New York City’s Budget Faces $2 Billion Risks, State Comptroller Says

(Bloomberg) -- New York City’s fiscal 2022 budget faces risks of $2.2 billion due to optimistic assumptions for education aid and labor savings that haven’t materialized, state Comptroller Thomas DiNapoli said.

The largest U.S. city, and epicenter of the cornavirus pandemic in April, is facing a $3.8 billion deficit for the budget year beginning July 1. The gap may grow to $6 billion because the city is assuming state funding for schools will increase by more than $1 billion even as it’s facing $8.7 billion deficit and because officials haven’t reached a collective bargaining agreement with unions to find $1 billion in savings, DiNapoli said in a report on New York City’s financial plan.

“The city has managed gaps of this magnitude in the past. But there are risks that could greatly increase the size of the gaps, and the city has not yet released a contingency plan,’” the report said. “A lack of federal aid to New York State would necessitate reductions in local assistance, which could have significant adverse impacts on the city’s budget.”

Through October, New York City has recovered just 37% of the 944,100 jobs lost in March and April, when officials imposed an economic shutdown on non-essential businesses, crushing tourism, restaurants and small businesses. While states have begun administering coronavirus vaccines, it could take months for most people to get it. Meanwhile, the city faces a resurgence of the virus, with winter weather and the holiday season likely to increase the spread.

The $900 billion pandemic stimulus package that Congress passed Monday night doesn’t provide direct aid to states. It does include $4 billion for the Metropolitan Transportation Authority, allowing the nation’s biggest mass-transit system to avoid deep cuts to bus, subway and commuter rail service. New York’s public schools will also receive a portion of the package’s $54 billion in education aid.

New York City balanced its current $92 billion budget by drawing down reserves by $2.8 billion, deferring about $640 million in labor costs to next year, and refinancing debt to save $700 million.

So far this fiscal year, New York City’s tax collections have fallen by 3.5%, half the drop seen in all of 2009, as a rise in property taxes, which account for half of city revenue, offsets drops elsewhere, according to figures from Comptroller Scott Stringer’s office. Income-tax revenue, which has been affected by business shutdowns and job losses, has exceeded forecasts by $365 million, falling about 10%, compared with a 23% drop in the immediate aftermath of the financial crisis.

Wall Street has been one bright spot. The securities industry’s pretax profits over the first six months of 2020 surged 82% to $27.6 billion, DiNapoli said in October. The city forecast $33 billion in profits for all of 2020.

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