On November 30, New York City Mayor Bill de Blasio issued the last financial-plan modification of his administration. Floating on a sea of federal aid, de Blasio has reached the end of his term without the financial crunch many observers, including myself, feared due to the Covid-19 pandemic. However, he has left incoming mayor Eric Adams with a financial mess. Adams will need to get on top of this quickly, or he will face the reckoning de Blasio escaped.
At first glance, the city’s finances are robust. The city now expects a balanced budget for Fiscal Year 2022 (from July 1, 2021, to June 30, 2022) of $102.847 billion. That’s up $4.123 billion from the plan the city council adopted just last June; increased federal aid has eased budget constraints.
The November financial plan anticipates gaps between projected revenues and projected spending of $2.9 billion in FY 2023, $2.7 billion in FY 2024, and $2.1 billion in FY 2025. While these figures seem large (and are large), they are relatively small as a percentage of the budget, which now tops $100 billion, and are not unusual when compared with budgeting under previous mayors.
So why should Adams—and indeed all New Yorkers fearful of recovery-stalling future tax hikes or budget cuts—be concerned? We should worry because the city has become dependent on the fickle inclinations of the U.S. president and Congress to send aid. We can get an idea of how dependent Gotham has become by comparing the current plan with the financial plan from November 2019, before a pandemic-related recession was on anybody’s radar.
The November 2019 plan projected that in FY 2022, the city would collect $67.2 billion in taxes. In contrast, the November 2021 plan projects tax revenues of $62.4 billion, a drop of $4.8 billion, or about 7 percent. Meantime, federal categorical grants rose from a projection of about $7 billion to $16.5 billion.
We can see how this plays out in terms of staffing. De Blasio has presided over a huge increase in city-funded personnel. Former Mayor Michael Bloomberg’s last financial plan in November 2013 projected total full-time and full-time-equivalent city-funded staff to be about 260,000 on June 30, 2014. All staff, including those paid from non-city sources, were projected to total 301,000.
By November 2019, after several years of de Blasio’s administration, the financial plan projected city-funded staff to rise to 282,000, and the total to almost 335,000, by June 30, 2020. Two years later, city-funded staff are down to 274,000, projected for June 30, 2022, but the total, including staff funded from other sources, is up to 339,000. In future years, the plan expects city-funded staff to remain at about the same level, while staff funded from other sources falls only a little, so that total staffing is only about 3,000 lower on June 30, 2025—well above the level Bloomberg thought necessary to run the city government.
Productivity improvements have been anathema to de Blasio, and his approach to city government is epitomized by the line for “efficiencies” in the November 2021 plan’s proposed Citywide Savings Program: it’s blank. So mayor-elect Adams faces a bloated municipal workforce and a “fiscal cliff” as federal aid runs down. The dangers this scenario poses are highlighted in comments on the November 2021 financial plan by the two polite Cassandras of New York City finances: the nonprofit Citizens Budget Commission (CBC) and New York State comptroller Thomas DiNapoli.
CBC president Andrew Rein’s statement notes that de Blasio’s financial plan fails to set aside funding for cost-of-living raises for city employees in a time of significant price inflation. It also lists a range of programs, now funded by non-recurring city revenues and federal funds, that the city council will no doubt wish to continue (and probably Adams, too). These additional costs represent a de facto increase in the fiscal gaps expected in future years.
DiNapoli observes that city tax revenues are consistent with projections, rather than outpacing them as often occurs—in times past, a painless way of closing projected fiscal gaps. He writes, “In light of these revenue concerns, the city should take more aggressive steps to identify and implement operational savings. It did not take up this effort in the updated plan.”
New York City coasted through the de Blasio years, deploying its bounteous wealth, and later a shower of federal cash, to paper over inefficiency. New Yorkers pay top dollar in taxes for second-rate services and constantly live under the threat that one bad recession will return them to the grinding austerity of the fiscal-crisis era. Adams needs to place the city on a sounder footing. He should certainly curtail hiring, if not actually implementing layoffs in agencies where de Blasio unnecessarily increased staff over Bloomberg’s levels. He needs to cut pointless red tape that makes staff unproductive and use technology to raise labor productivity, in keeping with worldwide best practices. New York City’s wealth and private-sector productivity should make it an exemplar of top-notch public services, not a supplicant for continued federal aid.
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