Higher tax revenue forecasts and billions in savings on debt service and pension contributions have helped New York City close its 2016 fiscal year budget gap and narrow the out-year budget gaps, according to an analysis of the city’s financial plan released today by New York State Comptroller Thomas P. DiNapoli.
“New York City’s budget outlook has improved with the economy, but the possibility of an economic setback increases with each year,” DiNapoli said. “To his credit, Mayor de Blasio has taken steps to increase the city’s reserves, which would cushion the impact of an economic downturn.”
The city’s revised financial plan released in February projects budget gaps of $1 billion in FY 2017, $1.4 billion in FY 2018 and $2.1 billion in FY 2019. These gaps are relatively small, ranging from 1.8 percent to 3.3 percent of city fund revenues, and the general reserve totals $750 million in those years.
New York City’s economic growth has been strong in recent years, driven by high levels of job creation, a booming tourism industry and strong real estate markets. The city has added 425,000 jobs since the end of 2009 and employment now totals a record 4.1 million jobs. During the current fiscal year, the city has raised its tax revenue forecast for fiscal years 2015 through 2018 by more than $4.5 billion and has reduced its forecasts for debt service and pension contributions by a total of $3.2 billion.
The city has reached new labor agreements with more than three-quarters of its workforce. The city also reports that it is on track to achieve the health insurance savings targets for fiscal years 2015 ($400 million) and 2016 ($700 million) under an agreement with the Municipal Labor Committee, but there has not yet been agreement on the specific proposals to achieve the savings.
DiNapoli estimates that city-funded spending will increase by 3.4 percent in FY 2015 and by a similar amount in FY 2016. Mayor de Blasio has also proposed increasing the city’s ten-year capital program by $14 billion (26 percent) to better reflect recent levels of capital investment, with more than two-thirds of the increase focused in education and housing.
DiNapoli’s report notes a few areas of concern. The Federal Reserve has begun to unwind the monetary policies that have boosted job growth. So far, the city has experienced five years of job growth and the city assumes that growth will last another five years, which would be the longest expansion in 60 years.
The Health and Hospitals Corporation (HHC) and the New York City Housing Authority are still dealing with challenges, which have required additional city assistance. For example, the city funded $300 million of the HHC’s financial obligations in FY 2013, including debt service on city bonds issued on the HHC’s behalf and the cost of medical malpractice.
For a copy of the complete report, see: Review of the Financial Plan of the City of New York.