City’s Fiscal Picture Improves Short Term, Significant

Risks Lie Ahead: DiNapoli

tives, according to a report released ursday by State Comptroller Tom DiNapoli.

DiNapoli’s o ce assumes that a number of the scal risks the city currently faces will continue, increasing the planned budget gap to about $8.9 billion in FY 2025 and $13.9 billion in FY 2027 (18 percent of city-fund revenues), even when adjusting for stronger revenue collections.

e city continues to face uncertainty over the national economy and its impact on nancial markets, its own lagging recovery and the costs associated with asylum seekers. ese scal risks remain di cult to quantify because they are not fully reected in current budget gures and are likely to increase the city’s budget gaps in the future.

By Forum Sta

e City’s $104.8 billion preliminary Fiscal Year 2024 budget has bene ed from be er-than-projected revenue collections, the reallocation of unused federal pandemic relief funds, and savings initia- e city’s recent contract se lement with the District Council 37 union gives clarity to collective bargaining costs, which had been an area of budgetary risk in its initial nancial plan. If it is rati ed and sets a pa ern for other labor agreements, total labor costs would increase by $4.7 billion in FY 2027 and will likely be higher therea er when fully annualized. e FY 2024 budget would continue to phase out federal pandemic aid, which is projected to decline from its peak of about $10 billion in FY 2022 to $2.4 billion in FY 2024. e city will likely have to provide its own funding for new or expanded pandemic-era services such as mental health programming, enhanced rental- and food-related income supports and access to legal counsel, if it intends on continuing those services. e mayor and City Council have also suggested new programs since the release of the January nancial plan that could create new scal cli s and require additional funding. e city assumes budget gaps will reach $3.2 billion in FY 2025 and grow to nearly $6.5 billion in FY 2027. As a share of city fund revenues, the remaining out-year gaps projected by the city would average 6.3 percent, the highest level at this point in the budget cycle since FY 2012.

Other risks, in addition to the in ux of asylum seekers and collective bargaining costs, include higher-than-projected costs for social services, education and operating subsidies to the Metropolitan Trans - portation Authority. ese scal concerns do not include the impact of the proposed state budget.

DiNapoli’s report notes growth forecasts for the nation’s economy, which are linked to the performance of the city’snancial sector, remain troublesome and numerous markers suggest a continued economic slowdown is likely nationally. e city gained jobs at a greater rate in 2022 than the country, but its unemployment rate still lags the nation (5.8 percent vs. 3.5 percent as of December).

If tax revenues do not exceed projections and other sources of funding are not made available to fund existing needs, the city may have to build on its recent costsavings e orts. Much of the savings in FY 2024 and on a recurring basis are associated with reducing head count. While these savings have helped the city’s scal picture, questions over the delivery of services have emerged. e city must take care to balance any additional savings made through staing changes with the risk of deteriorating core services and providing timely aid to those in need.