevant findings and recommendations, they will be shared with City Hall and the public.
Members include Antonio Weiss — an investor at SSW Partners LP, a trustee of the Citizens Budget Commission, and a fellow at the Harvard University John F. Kennedy School of Government — who served as counselor to the Secretary of the Treasury, where he led the domestic finance department.
Adam Blumenthal, founder and chairman of Blue Wolf Capital Partners, served as NYC's first deputy comptroller and chief investment officer between 2002 and 2005.
Abby Joseph Cohen, a professor at Columbia Business School, is a former partner and chief U.S. investment strategist at Goldman Sachs. She chairs the steering committee of the Jacobs-Technion Innovation Center at Cornell Tech Roosevelt Island and was previously on the White House Innovation Advisory Board. She is a member of the New York State Assembly's Board of Economic Advisors.
Carol O'Cleireacain served as budget director and commissioner of the NYC Department of Finance under Mayor David Dinkins. She also served as Detroit's post-bankruptcy deputy mayor for economic policy, planning and strategy, as well as chief economist at District Council 37 American Federation of State, County and Municipal Employees. She is now an adjunct professor at Columbia's School of International and Public Affairs and a member of the Council on Foreign Relations.
Martha E. Stark was the commissioner of the NYC Department of Finance. She previously served as a White House Fellow at the U.S. State Department and a board member of the Lambda Legal Defense and Education Fund. Stark is a professor at New York University Wagner Graduate School of Public Service and a life trustee of the NYU Law School Foundation Board.
Robert Steel was New York City's deputy mayor for economic development under Mayor Michael Bloomberg. Steel also served as U.S. Treasury undersecretary for domestic finance, CEO of the Wachovia Corp. and a partner at Goldman Sachs. Currently, he is a partner and vice chairman of Perella Weinberg Partners.
