New York City Mayor Zohran Mamdani took a victory lap around the City Hall rooftop with the release of his proposed balanced budget for fiscal year 2027, which begins on July 1. He’s closed a $12 billion funding gap he inherited on taking office, he claims, without resorting to the dreaded austerity measures supposedly demanded by budget grumps who, unlike him, want to harm “working people” and benefit the wealthy.
Balancing the budget is, of course, the mayor’s job, by law. Mamdani deserves credit for submitting a credible financial plan. Despite his inexperience, he has mastered the process and successfully worked with the governor and the legislature to get the budget relief he needed. But his plan is good for just one year. If he had listened more to the budget critics, less trouble would be in store for the future. Depending on unfolding events, many beyond his control, working people may still find their benefits under serious strain.
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The mayor closed the funding gap in two phases. In his preliminary budget, last February, he included $6.6 billion in additional tax revenue over fiscal years 2026 and 2027, and $1.5 billion in state aid promised by Governor Kathy Hochul. That closed most of the gap, but Mamdani also included $1.77 billion in projected agency savings, drew down reserves, and proposed a $3.7 billion property tax increase.
The property tax hike was in lieu of the mayor’s desired increase in personal and business income taxes, which required state legislation that the governor opposed. That ploy was received coldly by the city council, and the mayor has now dropped it. Commentators also criticized drawing down the city’s already inadequate reserves.
So Mamdani went back to the drawing board for the May executive budget. The major new moves include a “pied-a-terre” tax—a levy on high value nonresident second homes—intended to raise $500 million. This measure would likely be passed by the legislature, with the governor’s support, as part of the current state budget negotiations, though we still don’t know how the tax will be designed.
Mamdani also proposes to raise $68 million through an unincorporated business tax (UBT) by reducing the credit self-employed taxpayers receive on their city income tax. The change could be enacted by the city council alone. That would hit taxpayers with taxable incomes as low as $142,000. The UBT, unique to New York City, already creates an incentive for self-employed people with relatively high incomes to live outside the city, and this would make the incentive stronger.
On the spending side, the mayor proposes to restore some of the drained reserves. His big new change is to extend the amortization period for unfunded pension liabilities, a tactic that also enjoys support from the governor and state legislature. That move would save $1.6 billion in fiscal year 2027 and achieve further savings over the next several years. Those savings extend pension amortization payments well into the 2030s, fueling budget gaps that a future mayor will need to close.
Mamdani also claims fiscal year 2027 savings of $500 million by delaying class-size mandates set by the state, which will now be implemented later. He promises further Department of Education savings by bringing the costs of due process special education cases under control, something the city has not yet been able to do. The city will ostensibly achieve these savings by providing more services in city schools, rather than through private schools. The mayor achieves another $500 million in savings by better controlling the growth of the city’s rental housing assistance program, known as CityPHEPS. Spending on that program, like that on the special education due process cases, has also skyrocketed in recent years.
Mamdani’s proposed savings are focused on fiscal year 2027 and in many cases do not recur. The city’s comptroller, Mark Levine, estimates that the executive budget includes $2.8 billion in one-time measures. As a result, budget gaps in future years remain very large: $7.1 billion in fiscal 2028; $9.1 billion in fiscal year 2029; and $9.8 billion in fiscal year 2030.
As Greg David of The City notes, “What this budget does by relying on short-term fixes is set up yet another push for the mayor’s campaign promises to tax the rich next year, after the mid-term elections.” That’s a choice. The mayor is a man of the Left, and his objective is that taxing and spending will go up in real terms throughout his mayoralty.
The mayor could have made other choices—saving more and spending less in fiscal year 2027 and future years, but with impacts falling far short of the strawman “austerity budget.” For example, the budget forecasts that the city-funded civilian workforce will rise from 110,890 on June 30, 2026, to 111,797 on June 30, 2027, and remain roughly constant thereafter. Building in a gentle decline instead—for example, by allowing agencies to fill only a portion of their vacant positions—could save hundreds of millions of dollars each year.
The size of the teacher workforce is also projected to remain roughly constant, at just under 100,000. In a recent brief, my Manhattan Institute colleague Danyela Souza Egorov points out that city Department of Education policies in the face of declining enrollments, including keeping open schools with fewer than 150 pupils and “holding harmless” staffing in schools where enrollment declines, cost the city additional hundreds of millions a year. Those policies require the city to hire more teachers than educational need would dictate.
In addition to keeping the door open to potentially economically damaging tax increases, Mamdani’s reliance on one-time rather than ongoing savings leaves the city highly vulnerable to the impact of a future recession, in which tax revenues plunge and “austerity budgets” become unavoidable. No one can confidently predict the effects on the U.S. economy of the global chaos resulting from the Iran war and the closure of the Straits of Hormuz, on top of the consequences of skyrocketing federal debt and erratic trade and immigration policies. Economic forecasters have differing views. Goldman Sachs’s chief economist Jan Hatzius recently estimated the probability of a recession in the next 12 months at 25 percent. Mark Zandi of Moody’s Analytics, in contrast, puts the odds at 40 percent.
Enough uncertainty exists for New Yorkers to be concerned at Mamdani’s blithe confidence that he can keep spending more than the city takes in, balancing the budget with one-shots, borrowing, and tax hikes. One needs to go back a long time—to Mayor Michael Bloomberg, in the wake of the Great Recession in the spring of 2009—to find a genuine proposed austerity budget. Bloomberg’s plan actually cut spending, from $61.2 billion in FY 2009 to $59.4 billion in FY 2010. It hurt in the short term, but the upshot was to bequeath new mayor Bill de Blasio roaring economic growth and bountiful revenues when he took office in January 2014. Mamdani may yet need to study the Bloomberg playbook and learn its lessons.