I.  Executive Summary

Economic Outlook Remains Positive But Slower Growth Ahead

The U.S. and NYC economies are expected to grow moderately over the forecast horizon, with a small bump up in the near term (2017-2018) and slower growth in the outyears (2019 to 2021). This slowdown is the result of a national economy operating at full employment and the moderating effect of wage increases demanded by increasingly scarce employees. Consistent with the moderate growth forecast scenario, we expect to see jobs growth slow and to see wages and salaries grow at levels slightly above the local inflation rate.

Consistent with our moderate economic growth forecast, the Comptroller projects total tax revenue to rise 2.6 percent in FY 2017 and 3.1 percent in FY 2018, slightly faster than the Administration’s 2.3 percent and 3.0 percent growth forecasts. The difference is mostly due to the Comptroller’s higher forecast for personal income tax (PIT) and property tax collections in the near term and from property taxes in the outyears. The Comptroller’s Office forecast is above the Administration’s by $181 million in the current year, rising to $550 million in FY 2020. Over the entire Plan period, FY 2017 to FY 2021, the net annual average growth in tax revenues of 4.1 percent equals that of the Administration’s forecast.

The FY 2018 Executive Budget

The FY 2018 Executive Budget totals $84.9 billion, an increase of $192 million from the Preliminary Budget. The City-funds portion of the budget totals $61.1 billion, 72 percent of the budget. Tax revenues total $56.4 billion, a decrease of $567 million from the Preliminary Budget primarily from revisions to PIT, real estate-related, and sales tax revenue projections. Adjusted for prepayments and reserves, the FY 2018 budget increases by $1.5 billion over FY 2017, or 1.7 percent.

City-funds agency spending in the Executive Budget increased by $866 million. Three agencies, the Department of Homeless Services (DHS), the Department of Education (DOE), and the Administration for Children’s Services (ACS) account for almost one-third of the increase.

The April Financial Plan included another round of the Citywide Savings Program (CSP), which is estimated to generate savings of almost $2 billion in FY 2017 through FY 2021. The new round of CSP brings the total savings in FY 2017 through FY 2021 to $6.2 billion.

Despite higher City-funds agency spending and lower City-funds revenues, the 2018 Executive Budget remains balanced, due to a reduction in pension contributions and decreases in debt service and retiree pay-as-you-go health insurance expenses as a result of additional prepayments in FY 2017. The additional prepayments bring the total prepayments of FY 2018 expenses to $3.727 billion. If the City does not add to the prepayments or reserves in the upcoming June Financial Plan, it will begin FY 2018 with a budget cushion of $9.3 billion, 10.7 percent of FY 2018 expenditures adjusted for prepayments and reserves. The City began FY 2017 with a cushion of $9.6 billion, 11.1 percent of adjusted FY 2017 expenditures.

Outyear Gaps Are Higher

Outyear gaps in the current financial plan are projected to be $3.59 billion in FY 2019, $2.98 billion in FY 2020, and $2.32 billion in FY 2021. The outyear gaps are between $277 million to $526 million larger than the January Plan gaps, despite additional savings from the new round of CSP. The increases are driven by both lower revenue and higher expenditure estimates. As in FY 2018, the lower outyear revenue projections reflect primarily downward revision to tax revenues, particularly PIT and real estate-related tax revenues. Spending increases reflect new needs, including spending on pre-K for three-year-olds, homeless shelters, and access to counsel in Housing Courts.

Comptroller’s Risks and Offsets

The Comptroller’s Office’s analysis indicates that the outyear gaps could be larger than projected due primarily to higher expenditure estimates. The Comptroller’s Office estimates that, on net, expenditures could be above the City’s projections by $415 million in FY 2018, $391 million in FY 2019, $344 million in FY 2020, and $326 million in FY 2021. The higher expenditure estimates are driven by higher projections for overtime, homeless shelter expenditures, and support for New York City Health + Hospitals. The Comptroller’s Office also expects lower Medicaid reimbursement for special education students resulting in higher City-funds expenditures to make up for the shortfall.

Offsetting some of the expenditure risks to the Financial Plan is the Comptroller’s higher revenue forecast. The Comptroller’s Office projects that revenues will exceed the Plan projection in each year of the Plan, due primarily to higher tax revenue forecast. Offsetting some of the higher tax revenue forecast in FY 2019 through FY 2021 is the Comptroller’s Office assumption that taxi medallion sales totaling $731 million over this period will not materialize. Overall, the Comptroller’s Office projects net risks of $415 million in FY 2018, $391 million in FY 2019, $13 million in FY 2020, and $280 million in FY 2021.

Federal Budget Risks Loom

For now, the outyear gaps remain manageable by historical measure. However, the budget is particularly vulnerable to Federal budget cuts. Cuts in President Trump’s proposed budget would reduce the City’s FY 2018 Federal grants by as much as $1 billion. The bulk of the cuts are in grants that support services to the City’s most vulnerable populations and to other critical programs. Many of the President’s proposed cuts would have deep impacts beyond the City budget, including to public housing, nutrition assistance, and health services, that state and local governments will be under pressure to maintain. To the extent that the City will need to make up for cuts in Federal funding to maintain and replace services, the outyear gaps would increase significantly. In this climate of uncertainty, prudent spending choices are needed and greater operational efficiencies need to be pursued.

Table 1.  FY 2017 – FY 2021 Financial Plan

($ in millions) FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Change
FYs 2017 – 2021
Dollar      Percent
Revenues              
Taxes:
General Property Tax $24,606 $25,831 $27,492 $28,816 $30,125 $5,519 22.4%
Other Taxes $28,989 $29,787 $31,037 $32,255 $33,489 $4,500 15.5%
Tax Audit Revenues $1,251 $850 $721 $721 $721 ($530) (42.4%)
Subtotal: Taxes $54,846 $56,468 $59,250 $61,792 $64,335 $9,489 17.3%
Miscellaneous Revenues $7,011 $6,480 $6,640 $6,854 $6,841 ($170) (2.4%)
Unrestricted Intergovernmental Aid $57 $0 $0 $0 $0 ($57) (100.0%)
Less: Intra-City Revenues ($2,065) ($1,815) ($1,737) ($1,739) ($1,744) $321 (15.5%)
Disallowances Against Categorical Grants $613 ($15) ($15) ($15) ($15) ($628) (102.4%)
Subtotal: City-Funds $60,462 $61,118 $64,138 $66,892 $69,417 $8,955 14.8%
Other Categorical Grants $976 $880 $868 $859 $856 ($120) (12.3%)
Inter-Fund Revenues $641 $667 $662 $599 $597 ($44) (6.9%)
Federal Categorical Grants $8,937 $7,799 $7,002 $6,897 $6,879 ($2,058) (23.0%)
State Categorical Grants $14,437 $14,396 $14,849 $15,347 $15,702 $1,265 8.8%
Total Revenues $85,453 $84,860 $87,519 $90,594 $93,451 $7,998 9.4%
Expenditures    
Personal Service
Salaries and Wages $25,759 $27,306 $28,625 $29,425 $30,064 $4,305 16.7%
Pensions $9,395 $9,572 $9,866 $9,936 $10,001 $606 6.5%
Fringe Benefits $9,456 $10,119 $10,795 $11,694 $12,483 $3,027 32.0%
Subtotal-PS $44,610 $46,997 $49,286 $51,055 $52,548 $7,938 17.8%
Other Than Personal Service
Medical Assistance $5,915 $5,915 $5,915 $5,915 $5,915 $0 0.0%
Public Assistance $1,584 $1,594 $1,605 $1,617 $1,617 $33 2.1%
All Other $29,138 $28,118 $27,565 $27,571 $27,789 ($1,349) (4.6%)
Subtotal-OTPS $36,637 $35,627 $35,085 $35,103 $35,321 ($1,316) (3.6%)
Debt Service
Principal $2,175 $2,194 $2,163 $2,293 $2,243 $68 3.1%
Interest & Offsets $1,925 $2,133 $2,232 $2,494 $2,748 $822 42.7%
Subtotal Debt Service $4,100 $4,327 $4,395 $4,787 $4,991 $890 21.7%
FY 2016 BSA & Discretionary Transfers ($4,038) $0 $0 $0 $0 $4,038 (100.0%)
FY 2017 BSA $3,727 ($3,727) $0 $0 $0 ($3,727) (100.0%)
TFA Debt Service
Principal $826 $980 $1,329 $1,305 $1,348 $522 63.2%
Interest & Offsets $1,356 $1,221 $1,501 $1,817 $2,057 $701 51.7%
Subtotal TFA $2,182 $2,201 $2,830 $3,122 $3,405 $1,223 56.1%
Capital Stabilization Reserve $0 $250 $250 $250 $250 $250 NA
General Reserve $300 $1,000 $1,000 $1,000 $1,000 $700 233.3%
  $87,518 $86,675 $92,846 $95,316 $97,515 $9,997 11.4%
Less: Intra-City Expenses ($2,065) ($1,815) ($1,737) ($1,739) ($1,744) $321 (15.5%)
Total Expenditures $85,453 $84,860 $91,109 $93,577 $95,771 $10,318 12.1%
Gap To Be Closed $0 $0 ($3,590) ($2,983) ($2,320) ($2,320) NA

Table 2.  Plan-to-Plan Changes April 2017 Plan vs. January 2017 Plan


($ in millions)
FY 2017 FY 2018 FY 2019 FY 2020 FY 2021
Revenues          
Taxes:
General Property Tax $206 $0 $0 $0 $0
Other Taxes ($453) ($567) ($475) ($626) ($523)
Tax Audit Revenues $210 $0 $0 $0 $0
Subtotal: Taxes ($37) ($567) ($475) ($626) ($523)
Miscellaneous Revenues $176 $118 $38 $50 $34
Unrestricted Intergovernmental Aid $0 $0 $0 $0 $0
Less: Intra-City Revenues ($26) ($29) $44 $48 $43
Disallowances Against Categorical Grants $413 $0 $0 $0 $0
Subtotal: City-Funds $526 ($478) ($393) ($528) ($446)
Other Categorical Grants ($4) $24 $21 $22 $23
Inter-Fund Revenues ($14) $9 $4 $4 $4
Federal Categorical Grants $111 $787 $191 $88 $98
State Categorical Grants $20 ($150) ($159) ($57) ($16)
Total Revenues $639 $192 ($336) ($471) ($337)
Expenditures          
Personal Service
Salaries and Wages ($70) ($10) ($171) ($209) ($158)
Pensions ($18) ($247) ($234) ($216) ($169)
Fringe Benefits ($150) ($139) ($186) ($226) ($218)
Subtotal-PS ($238) ($396) ($591) ($651) ($545)
Other Than Personal Service
Medical Assistance $0 $0 $0 $0 $0
Public Assistance $0 $0 $0 $0 $0
All Other $337 $1,342 $564 $657 $668
Subtotal-OTPS $337 $1,342 $564 $657 $668
Debt Service
Principal $0 ($22) ($23) ($26) ($28)
Interest & Offsets ($101) ($8) ($35) ($20) $27
Subtotal Debt Service ($101) ($30) ($58) ($46) ($1)
FY 2016 BSA and Discretionary Transfers $0 $0 $0 $0 $0
FY 2017 BSA $672 ($672) $0 $0 $0
TFA
Principal ($3) ($17) $25 ($7) ($7)
Interest & Offsets ($2) ($6) ($43) $2 $31
Subtotal TFA ($5) ($23) ($18) ($5) $24
Capital Stabilization Reserve $0 $0 $0 $0 $0
General Reserve $0 $0 $0 $0 $0
  $665 $221 ($103) ($45) $146
Less: Intra-City Expenses ($26) ($29) $44 $48 $43
Total Expenditures $639 $192 ($59) $3 $189
Gap To Be Closed $0 $0 ($277) ($474) ($526)

Table 3.  Plan-to-Plan Changes April 2017 Plan vs. June 2016 Plan

($ in millions) FY 2017 FY 2018 FY 2019 FY 2020
Revenues
Taxes:
General Property Tax $377 $219 $372 $427
Other Taxes ($711) ($1,103) ($844) ($729)
Tax Audit Revenues $537 $136 $7 $7
Subtotal: Taxes $203 ($748) ($465) ($295)
Miscellaneous Revenues $604 $46 ($38) $77
Unrestricted Intergovernmental Aid $57 $0 $0 $0
Less: Intra-City Revenues ($301) ($51) $22 $26
Disallowances Against Categorical Grants $628 $0 $0 $0
Subtotal: City-Funds $1,191 ($753) ($481) ($192)
Other Categorical Grants $123 $43 $33 $28
Inter-Fund Revenues ($5) $23 $80 $18
Federal Categorical Grants $1,264 $988 $322 $279
State Categorical Grants $764 $103 $86 $98
Total Revenues $3,337 $404 $40 $231
 
Expenditures
Personal Service
Salaries and Wages $14 $93 ($124) ($157)
Pensions ($27) ($138) $14 $153
Fringe Benefits ($223) ($135) ($137) ($185)
Subtotal-PS ($236) ($180) ($247) ($189)
Other Than Personal Service $0 $0 $0 $0
Medical Assistance $0 $0 $0 $0
Public Assistance $0 ($8) ($8) ($7)
All Other $1,688 $1,725 $899 $1,015
Subtotal-OTPS $1,688 $1,717 $891 $1,008
Debt Service
Principal $0 ($22) $24 $23
Interest & Offsets ($256) ($111) ($184) ($177)
Subtotal Debt Service ($256) ($133) ($160) ($154)
FY 2016 BSA and Discretionary Transfers ($44) $0 $0 $0
FY 2017 BSA $3,727 ($3,727) $0 $0
TFA
Principal ($3) $9 $77 $46
Interest & Offsets ($38) ($297) ($148) ($98)
Subtotal TFA ($41) ($288) ($71) ($52)
Capital Stabilization Reserve ($500) $250 $250 $250
General Reserve ($700) $0 $0 $0
  $3,638 ($2,361) $663 $862
Less: Intra-City Expenses ($301) ($51) $22 $26
Total Expenditures $3,337 ($2,412) $685 $888
 
Gap To Be Closed $0 $2,816 ($645) ($657)

Table 4.  Risks and Offsets to the April Financial Plan (Positive numbers reduce the gap and negative numbers increase the gap)

  FY 2017 FY 2018 FY 2019 FY 2020 FY 2021
City Stated Gap $0 $0 ($3,590) ($2,983) ($2,320)
Tax Revenues
Property Tax $0 $34 $285 $572 $673
Personal Income Tax 122 280 146 48 (65)
Business Taxes 0 33 69 128 49
Sales Tax 0 32 (32) (118) (201)
State Sales Tax Intercept 0 (50) (150) 0 0
Real Estate-Related Taxes 59 (74) (76) (80) (81)
Subtotal Tax Revenues $181 $255 $242 $550 $375
Non-Tax Revenues
ECB Fines $5 $30 $30 $30 $30
Late Filing/No Permit Penalties 0 5 5 5 5
Motor Vehicle Fines 0 5 5 3 3
Taxi Medallion Sales 0 0 (107) (257) (367)
Subtotal Non-Tax Revenues $5 $40 ($67) ($219) ($329)
Total Revenues $186 $295 $175 $331 $46
Expenditures
Overtime (170) (174) (150) (150) (150)
DOE Medicaid Reimbursement (20) (70) (70) (70) (70)
Homeless Shelters 0 (121) (121) (121) (121)
NYC Health + Hospitals 0 (165) (165) (165) (165)
Public Assistance 20 15 15 15 15
HYIC Interest Support Payments 0 0 0 47 65
VRDB Interest Savings 40 100 100 100 100
General Reserve 300 0 0 0 0
Subtotal $170 ($415) ($391) ($344) ($326)
Total (Risks)/Offsets $356 ($120) ($216) ($13) ($280)
Restated (Gap)/Surplus $356 ($120) ($3,806) ($2,996) ($2,600)

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