Comptroller raises concerns about HHC’s finances and reliance on non-recurring resources

View Comptroller's Testimony
View The Comptroller's Comments on the Preliminary Budget for Fiscal Year 2006 and the Financial Plan for Fiscal Years 2006-2009

Comptroller William C. Thompson, Jr. today issued his charter-mandated report on the Mayor’s Preliminary Budget for Fiscal Year (FY) 2006 while testifying before the City Council, noting that the City’s fiscal outlook appears to have stabilized for the current fiscal year and FY 2006 but predicting budget gaps for the future.

“Over the past three years, the City has faced and surmounted its most daunting fiscal challenge in decades,” Thompson said. “The FY 2006 Preliminary Budget appears on course toward balance assuming the risks it contains are expeditiously addressed.”

Thompson stated that, after accounting for potential revenue offsets, the budget contains $478 million of risks for FY 2006. Thompson cautioned that the preliminary budget does not include any provisions for wage increases for civilian employees whose contract expires this June 30 th. He added that the outcome of the final ruling on the contracts for firefighters, police officers, and teachers, all of which are currently in mediation, could result in additional costs to the City. Thompson also warned that the City might be required by the State Legislature to pay a portion of the costs associated with increased education spending ordered by the New York State Supreme Court.

A significant area of concern, according to Thompson, is the Health and Hospitals Corporation’s (HHC) finances. The City projects that the HHC faces budget gaps ranging between $485 million and $636 million in FYs 2006-2009, which may be alleviated in part by Federal and State actions.

“Unless a significant improvement in HHC’s receipts occurs, we should at least acknowledge the potential of a more permanent increase in the level of support that the City provides to the Corporation,” Thompson said.

Thompson also raised concerns about the City’s practice of relying on non-recurring actions to balance its budget, as demonstrated by the use of an anticipated $2 billion FY 2005 surplus to prepay FY 2006 expenses. 

“While the surplus provides one-time budget relief to FY 2006, it does not address the central budgetary challenge: the fact that the growth of the City’s expenditures outpaces the growth of its revenues over the financial plan period,” Thompson noted. “Reliance on non-recurring revenues allows the City little margin for error in the event of increases in labor, education and health care costs or another economic downturn.”

The City does not project a surplus in FY 2006. The absence of these resources in subsequent years contributes to projected budget deficits of $3.7 billion in FY 2007, $3.6 billion in FY 2008, and $3.2 billion in FY 2009.

“Until the City can find a way to address the embedded gap between revenues and expenditures, the citizens of New York will face years of difficult budget deficits,” Thompson concluded.

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