New York City Mayor Eric Adams unveiled a $98.5 billion budget that employs a cautious spending approach combined with a record level of reserves.
Speaking at press conference in the Blue Room at City Hall on Wednesday, Adams issued his preliminary
“New spending of $536 million in fiscal 2022 and $926 million in fiscal 2023 in this budget is wholly offset by nearly $2 billion achieved within the PEG [Program to Eliminate the Gap]," he said. “Fiscal 2023 tax revenues reflect a $1.6 billion increase over the November plan, driven by better-than-expected personal and business income taxes, sales taxes, and transaction taxes. Tax revenue growth of $726 million in fiscal 2023 over the November plan is due to higher-than-expected property tax values.”
As the city economy slowly recovers from the COVID-19 Omicron variant, Adams implemented a PEG that has cut almost $2 billion in spending. This exceeds the 3% target set for most city-funded agency budgets in fiscal 2022 and 2023, the administration said, and helped close the $3 billion budget gap in fiscal 2023.
As part of the PEG, the Adams administration reduced city headcount by 3,200 in fiscal 2022 and 7,000 in fiscal 2023 by eliminating vacant positions and without layoffs.
The administration also removed $500 million in unidentified labor savings from the budget and from future plan years to more accurately reflect the city’s financial condition.
The budget increased reserves to a record high $6.1 billion, up $1 billion from fiscal 2022. There is $1 billion in the general reserve, $1 billion in the rainy day fund, $3.8 billion in the retiree health benefits trust and $250 million in the capital stabilization fund.
New York City’s job recovery was slowed substantially by the COVID-19 pandemic subsequent waves of variants; it continues to trail gains made by the state and country. Many
“We have recovered just 55% of the 933,000 jobs lost at the height of the pandemic. This lags behind the state, which has recovered 63%, with the U.S. at 84%,” Adams said. “This contributes to an unemployment rate of 8.8%, down from 20% at the peak of the first wave but still much higher than the state and country overall.” He said the city doesn’t expect to regain its pre-pandemic level of jobs until 2025.
Separately, former Lt. Gov Richard Ravitch said bringing back workers to the transit system is key to the city's health.
“I think the mayor’s proposed budget is a good step in the right direction, but it’s still going to have deficits,” said Thursday during a webinar on the city's finances held by the Volcker Alliance. "New York City will come back. I think it will take more time, but it will happen.”
But the city’s transit system, which is operated by the state, concerns him, especially as federal funds run out.
“The biggest concern is our subway system and our bus system, which is inadequately financed and the only way they can meet their obligations — and hopefully deal with an increasing ridership because right now their revenues are way off because of the decline in ridership — is to get a revenue stream enacted by the Legislature to create another source of borrowing. There is no other alternative. There’s no fairy godmother.”
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.
On Wednesday, the City Council took a wait-and-see approach to the process.
“As our city looks ahead to a post-pandemic recovery, we must strive to adopt a budget that promotes equity, health and safety for all New Yorkers,” Council Speaker Adrienne Adams and Finance Committee Chair Justin Brannan said in a joint statement.
“This is a promising start to the budget process and the Council looks forward to fulfilling its role in examining this preliminary budget through hearings and other efforts,” they said. “We as leaders have a responsibility to ensure that our fiscal year 2023 budget advances equity, fiscal responsibility, and a strong recovery for New York City.”
City Comptroller Brad Lander gave the preliminary budget a mixed review.
“The mayor has rightly sought to reduce agency headcount and I’m glad the budget does not rely on the illusory $500 million in labor savings,” he said in a statement. “However, the current plan does not include a credible effort to build up the long-term reserves the city needs, with only a scant addition in fiscal year 2023 and nothing in the remaining years of the plan. It remains urgent to codify deposits into the rainy day fund.”
State Comptroller Thomas DiNapoli agreed.
“New York City is still rebounding from the pandemic and is facing an uneven economic recovery. The city’s outlook has improved, a result of some good fortune and more proactive planning, but it can do more to prepare for ongoing uncertainty and boost its reserves,” he said in a statement.
“I have also called for the city to bolster its reserve levels. This budget takes a small step in that direction, enhancing the general reserve by $55 million in fiscal 2023, and still includes a planned $500 million deposit into its rainy-day fund,” he said. “More can be done as the fiscal year ends and the city’s budget surplus is likely to exceed current planned levels.”
Citizens Budget Commission President Andrew Rein said the preliminary budget was a good start.
"Mayor Eric Adams’ preliminary budget proposes important, welcome, and refreshing initial steps in the right direction, especially reducing unneeded vacant positions to realize recurring savings and removing the $500 million in specious labor savings — a victory for fiscal integrity,” he said in a statement.
“Still, to bolster New York’s competitiveness and ability to serve New Yorkers in the future, the city should take significant additional actions in the executive and adopted budgets to make government more efficient, stave off the looming fiscal cliffs, and save for the inevitable next downturn,” he said.
The Adams administration should identify additional agency and central function efficiency savings to include in the executive budget, he said, adding it is important the administration work with the unions to identify and implement efficiency savings during the upcoming collective bargaining negotiations.
“The preliminary budget is the beginning of the process. Many more steps should be taken in the executive and adopted budgets to address the city and federal fiscal cliffs, restructure to make government more efficient, and save for the inevitable next downturn," Rein said.
“Mayor Eric Adams' inaugural 2023 budget, with an expected $75.2 billion in funding that comes from city resources (as opposed to federal and state resources), represents a 2% increase in spending over this year's levels, well below inflation,” Nicole Gelinas, a senior fellow at the Manhattan Institute, said in a statement.
“The mayor clearly intends to keep control over spending, but yet he has not demonstrated in detail how he will do that, and, in fact, some of the mayor's proposals could result in the opposite, including eliminating a plan to achieve $500 million a year in labor savings,” she said. "New Yorkers must await further detail to see how and if the mayor can achieve his goal of fiscal responsibility.”
