Manhattan Institute fellow and director of state and local policy John Ketcham joins City Journal associate editor Theodore Kupfer to discuss the New York State and City budgets and a recent Manhattan Institute report on cost-saving measures the city can take.
Theodore Kupfer: Welcome back to 10 Blocks. I'm Theodore Kupfer, an Associate Editor of City Journal, and I'm joined today by John Ketcham. John is a Fellow at the Manhattan Institute and MI's director of state and local policy. He writes regularly for City Journal, and today he joins us to discuss all things New York City and State. So, John, thank you very much for coming.
John Ketcham: Wonderful to be with you, Theodore. Thanks so much for having me.
Theodore Kupfer: So last week the New York state legislature passed its budget for the 2023-2024 fiscal year. It's one of the latest dates for budget completion in the past decade, passing more than a month after the deadline. The state constitution allows governors to include wide-ranging policy proposals in their executive budgets, and Governor Kathy Hochul had recommended drastic changes on a number of fronts, from bail laws to charter schools to housing. So, I guess let's start by, what is in this budget? How does the approved budget stack up to Hochul's proposed version?
John Ketcham: Well, what made it to the final budget and what Governor Hochul proposed back in the winter look like two different things almost entirely. So Governor Hochul tried to propose a number of transformational changes to New York State's housing, criminal justice, and charter schools, as you said. And really, the only thing she wound up getting, to any significant degree at least, is on criminal justice. Now, there's been a lot of back and forth as to the prudence of focusing on the particular criminal justice reform that she had sought compared to some other alternatives, and basically struck out on her transformative housing proposal, which really would have addressed New York's critical supply shortage of new housing, especially in the Downstate region.
She basically got nothing out of that, and she only got a small slice of the up to 100 new charter schools in New York City that she sought in her executive budget. She wound up settling for 14 revived charters from those schools that had previously been granted them, but have since closed. Those are called zombie charters. So besides those 14 reauthorizations and the one particular criminal justice reform that she pushed very hard for, the governor walked away from the budget without a whole lot to show for it.
Theodore Kupfer: I want to get to what this all means for Hochul politically, but let's focus for now on the criminal justice measure, the so-called least-restrictive-means standard, and on the housing proposals. As you mentioned, it's a victory on the first one, although the impact of that victory is in question and what seems to be a pretty big loss on housing. So, tell me what these proposals actually entail.
John Ketcham: For least-restrictive means, judges were previously required to select the least-restrictive means necessary to reasonably assure a pretrial defendant's return to court. That meant that judges could only make a determination for these bail-eligible offenses on the basis of flight risk, not on the basis of dangerousness, and that does not change even after this new proposal has passed. So the elimination of the least-restrictive-means standard will give judges some newfound discretion to restrict people's freedom where they wouldn't be able to under the old standard, setting bail in certain instances, or setting harsher conditions like non-monetary release conditions compared to release on recognizance.
But it's not altogether clear whether judges relied on the least-restrictive-means before to make their determinations. The judicial decision-making process does not lend itself particularly well to knowing whether judges really needed to have this provision removed in order to incapacitate some of the more dangerous elements in the criminal-justice system such as repeat offenders.
Theodore Kupfer: Got it. So in other words, New York's bail law, the state will remain an outlier on this dangerousness standard question.
John Ketcham: Right. New York State is the only state that does not allow judges to assess a pretrial defendant's dangerousness when making bail determinations.
Theodore Kupfer: So let's turn to housing then, John. As I understand it, Hochul's proposal included two key provisions that were meant to address the housing supply crisis Downstate. There was growth-target legislation and there was transit-oriented development. My understanding is that the former was more of a carrot approach, the latter more of a stick. But tell me about these, why they would've been so transformative and ultimately, why they failed to make it through the legislature?
John Ketcham: Well, these two approaches were in tension with each other to some degree, and our senior fellow, Eric Kober, laid this all out in a report earlier in the year very well. The growth targets proposal encouraged gradual, modest, 3 percent increases in the housing stock in the Downstate region, and it provided localities with a menu of options that they can choose from in order to remain in safe-harbor compliance with the housing law. Transit-oriented development, by contrast, would've been much more aggressive in a half-mile radius around transit corridors. That would have severely disrupted many communities. Take Garden City, for example. That has about 7,000 or so units currently. Under the Transit-Oriented Development proposal, it would have been required to permit 100,000 new units within a three-year timeframe, which would have, of course, been massively disruptive to the residents of Garden City and consequently engendered a great deal of political opposition.
Now, there was another related enforcement mechanism on the first proposal for growth targets, and that was a housing override board. This has been adopted from other states where, if a jurisdiction did not comply with the housing law, the state could take action to provide a developer with the right to build through this housing override board, and that would've essentially taken away local control from jurisdictions who failed to comply. Now, that was seen as too harsh by many suburban Downstate lawmakers from both parties. Republicans are typically in favor of strong zoning. Democrats, to varying degrees, but suburban Democrats have the same sort of constituency as suburban Republicans, and they generally like to preserve the character of their neighborhoods.
So to the extent that such control over the character of their neighborhoods would've been taken away by this override board, it led to a great deal of political opposition. The other political component in the housing debate throughout the budget process was good-cause eviction and progressives, for their part, were not willing to really engage in supply-side measures unless good-cause eviction was on the table. Now, what good-cause would've done was essentially to nearly universalize the state's rent stabilization law, which would require landlords to offer a tenant a renewal on the lease even if a market-rate landlord did not want to give that renewal to the tenant and would have capped the annual in rent increases by a certain amount determined by the state.
That would've severely limited landlords' discretion to select the tenants that they wish to have live in their properties and to increase the rents. Now, progressives, like I said, did not want to play ball on anything that excluded good-cause eviction. Governor Hochul didn't want to go there, and you just had an impasse that couldn't be resolved even a month after the nominal April 1 budget deadline.
Theodore Kupfer: So let's talk about the politics of all this. I want to turn to the New York City budget in a second, but let's do a postmortem here. Hochul seemed to have staked quite a bit on these housing proposals and failed to get anything. As you describe, opposition from the right, opposition from the left coalesced to produce a big fat zero. And it's hard to resist the comparison with her predecessor, Governor Andrew Cuomo, who always seemed to excel come budget time at getting what he wanted. Whether that was for good or for ill we can table, but just as far as the grubby business of retail politics, it seems like Hochul emerges from this looking quite a bit less powerful than she might have a few months ago. Is that an accurate assessment?
John Ketcham: I think, yes, it is. Kathy Hochul has tried to be the anti-Cuomo, has tried to strike a more conciliatory tone among those in the legislature, certainly with the mayor of New York City. However, self-interest has a funny way of prevailing in politics, and despite her gestures of goodwill, she has not been rewarded for them. Take for example her approval of legislative pay raises at the end of the year. That could have been leveraged into a policy win come budget time.
She could have gotten something out of it. Instead, as a gesture of goodwill, she approved them only to have the state senate reject her candidate, Hector LaSalle, for the court of appeals, the state high court, in a stunning and unprecedented rebuke. It has never happened before. So the governor's attempt to transform the nature of state politics has not fared well for her particular objectives yet and may have indeed backfired in certain respects.
Theodore Kupfer: So let's turn our attention to New York City where Mayor Eric Adams has released his $106 billion fiscal year 2024 budget. That's the largest in history, and yet the city faces several financial hurdles. Benefits for public employees remain a very large liability, the city's migrant crisis costs money, pandemic relief funding is running out. So what's in this Adams budget? What are the merits? Where does it fall flat, and how do you see these negotiations going? The city council has until July 1 to pass the budget, I believe. So how can we expect this to go?
John Ketcham: Correct. The city council has to have its budget done and signed by the mayor by July 1, and that's a hard requirement, unlike the state. So Mayor Adams, on April 26, released his executive budget, which responded to months of city council hearings and stakeholder input on his preliminary budget, which was released in January. It grew by $4 billion compared to the preliminary budget to this $106.7 billion figure. Now that is just a stunning amount. It is a few billion dollars shy of the state government budget of Florida, just to put that in context. New York City is an absolutely gargantuan political entity and provides so much support for everything—housing, transportation, homelessness services, you name it.
Now, the big crisis that New York City is facing right now is a mixture of economic uncertainty, which will hinder tax revenues potentially. Looks like the comptroller's office is forecasting a 7 percent decline in non-property tax revenues going forward. At the same time, you are experiencing an inflationary macroeconomic environment, greater competitiveness from other cities, especially in the Sun Belt, who have courted professionals, who have courted firms like Goldman Sachs and those large financial titans that have kept the city's tax base secure and city services running for the better part of 40 years now. And all at the same time, you have renewed labor contracts, which will cost the city many billions of dollars. The NYPD's renewal, for example, cost the city over $5 billion.
There are many that remain to be signed. You also have an unprecedented foreign migrant crisis. The asylum-seeker crisis is going to reach even greater proportions as Title 42 ends on Friday at midnight. That's going to certainly exacerbate a problem that the city has already struggled to grapple with. So the city, for example, has had 57,000 people come since the summer of last year. It has attempted to put them up in temporary shelters. The city has witnessed 57,000 migrants enter and seek shelter and other services. So right now there are about 38,000 foreign migrants in city shelters, and that has cost the city tremendously. $4.3 billion is the estimated amount that the Adams administration is pegging to the asylum-seeking crisis.
And we don't know how large that will get, and we don't really know how much will come in the form of federal aid, particularly. Governor Hochul promised a billion dollars and that was indeed included in the final state budget. But Mayor Adams was banking on a one-third, one-third, one-third split between the local, state, and federal governments. It appears now that not much is going to be coming from Washington, so the city is going to have to eat at least two-thirds of this foreign migrant crisis and is not particularly well-equipped to do so at this time, given the amount that it needs to satisfy pay raises for the city's unionized labor force and the revenue headwinds that lie ahead.
Theodore Kupfer: Right. And given the current condition of the border, I mean, we're recording this on May 11. Title 42 has just expired and it seems like things are not going to get better anytime soon, so that's a crucial issue. So, John, I just want to close by talking about your vision of what the ideal New York City budget would look like. You and a group of MI scholars recently produced a comprehensive and really smart, informative report on the city budget. You enumerate the fiscal challenges facing education, policing, housing, other such issues, and recommending cost-saving policies for each. So give me a brief overview of this report's major themes, some of the solutions you recommend the mayor could take, and just tell me about what you and our colleagues at MI found.
John Ketcham: Sure. So the report is titled “Reform and Renewal: Opportunities in New York City's FY 2024 Budget,” and I of course recommend it to everyone's reading. It lays out many of the structural long-term problems the city faces, and also the acute short-term problems like the asylum-seeker crisis. Many of the reforms that the city needs to enact have been needed for many decades now. For example, reforming the pension system, reforming public-sector union contracts and collective bargaining agreements to improve workforce productivity. Some are more recent and more pressing. For example, the de Blasio administration turned its attention away from jobs-first programming that was in place during the Giuliani and Bloomberg administrations and shifted emphasis to a workforce training and education model that has not really yielded, I think, the results that many New Yorkers would want, which is, people getting into jobs and doing their part in the short-term and working themselves out of their poverty.
At the same time, you also see large challenges in education. We have the largest public-education system in the country, around $38 billion or so. We spend around $38,000 or so depending on the year. That's a figure for the next year, per pupil. That is more than twice the national average, and we get middling results. Grades 3 to 8 are only 38 percent proficient in math and 49 percent proficient in reading. The problem is clearly not spending. We can't spend our way out of this issue. It is obviously something that has to involve changing teacher productivity, making them accountable for results and so forth. But that entails enormous union pushback from the United Federation of Teachers and from other state teachers unions. But a lot of the budget proposals that we suggest are focused around things that work.
For example, in the policing section, we propose simply hiring more police officers because they have been demonstrated time and time again through research to reduce violent crime, homicides, and can also reduce the incidence of public disorder, which people really care about. If you go to your local civic meeting, you go to a community board meeting, many times people care about the disorder that's around them as opposed to looking at other alternatives like community-based programming, nonprofit investments and so forth that have not demonstrated the results of simply hiring more police officers. So we are trying to focus on a mixture of short-term and long-term solutions.
Many of these things are not going to be easy to implement, but they're necessary to set New York City on a sustainable and fiscally sound future given the headwinds that city faces right now. And if history is any lesson, we see that New York's revitalization came after it got its financial house in order in the mid-1970s and early '80s. That created the conditions necessary for New York to thrive in the '90s and aughts by, for example, allowing for an enlarged police force, greater resources, greater innovation for things like CompStat. And so we know what works this time around, and it's fundamentally a matter of political will to get these policies enacted and to get the city back to a sound position fiscally on crime, on transportation, and on so many other issues.
Theodore Kupfer: Well, that's as good a note to close on as I can think of. So, thank you very much, John. Listeners, don't forget to check out John Ketcham's work on the City Journal website, www.city-journal.org. We will link to his author page in the description. We'll provide links to the reports that we've mentioned, and you can find John on Twitter @JKetcham91. You can also find City Journal on Twitter at @CityJournal and on Instagram @cityjournal_mi. And as always, if you like what you heard on the podcast, please give us a five-star rating on iTunes. John, thanks again.
John Ketcham: Thank you, Theodore. Great to be with you today.