NYC to Curb Spending, Deepen Hiring Freeze as Revenue Slows

(Bloomberg) -- New York City will ask agency heads to reduce spending across the board and deepen a partial hiring freeze enacted two years ago as part of Mayor Bill de Blasio’s $92.2 billion budget for the 2020 fiscal year.

The spending plan, which the mayor said reflects “an unusual measure of uncertainty,” is little changed from the $92 billion budgeted for the current year. Seeking to prevent the city from running deficits, it sets a savings goal of $750 million by asking agency heads to cut spending. The budget, balanced for 2020, predicts a $3.5 billion shortfall for 2021, which administration officials said is manageable given its $5 billion in reserves.

But the uncertainty surrounding the state’s finances and the city’s weaker-than-expected tax collections underscore De Blasio’s approach. Earlier this week, New York Governor Andrew Cuomo said the state collected $2.3 billion less than expected in income tax revenue in December, a development he said would require redrafting a budget that already contained almost $600 million in cuts to the city next year. The city’s estimated income-tax payments as of December totaled $1.25 billion -- about 20 percent less than had been anticipated, according to the city comptroller.

“We are facing new realities and likely tough choices,” the mayor said in presenting his preliminary plan for the year beginning July 1. “The economy is slowing and Washington and Albany are looking to stick us with impossible bills.”

As tax collections come in at a slower pace than last year, the city projects that personal income-tax revenue will fall by $935 million. An economic slowdown could come as soon as 2020, according to economists and business leaders the administration has consulted, the mayor said.

Plummeting stock prices in December were among reasons for a 20 percent drop in estimated tax payments, said Ronnie Lowenstein, director of the Independent Budget Office, a city agency that acts as a fiscal watchdog. It was a marked contrast with earlier estimated payments, which “were strong” in April, June and September.

“People who usually take their end-of-the-year profits either didn’t do it or took losses,” Lowenstein said. “And some people who made estimated payments earlier in the year, may have realized they had overpaid, so they put in less.” December’s levels were the lowest since 1991, she said.

The mayor will present an updated spending plan in May that must be approved by the City Council by June 30.

City Comptroller Scott Stringer, a potential mayoral candidate in 2021, welcomed the mayor’s proposals to save money while at the same time criticizing him for not doing it earlier. His office estimated that the city already had about $240 million less revenue than it had last year through the end of January.

“I’ve said for many years that as part of the budget process we should always look for savings,” Stringer said. “The administration has finally decided to move forward.”

The budget contains about $500 million in added spending. The mayor’s “healthcare for all” program, which would pair 600,000 uninsured New Yorkers with a network of city-managed clinics and hospitals, costs about $25 million next year and will grow to $100 million in future years.

Another $106 million will provide half-fare subway and bus rides to some New Yorkers receiving food stamps and other benefits. Police mental-health crisis intervention will be a $5.3 million added expense. Starting pre-school for 3-year-olds in two school districts in Brooklyn and the Bronx, increasing the service to about 20,000 children, will cost about $25 million. Pension costs will increase to $11 billion in 2023 from about $9.9 billion in the current fiscal year, according to the plan’s projections.

“I’m comfortable with the spending as long as we can afford the spending,” de Blasio said.

To contact the reporter on this story: Henry Goldman in New York at hgoldman@bloomberg.net

To contact the editors responsible for this story: Flynn McRoberts at fmcroberts1@bloomberg.net, Michael B. Marois, William Selway

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