New York State’s Financial Control Board on Wednesday voted to remain in "sunset mode" for a 33rd straight year, saying New York City’s budget is in balance and its economy remains strong.
The control board, which was created by the state legislature during the city’s financial crises in the 1970s, voted unanimously at its annual meeting to certify the city’s financial house is in order.
What that means is that the board will continue to have no actual power over the city, but rather will act as a fiscal monitor. The board issues quarterly reports on the city's financial plan and its members meet with the mayor and the governor's office on a regular basis.
From 1975 to 1986, it controlled the city's finances, bond issuance and large contracts. While those powers were sunset in 1986, by law the board can re-activate its control over the city if it finds any budgetary red flags, such as the city running an operating deficit of more than $100 million or it defaults on its note or bonds.
Among those attending Wednesday’s meeting at Gov. Andrew Cuomo’s offices in midtown Manhattan were state Budget Director Robert Mujica, state Comptroller Thomas DiNapoli, NYC Mayor Bill De Blasio, city Comptroller Scott Stringer, city First Deputy Mayor Dean Fuleihan, city Office of Management and Budget Director Melanie Hartzog, city Deputy Comptroller Preston Niblack and the control board’s Acting Director Jeffrey Sommer, as well as several members representing the public.
In June, the New York City Council and Mayor Bill de Blasio reached agreement on a final fiscal year 2020 budget of $92.8 billion. The final budget was larger than the $92.5 billion executive budget released in April and the $92.2 billion preliminary budget unveiled in February. The final fiscal 2019 budget was $89.2 billion.
On Wednesday, De Blasio spoke to the board about the economic progress the city has made in the past year.
“We are focused on two areas, growing our savings and increasing our already significant reserves,” de Blasio said.
“I’m proud to say these efforts haven’t gone unnoticed. Our consistent focus on savings and reserves has been routinely praised by fiscal monitors and rating agencies,” he said. “In March, Moody’s Investors Service upgraded the city’s GO bond rating to Aa1, the highest level ever achieved by the city, and our first ratings increase in nearly a decade. In making the upgrade, Moody cited our strong financial management and improvements in our financial position that reflect a greater capacity to withstand an economic downturn. So that’s the level of prudent fiscal management we’ve always believed was the foundation to a progressive government.”
City Comptroller
"I am pleased to report today that our city’s economy and fiscal condition continued strong over the past fiscal year and I congratulate the Mayor and the City Council on a balanced Fiscal Year 2020 budget that funds many important priorities for our city," Stringer said. “Among other things, the economy’s strength has allowed our city to enjoy low borrowing costs. In collaboration with the Mayor’s Office of Management and Budget, my office has achieved nearly $4.5 billion in savings from bond refinancings since 2014 — building up crucial resources at a time when every penny counts."
He added that while the city's economy is strong now, "we don't have unlimited resources, which means we need to manage our budget with care today for the long-run benefit of our city. We must find the necessary savings to ensure that any growth in spending is aligned with actions to strengthen the foundation of our city for future generations of New Yorkers.”
Stringer also cited unaudited preliminary returns for the city’s pension funds.
“I am also happy to report today, that despite a year in which the markets were characterized by volatility, trade conflicts, and instability in the technology sector, our pension funds finished the year up 7.24% — above our actuarial target of 7.0%,” he said. “Ten years after the rock-bottom of the financial crisis, our funds are stronger than ever. That’s due to the strong partnership between the Trustees of the City Retirement Systems, the Mayor’s office, and our own Bureau of Asset Management. It’s our most important job.”
State Comptroller
“New York City’s economy continues to expand, but the risk of an economic setback should not be overlooked,” DiNapoli said. “The city boosted its reserves in FY 2020, a practice it should continue given the threats on the horizon. The city should also step up its efforts to identify savings opportunities to help close projected budget gaps.”
DiNapoli said the strength of the local economy has made balancing the city’s budget easier. Since 2009, the city has added 820,400 jobs, bringing employment to a record level of 4.55 million in 2018 and reducing the annual unemployment rate to 4.1%, the lowest on record. Strong job growth has continued this year and the unemployment rate remains near its record low. The city is on track to add 94,400 jobs in 2019, a faster pace than last year.
However, the comptroller said that the current job expansion is in its 10th year and changes in the business cycle are inevitable. “While the financial plan assumes that the city’s economy will slow, it does not anticipate a recession,” he said.
DiNapoli also pointed to possible risks from Washington or Albany.
"Other issues facing the city include the potential for state or federal budget cuts during the financial plan period ending in FY 2023. Although the immediate risk of federal budget cuts has been reduced by the recent two-year budget agreement, there still remains the potential for cuts during the latter part of the financial plan period given the large and growing federal budget deficit.,” he said.
The city is one of the largest issuers of municipal debt in the United States. As of March 31, the city had nearly $38 billion of general obligation (Aa1/A/A) debt outstanding. That's not counting the various city authorities which issue debt.
The NYC Transitional Finance Authority has around $37 billion of debt outstanding while the NYC Municipal Water Finance Authority has about $30 billion. The TFA’s debt consists of future tax secured senior bonds (Aaa/AAA/AAA), future tax-secured subordinate bonds (Aa1/AAA/AAA) and building aid revenue bonds (Aa2/AA/AA). The MWFA’s debt consists of general resolution bonds (A1/AAA/AA+) and second general resolution bonds (Aa1/AA+/AA+).
