Comptroller Lander Delivers Testimony on NYC’s Preliminary Fiscal Year 2023 Budget Before the City Council Committee on Finance
(New York, NY) — Today, City Comptroller Brad Lander testified before the New York City Council Committee on Finance’s Fiscal Year 2023 Preliminary Budget Hearing. Additionally, Comptroller Lander released a report on the Mayor’s Preliminary Fiscal Year 2023 Budget and Financial Plan for Years 2023 – 2026.
To read Comptroller Lander’s testimony at the New York City Council Committee on Finance’s FY 2023 Preliminary Budget Hearing, click here.
To read the Comptroller Lander’s report on New York City’s Preliminary FY23 Budget and Financial Plan for FY 2023 – FY 2026, click here.
Testimony text:
Good morning, Speaker Adams, Chair Brannan, members of the Finance Committee and the City Council. It’s such an honor to be back before the Council. There’s no way I could resist my 13th consecutive preliminary budget hearing. Joining me today is Francesco Brindisi, Executive Deputy Comptroller for Budget and Finance.
The Fiscal Year 2023 budget is New York City’s chance to invest in the services and infrastructure our city needs for an inclusive, resilient, long-term recovery. I’m pleased to share with you today our analysis of the City’s budget plan, discuss the spending of federal stimulus money, and talk about what we need to do to focus on the basics, on equity, and on resilience.
Overview of New York City’s Economy and Budget
Our City is reopening, but of course we are still grappling with many challenges spurred by the pandemic’s health and economic impacts. New York City finished 2021 with private employment close to 3.7 million jobs, up 218,000 from January 2021, but still 413,000 below the pre-pandemic peak in February of 2020.
Restaurant and retail workers were hit especially hard and employment in these sectors is likely to remain lower than pre-pandemic levels, as many of the office workers that once patronized Manhattan bars, restaurants and stores continue to work remotely on at least a part-time basis. All of us, but especially low-income New Yorkers, feel the sharp pinch of inflation raising the cost of rent, energy, child care, and more.
Adjusting to remote and hybrid work – and its impacts on office space and employment – is one of the greatest challenges to the city’s economic recovery. Going forward, I hope to see less finger-wagging and more creativity and collaboration from both the public and private sectors to reimagine office space and jumpstart the jobs and businesses of tomorrow. Think biotech labs, innovation incubators, CUNY campuses, and more midtown karaoke.
Despite the extraordinary challenges, there are many reasons for optimism about our city’s economic recovery. Property values rebounded in the most recent tentative property roll, residential real-estate transactions have been strong, and tax collections to-date are $1.6 billion above the November forecast. We face great risks and uncertainties – Russia’s war on Ukraine, inflation, federal monetary policy, climate change – but the indicators point uniformly to an ongoing recovery over the coming year.
Since the November Plan, the Office of Management and Budget (OMB) has increased its tax revenue forecast by $1.6 billion. Since that is nearly the same as the year-to-date increase, with five months still left in the fiscal year, my office projects that actual year-end collections will be above OMB’s forecast by approximately an additional $1.4 billion this year and $800 million next year.
On the expense side, the Mayor has asked agencies to trim their headcounts and budgets through attrition and efficiencies, which rightly produces recurring savings throughout the financial plan, a positive change from the prior Administration’s savings plans. But at the same time, the City faces numerous risks from under-budgeted expenses such as overtime, homeless shelters, rental assistance, and Carter cases. Some of these risks are perpetually under-budgeted by OMB, while others face a fiscal cliff when Federal COVID funds expire in FY 2026.
Of note, my office projects that overtime will be above budget by $431 million this year and $348 million in FY 2023, fueled in part by the high use of sick leave during the Omicron wave. So far this year, from July through January, actual overtime spending has exceeded pre-pandemic levels over the same period by 31%. Among uniformed staff, year-to-date overtime has exceeded pre-pandemic levels by 12% at the Police Department, 71% at the Department of Correction, 56% at the Fire Department, and 151% at the Department of Sanitation.
Unfortunately, the Department of Correction (DOC), where reform is urgently needed, was shielded from cost-cutting, despite the fact that it’s paying workers who haven’t shown up to work in months. DOC spends more than half a million dollars per year to detain one individual. Yet 2021 was the deadliest year in City jails in recent memory, and the Board of Correction continues to receive a fraction of what the City spends on DOC to ensure the department complies with minimum standards of care. It is urgent that DOC and all actors in the criminal legal system actively work toward both a rationalized workforce and a lower jail population to make the closure of Rikers Island a reality by 2027.
Factoring in these increases in both revenue and expenses, we project a balanced budget this year and next, but slightly larger gaps of $3.2 billion in FY 2024, $2.9 billion in FY 2025, and $4.4 billion in FY 2026. However, there are two critical items to note.
First, while OMB has prudently addressed one labor-related risk, another looms large. The illusory $500 million annually in labor savings is gone, but new labor contracts are not yet factored in. By 2023, all of the City’s labor agreements will expire, but there is no funding in the budget for wage increases for the first two years of each contract period. Each 1% increase in wages for City employees, including pensions, would cost approximately $450 million in the first full year and compound over time.
Second, the current plan does not include a credible effort to build up the long-term reserves the City needs, with only a scant $55 million addition in FY 2023 and nothing in the remaining years of the plan. We are far below the budget cushion we need to weather the next fiscal downturn, and the budget includes no plan to get there. It remains urgent to codify regular deposits into the Rainy-Day Fund year-over-year. My office will offer guidelines for how to do this in the near future.
Making Wise Use of Stimulus Funds
One critical lens on this year’s budget is the use of Federal COVID aid. From FY 2020 through FY 2026, the City is expected to spend $26 billion. We’ve already spent or committed roughly half of it, but that means there are equally as many choices to make about how we spend the rest.
To ensure that we are wisely using this one-time opportunity to help vulnerable students, small businesses, and neighborhoods recover, yesterday my office unveiled a new COVID funding tracker that allows the public to track federal stimulus funding. The tracker enables the public to view and download planned and actual spending by agency, unit of appropriation, budget code and object code.
Unfortunately, what we’re getting for this spending is in too many cases less clear – because so far we have no reporting on outcomes.
For example, data available on the tracker show that the Department of Education (DOE) has spent $725 million to maintain safe and clean classrooms, but we don’t yet have clarity on the distribution of ventilation and measures of indoor air quality. We’ve spent more than $260 million on “learning loss,” but we do not know what these funds bought or how funds have impacted our students’ academic, social, and emotional recovery. I have asked and continue to urge the Administration to produce timely interim data on outcomes, so we can make better decisions about how to spend the remainder of this essential one-time resource.
Further complicating matters, due to the City’s inability to uniformly link grant funding sources to expenditures, there is no clear mechanism to monitor and control spending against grants by which the City can provide more accurate budget projections. This limitation prevents the City from being able to provide greater transparency with respect to the spending of governmental aid. I know that OMB is well aware of these issues and we’re committed to working with them by initiating a cost accounting feature in the City’s financial management system, which is long overdue.
Focusing on the Basics
As we look toward the future of our city, we need to ensure we’re getting the basics right. One area of COVID spending reveals both the importance and the challenge the City faces in spending wisely on a thriving and inclusive recovery: sanitation.
Across the five boroughs, New Yorkers in every community have told me they are deeply distressed by how dirty their neighborhoods are. Evidence shows a strong correlation between neighborhood cleanliness and overall quality-of-life. And this is an equity issue as well: Black and Latino New Yorkers are twice as likely as white New Yorkers to prioritize trash, sanitation, garbage, and rats as a priority for City action – not to mention more likely to live near waste transfer stations that affect air quality and health.
So the previous administration was smart to allocate $230 million in stimulus funds to clean up neighborhoods. On one of his last days in office, then-Mayor de Blasio announced some numbers: the New-Deal inspired City Cleanup Corps had removed 1 million trash bags, hand-swept 70,000 block faces, and maintained 40,000 rain gardens.
Were neighborhoods cleaner? Did anyone’s sense of quality-of-life improve? Will additional cleaning continue? We don’t know. And the proposed FY 2023 budget goes backwards, rather than forwards.
We need to make sure all neighborhoods in our city are receiving timely and effective sanitation services. I know that’s what Sanitation Chair Sandy Nurse is focused on. This is not the time to cut organic waste collection, but to plan to expand it citywide. And we should move toward innovative solutions like street-level containerization that could dramatically improve the cleanliness and quality-of-life of all our neighborhoods.
A similar focus-on-the-basics is critical in so many other areas as well. I hope the Council will be a strong voice for scaling up investments in evidence-based public safety interventions like violence interrupter programs, supportive housing, effective mental health outreach, and community-based responses to hate violence such as the Hate Violence Prevention Initiative. As we boost funding for these initiatives, we must also appropriately fund the City’s reporting and monitoring infrastructure so we can make sure we are getting the most for every taxpayer dollar.
Investing for a More Inclusive Recovery
For the long-term, we need to make sure the dollars we spend take aim at addressing the pre-existing inequalities that the pandemic exacerbated.
I was pleased to see some needed investments in Mayor Adams’ first budget proposal, especially in areas the Council has long championed, including baselined funding for 100,000 summer youth jobs, baselining Fair Fares, and increasing funding for young people in foster care through Fair Futures. But there is, of course, a very far way to go.
Given the housing affordability and supply crisis currently facing our city – a city in which more than 45,000 people sleep in shelters each night, thousands more on our streets and subways, hundreds of thousands more fear eviction, and in a survey of young people released by the NYC Youth Agenda last week, 40% of young people fear they won’t be able to afford to live in the neighborhoods they’ve grown up in – I was disappointed not to see a serious commitment to increasing funding for affordable or supportive housing in this budget.
I urge the Council to push for the $4 billion in capital funding that the broad United for Housing coalition has identified as what’s needed to save NYCHA, preserve our existing affordable housing stock, and invest in new affordable and supportive housing. More funding is the only way to achieve deeper affordability and to end our homelessness crisis. More resources will allow supportive housing providers to serve New Yorkers leaving prison and long-term hospital stays in addition to chronically homeless New Yorkers, and is key to ensuring providers can afford market rents and vital services for residents. NYCHA is a key piece to the puzzle and must be included in the Council and Administration’s vision for preserving affordable housing.
It’s also time to restore a large-scale, affordable multifamily cooperative homeownership program. The Mitchell-Lama Co-ops are one of the best public policies in the history of our city. Instead of directing 80% of our housing subsidies to for-profit, private developers to build rental housing, we should invest at least half of it – and all of the City-owned land we dispose for housing – to non-profit developers, limited equity cooperatives, and community land trusts for the community-owned, permanently-affordable and supportive housing we need.
Spending our affordable housing subsidies wisely also means pushing the State legislature to end the tax giveaway known as 421-a. Although it’s a State policy, that’s $1.7 billion a year in New York City property taxes.
We should let it end and take the opportunity it opens to reform our deeply inequitable and confusing property tax system. My neighbors and I in Park Slope are undertaxed relative to homeowners in the Speaker’s district in Southeast Queens or in Finance Chair Brannan’s district in southern Brooklyn. There’s simply no way to justify it. And our property tax system also discourages rental housing development, a large part of why developers argue 421-a is needed.
So I hope you will join me in calling on the State legislature and the Governor to allow 421-a to expire in June, and then set a deadline of the end of this calendar year to adopt comprehensive property tax reform, with parity among homeowners, and between rentals, condos, and co-ops for future development.
Building a More Resilient City for the Long Term
Finally, having seen during the pandemic what it looks like when we fail to prepare for a crisis, we must invest now in our City’s preparedness for the future risks we face. I was happy to see Governor Hochul and Mayor Adams address cybersecurity last week, one very real risk we face.
I mentioned earlier the need to boost our Rainy Day Fund. But of course, being prepared for a rainy day in the New York City of 2022 means that we must center climate resilience. Simply put: six months after Hurricane Ida, 10 years after Hurricane Sandy, we’ve done far too little to get our sewers, streets, and vulnerable communities ready for the storms to come.
Earlier this week, the UN released a report underscoring the urgent investments to prepare for these threats. Put simply in the words of UN Secretary General Guterres, “adaptation saves lives.”
The Federal infrastructure bill presents a once-in-a-generation opportunity to invest in our infrastructure. We need a laser-focus on resilience that strategically combines federal and local resources and creatively integrates multiple benefits within our infrastructure investments to ensure that each dollar we spend maximizes public well-being. Projects to improve the safety of our intersections and streets should also efficiently integrate strategies to manage our stormwater and reduce urban heat island. These investments must be made with a clear pathway to good jobs for local residents and urgent reforms in our capital projects management to get projects done on-time and on-budget.
The City Council passed Local Law 97 in 2019, the most aggressive law in the country requiring owners to retrofit larger buildings for energy efficiency. Yet this budget fails to sufficiently staff the Office of Building Energy and Emissions Performance needed to implement and enforce it. Building a resilient housing stock will require that the City provide financial resources, technological support and outreach to affordable housing developers now. And somehow, we’re still putting corrosive road salt down on our aging roads and bridges, even though less destructive and more environmentally sustainable options exist, because the budget does not include a modest investment in the trucks needed for that conversion.
We need to go much further and faster in moving toward clean energy, which is why I’ve proposed the Public Solar NYC plan, to dramatically scale-up rooftop solar installations through an innovative municipal approach. I hope the Council will consider putting $110 million into the capital budget to get it started, and push for a total of $550 million over five years.
And based on hard post-disaster conversations with constituents of Councilmembers Riley, Williams, Brooks-Powers, Finance Chair Brannan, and Speaker Adams, we have identified the need to establish and fund a Disaster Recovery Support Center – a Council-funded resource to help communities navigate the complex web of federal and local assistance, insurance, claims, and recovery process after disasters strike.
We’ve already seen, too many times just in the last few years, the costs of not being prepared for storms and other emergencies. And we’ve seen that those disasters hit the most vulnerable households hardest. It is incumbent on us to budget now to prepare for the risks ahead.
The good news is this, though: Focusing on the basics, investing in a more inclusive recovery, and building a more resilient city are, by far, the best ways to build a genuinely thriving New York City for the years ahead.
Thank you for the opportunity to testify. I am happy to answer questions.
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