Two New York budget watchdogs testified before the City Council's Finance Committee on Monday listing the good, the bad and the worrisome about the current state of the Big Apple's finances.
The
Testifying before the Council's Finance Committee on Monday about the city's
She noted, however, a surplus could be used to cover increased spending in the current fiscal year instead of prepaying next year's expenses.
The IBO also sees out-year budget gaps growing to $7.2 billion in fiscal 2026 and $6.6 billion in fiscal 2027, larger than the OMB's forecasts of shortages of $6.5 billion and $6.4 billion, respectively.
Chafee said while the city faces major budget challenges, the local economy continues to rebound from the COVID-19 pandemic.
"While not dramatically different than our projections in May, the national economic outlook has strengthened somewhat since then, with stronger GDP growth driven by sustained consumer spending, even amidst high interest rates, which are contributing to falling inflation," she said.
However, substantial risks to both the national and local economy remain, Chafee said.
OMB has projected the cost of care and shelter for an ever increasing number of migrants arriving in the city at
Also testifying at Monday's hearing was Ana Champeny, vice president for research at the
"New York City's fiscal health is extremely precarious," she said. "I want to be very clear. The budget problems are real and large. The choices made in the coming months will determine whether the city emerges as fiscally stable and competitive or risks both its ability to serve New Yorkers in need and its attractiveness to residents and businesses."
She said the city will soon face some hard choices.
"The city cannot provide everything to everyone. But it can thrive and help our most in-need neighbors if it prioritizes key services, relentlessly manages them to get results and operates effectively and efficiently," Champeny said. "It is not the time to raise taxes, which would weaken New York City's competitiveness, or dip into reserves, which would weaken the city's ability to withstand any future recession."
She noted city's budget was pressured by costs associated with the migrant crisis.
"The rapid and persistent influx of migrants and asylum seekers has come with an immense, unanticipated fiscal cost," Champeny said.
But, she noted, these costs are just part of the problem, responsible for about half of the CBC's estimated budget gap.
"The rest of the gap is due to short-sighted choices — choices, not external events — to increase recurring spending without the support of recurring revenues, predictably leading to the city's current situation."
Champeny said "temporary federal COVID aid was used to support and expand recurring programs that will be unfunded once the aid is depleted — the federal fiscal cliff."
The city's temporary personal income and business tax revenue surge was used to expand services, she added.
"But as the economy normalizes, the money is not recurring," Champeny said. "This city fiscal cliff is more than twice as large as the federal cliff."
The recent collective bargaining agreements with the city's unions, "while providing reasonable raises, did not include any offsetting productivity increases to help pay the $16 billion in added costs
While the city's financial plan shows a $7.1 billion gap for fiscal 2025, she said, it doesn't include the impacts of the fiscal cliffs, or other areas that the city regularly underbudgets.
"Adding these brings the gap to a more accurate $10.6 billion, a significant shortfall even if tax revenues modestly exceed the forecast or migrant costs are overestimated," she said.
The City Council released its
Speaker Adrienne Adams said Monday Mayor Eric Adams' administration has solely attributed the budget challenges on the arrival of thousands of migrants, something she refutes.
In addition to the asylum seekers, she said, many factors combine to create the out-year gaps, including the end of federal COVID aid, a slowing economy, commercial office vacancies, weaker home sales and "under-budgeted costs."
"Despite the resilience of our national and local economies, the Council's economic and tax revenue forecast released yesterday is projecting that the city is expected to enter a period of slower tax revenue growth. The forecast anticipates tax revenue to decline in FY24, which has only happened three times over the past 40 years," Adams said.
"The forecast anticipates tax revenue to decline in fiscal 2024, which has only happened three times over the past 40 years," she said. "All of this makes clear that the city is facing tough economic headwinds in the coming years that we must confront."
