Febraury 18, 2017
By Neal Tepel
New York, NY – “Our economy is strong, but with the pace of growth slowing and with uncertainty surrounding the Trump White House mounting, we have to prepare for whatever comes our way. I believe that we must prepare for the challenges ahead,” New York City Comptroller Scott M. Stringer said.
“Mayor De Blasio has presented a Preliminary Budget that contains a number of laudable new initiatives, which I support. Yet, as we face challenges ahead, we will have to grow our budget cushion and a more vigorous agency savings program will be necessary.”
The city has created 635,000 jobs since 2009, totaling a historic high of nearly 4.4 million jobs, and unemployment rates are down in all five boroughs. Over half of new jobs have been in industries such as retail, leisure and hospitality, and healthcare, where wages are generally low. Real earnings for high-income sectors saw dramatic rises between 2009-2015. Lower paid workers, in contrast, saw much smaller gains, with workers in the healthcare and education super-sector, who earn on average just $52,000, seeing no gains in real earnings at all.
This year and next, the Comptroller’s Office expects growth to be sustained at better than two percent, due to a predicted artificial stimulus through potential tax cuts and proposed infrastructure spending.
City relies on $7 billion annually in federal aid to help fund a wide range of city programs and services. Examples include 124,000 families who rely on HUD Section 8 vouchers, 770,000 low-income and elderly households who get federal assistance to keep their homes warm in winter, and 105,000 jobseekers who were served by City Workforce One centers last year.
Repealing the Affordable Care Act could have a devastating impact on 1.6 million newly enrolled New Yorkers and the NYC Health + Hospitals system. NYC Health + Hospitals is in the midst of a Transformation Plan to address budget gaps that reach $1.8 billion by 2021, which could be derailed by ACA repeal.
The optimal range for a budget cushion is between 12 percent and 18 percent of adjusted City expenditures. The City began fiscal year 2017 with a cushion of $9.6 billion, or 11 percent of spending.
As of the Preliminary Budget, the City would start 2018 with a cushion of 10 percent of spending – about $8.5 billion. An additional $1.7 billion would be required to reach the minimum 12% threshold.
Spending on citywide homeless services is projected to increase by $460 million over last year. Those dramatic rises are driven in part by the cost of commercial hotels, spending for which reached $102 million in calendar year 2016.
Comptroller’s Office is more optimistic in its tax revenue forecast than OMB’s. However, the assumption that the City will realize $731 million from the sale of taxi medallions may be optimistic, and the Preliminary budget continues to leave out the intercept of sales tax revenue imposed by the State last year to recapture savings from the 2014 refinancing of STAR-C bonds. The analysis also shows several areas where spending is likely underestimated, including overtime pay, homelessness, DOE’s Medicaid reimbursement claiming, and City support for NYC Health + Hospitals.