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March 12, 2013

DiNapoli: Challenges Remain For New York City Budget

New Data Shows Larger Wall Street Job Losses

New York City’s budget is balanced in the current fiscal year and Mayor Bloomberg has presented a balanced preliminary budget for fiscal year (FY) 2014, but a number of issues pose significant budget risks in the years ahead, according to a report released today by New York State Comptroller Thomas P. DiNapoli.

“New York City has successfully navigated through the Great Recession, but it still faces a number of fiscal challenges, including the loss of federal aid,” DiNapoli said. "In recent years, the city has relied heavily on reserves built up during the last economic expansion to help balance its budget, but those reserves are mostly depleted, leaving a smaller cushion to address new budgetary setbacks."

New York City’s financial plan projects out-year budget gaps of $2.4 billion for FY 2015 and $1.9 billion each for FYs 2016 and 2017. These estimates, however, do not reflect the impact of federal budget cuts, the potential cost of future labor agreements or the risk of further delays in the sale of additional taxi medallions. All of the municipal labor agreements have expired and some workers have been without an agreement for years. The city is counting on $1.5 billion in revenue over three years beginning in FY 2014 from the sale of taxi medallions, even though the sale is the subject of on-going litigation.

Revenue collections have not yet shown any discernible impact from Superstorm Sandy. There was a sharp drop in employment in October and November of 24,800 jobs, although all of the jobs were recovered over the next two months. The city assumes that federal aid will cover the $4.5 billion estimated cost of Superstorm Sandy, but federal budget cuts may reduce the amount of aid by an estimated $500 million.

Federal sequestration is also expected to reduce federal aid to New York City by about $200 million in federal fiscal year 2013, mostly for education and social service programs. The city will have to decide whether to substitute city funds for any loss in funding or to permit a reduction in services.

Wall Street profits from broker/dealer operations totaled $23.9 billion in 2012, a large increase over last year's $7.7 billion, and the Comptroller recently estimated that the cash bonus pool for financial industry employees in New York City grew by 8 percent in 2012. However, the Comptroller expects continued downsizing, at least in the near term.

Newly revised employment data indicates that job losses in the securities industry in New York City were much greater than previously reported. DiNapoli estimates that the industry lost 5,400 jobs over the past 17 months, more than half of the jobs gained during the first part of the recovery (9,700). While job growth has been strong in New York City – it has recovered 175 percent of the jobs lost during the recession – the securities industry has recovered only 15 percent of its job losses, half the share previously reported.

For a copy of the report, visit: http://www.osc.state.ny.us/osdc/rpt13-2013.pdf



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