DiNapoli Says NYC’s Finances Remain Strong
The city projects budget gaps of $3.3 billion in Fiscal Year 2020, $2.9 billion in Fiscal Year 2021 and $2.3 billion in Fiscal Year 2022.
NEW YORK CITY—New York State Comptroller Thomas DiNapoli says that New York City’s economy and finances are strong, but the city should continue to bolster reserves for future risks to help fill anticipated budget deficits in coming years.
The comptroller’s report notes that the city’s economy is on pace to add more than 72,000 jobs this year. In addition, the city’s unemployment rate at 4.2% is at the lowest level in 42 years.
“New York City’s economy is robust and the fiscal year 2019 budget is balanced under current conditions,” DiNapoli says. “However, the out-year gaps have grown and there are risks that could make closing them more difficult. The city has increased its reserves and should continue to do so given the threats on the horizon.”
The city’s four-year financial plan, released in June, projects a surplus of nearly $4.6 billion in FY 2018, the largest in 10 years. The surplus, which was used to balance the FY 2019 budget, resulted mostly from a reallocation of unneeded reserves and higher tax revenues, the report notes.
Tax receipts exceeded the city’s forecast at the beginning of Fiscal Year 2018 by $2.2 billion, driven by a 15% increase in higher personal income tax collections. in Fiscal Year 2018 and collections exceeded the city’s initial forecast by $1.5 billion.
Most of the unanticipated revenue resulted from conditions that are not expected to recur this fiscal year, although collections are still likely to exceed the city’s conservative forecast, the State Comptroller notes.
The city projects budget gaps of $3.3 billion in Fiscal Year 2020, $2.9 billion in Fiscal Year 2021 and $2.3 billion in Fiscal Year 2022. The city’s financial plan includes reserves of nearly $1.4 billion in Fiscal Year 2019 and $1.25 billion in subsequent years, which could be used to help close the projected gaps.
The largest state action requires the city to match the state’s contribution of $418 million to the Metropolitan Transportation Authority’s Subway Action Plan. How the MTA’s next five-year capital program is funded could also impact the city’s financial plan.
The problems with the New York City Housing Authority was also included in the report. The State Comptroller’s report states that “despite commitments from the state and the city to increase funding, NYCHA’s five-year capital program addresses just a fraction of its estimated $32 billion in capital needs during that period.” The report also indicated that the city’s Health and Hospitals Corporation “also faces serious challenges.”
The report detailed the fiscal impacts of union contracts on the city budget. Since the release of its financial plan, the city reached a tentative labor agreement with District Council 37 and also announced an agreement with the Municipal Labor Committee to generate $1.7 billion in health insurance savings during the financial plan period to help fund the 2017-2021 round of bargaining.
If the economic terms of the tentative agreement with District Council 37 were applied to the entire work force as the city assumes, the FY 2020 budget gap would increase by more than $700 million to $4 billion even after taking into account anticipated health insurance savings, the report states.
Looking ahead, the report theorizes, “Although the current economic expansion shows no signs of weakening after eight years of growth, rising trade tensions or some unforeseen development could trigger a setback, complicating efforts to balance the budget.”
The report also stressed that the city’s financial plan does not reflect the potential for future federal or state budget cuts. “Growing federal deficits, which may reach $1 trillion by 2019, will likely increase pressure on Congress to cut entitlement and other federal programs on which the city and the state rely,” the report states.