New York City mayor Eric Adams will soon release his executive budget for fiscal year 2024. The document that Adams will unveil has been shaped by months of city council hearings and will anchor negotiations ahead of the July 1 final budget deadline. The stakes are high, not only for this year but also for Gotham’s fiscal future. In a new Manhattan Institute report, scholars break down the budgetary challenges facing important municipal departments and identify cost-saving policies for each.
The economic tailwinds of the last decade boosted New York City’s budget by nearly $30 billion, but economic conditions have changed, and the city comptroller’s office predicts budget gaps of $7.1 billion in FY 2025 and $10.2 billion the following year. Driving this uncertainty are issues like rising public-employee health-care costs, the ongoing migrant crisis, and vanishing pandemic relief funding. Adams no longer expects the Biden administration to pick up a third of the city’s migrant-related expenses, meaning the city will be on the hook for a larger share. Yet the city council has pushed back against cuts to social-services spending, with the progressive caucus decrying Adams’s supposed austerity.
State law limits the mayor and city council’s ability to modify aspects of city spending. The state’s unusually burdensome Medicaid cost-sharing arrangement requires counties to pay a combined $7.6 billion—more than all other local governments in the U.S. combined—with about $5.4 billion coming from the city. And the funding the city receives from the state fluctuates with Albany’s annual budgets, which often obligate the city to raise expenditures. Governor Kathy Hochul’s FY 2024 executive budget, for example, calls for New York City to pay an extra $500 million to make up for shortfalls in the Metropolitan Transportation Authority’s farebox revenue. State law pertaining to public contracts also raises capital construction costs and, consequently, the city’s annual debt service.
One of Adams’s biggest challenges is weaning the city off temporary federal pandemic funding used to support recurring programs like pre-kindergarten for three-year-olds, mental-health aid, and more. Spending time-limited funding on continuous costs enables incumbents to score short-term political gains but leaves the hard task of finding regular funding to future officeholders. It also sets unrealistic expectations for those who begin to rely on programs that may be unsustainable. In last year’s budget, Adams tried to spread out dwindling federal education relief over more years; in response, parents and teachers sued him, embroiling the city in a five-month legal battle.
Longstanding features of New York City government likewise impede the mayor’s flexibility to modify government processes and rein in expenses. Collective bargaining agreements (CBAs) with the city’s public-sector unions determine employees’ salary scales, pay raises, and work rules. For the vast majority of workers, the city pays the full premium of health insurance for individual and family coverage—even for those retiring before age 65—and thereafter picks up the full tab for Medicare Part B.
There are, however, several ways that the mayor can control costs unilaterally during this year’s budget negotiations, and beyond. First, he can establish a policy restricting the use of time-limited state and federal relief funds for recurring programs, which would reduce the possibility of future imbalances. And while a rainy-day fund set up two years ago enables the city to sock away excess funds during bountiful years to fill budget gaps during economic downturns, deposits to the fund are not required. Adams might heed the city comptroller’s previous recommendation to enact a mandatory savings policy.
For the CBAs that remain to be negotiated with public-sector unions, the mayor should negotiate tougher concessions on work rules, employee productivity, and accountability in exchange for pay raises. The city has not always dealt shrewdly with its unions. A recent deal with the police union, for instance, will help attract and retain well-qualified candidates to join the force by boosting pay for those on the job, but it does not stipulate greater accountability.
For large public-construction projects, Adams could establish a dedicated multiagency team that would see plans through, from start to finish. Instead of dealing with each agency individually, which too often leads to costly delays, contractors could work directly with a single team, which would have both the incentive and the authority to bypass ordinary agency processes and achieve project-related goals.
If New York City’s leaders refuse to find savings before July 1, balancing future budgets may prove far more painful. It doesn’t have to be.
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