Comptroller Lander Provides Testimony to the City Council on FY 2024 Preliminary Budget

New York, NY – New York City Comptroller Brad Lander released a report on the Adams administration’s preliminary budget for Fiscal Year 2024 and testified to the City Council about the short- and long-term outlooks for the City’s economy and finances.

The report on the FY 2024 Preliminary Budget includes the Comptroller’s office’s economic forecast and analysis of budgetary risks facing the City of New York, including updated analysis of the cost of collective bargaining agreements and the provision of services for asylum seekers. The report is available here.

The Comptroller’s office also released a new brief, Understaffed, Underserved, on the impacts of staff vacancies on agency performance, drawing on data from the January Mayor’s Management Report. Among the 15 agencies with the highest vacancy rates, the Department of Small Business Services, Department of Health and Mental Hygiene, and Housing Preservation and Development are falling farthest behind on the critical indicators they set for themselves in the Mayor’s Management Report.

Comptroller Lander’s testimony to the City Council is available online here and the hearing can be viewed online here. Remarks as prepared for delivery:

Good afternoon, Speaker Adams, Chair Brannan, members of the Finance Committee and City Council. I’m glad to be here to discuss the Preliminary Budget, the state of NYC’s economy, and how we can budget for a thriving future. Joining me today are Executive Deputy Comptroller Francesco Brindisi and Deputy Comptroller for Budget Krista Olson.  

This morning we released our Preliminary Budget and Financial Plan report (90+ pages which I will briefly summarize here), as well as a brief on how City staff vacancies impact outcomes per the Mayor’s Management Report.   

The City’s fiscal outlook differs significantly from that depicted in the Preliminary Budget for three reasons: additional costs from the collective bargaining agreement the City recently reached with DC37, shelter and services provision for asylum seekers, and cost shifts proposed by the Governor in the State’s Executive Budget. As a result, before the potential fiscal impact of asylum seekers and State Executive Budget, budget gaps are modest and manageable for Fiscal Years 2023 and 2024, but become significant in the outyears of the Financial Plan.    

At the same time, as the “New New York” panel convened by the Governor and Mayor outlined, New York’s economic future depends on significant investments in affordable housing, child care, mass transit, and public realm. How to navigate these competing realities is the challenge facing the Council and the Mayor in the years ahead.    

New York City’s Economy  

New York City’s economy has proven resilient despite the pandemic’s disruption and tighter monetary policy. Our updated forecast projects an economic “soft-landing,” with national and City’s economies slowing down but avoiding a recession.  

Last month, Fitch Ratings upgraded the City’s General Obligation bonds, which fund our capital program, to AA, citing our strong recovery and long-term reserves the Council funded at my urging last year.    

Jobs have returned to 98% of their pre-pandemic peak.  Health care and information technology are above pre-pandemic levels. However, jobs in the arts, retail, and accommodation and food services remain 13% below pre-pandemic levels.   

Cost of living, specifically housing affordability, is a key challenge. After a dip at the beginning of the pandemic, asking rents rose above their previous peak, averaging $3,500 over the last few months. Nearly 30% of New Yorkers spend over half of their income on rent. Local inflation has risen 12.8% since January 2020, without the minimum wage changing since 2019 – strong rationale for raising the minimum wage.    

Comptroller’s Assessment of the Preliminary Budget  

The Mayor’s FY 2024 Preliminary Budget totals $102.7 billion. The gap of $4.2 billion in the Adopted Plan was resolved through a combination of revenue increases, pre-payments, and a PEG totaling $1.95 billion in savings, resulting in reducing 4,374 city positions.    

The FY 2024 budget reduces spending with the ramping down of COVID federal grant-related spending. New York City spent $18.8 billion through FY 2022, with $7.6 billion remaining in the current financial plan.  

City revenues are above plan  

On the positive side, with updated property tax receipt information unavailable when the Preliminary Budget was released, we project that overall revenues will come in higher than the City’s projections in each year of the Financial Plan.   

Since OMB released the Preliminary Budget in January, three significant things have changed:  

Labor agreement with DC37   

The tentative contract agreement reached between the City and DC 37 would add a total of $16.3 billion over the Financial Plan, if other unions follow suit.   

Rising costs for shelter and services for those seeking asylum  

Second, the cost for shelter and services for asylum seekers is escalating. City Hall now projects the cumulative cost for FY 2023 and FY 2024 to be $4.2 billion. State and Federal aid are projected to cover only a quarter of that as costs continue to grow.  

New York State Executive Budget would negatively impact New York City  

Third, the NY State Executive Budget, while providing partial funding for sheltering asylum seekers and an increase in school funding, also includes substantial cost shifts, unfunded mandates, and revenue cuts. In total, the Governor’s proposed budget would cost NYC $1 billion, from transit cost shifts to charter school mandates, growing to over $2 billion by 2027 – exacerbating our already widening budget gaps. And that does not include the cost of implementing the State’s class size mandate, which requires class size reductions over the next five years.  

Additional risks  

As in past years, my office identified many under budgeted areas that are likely to significantly increase expenditures above financial plan projections. These include funding shortfalls for tuition at existing charter schools, underfunding of Carter special education cases, pupil transportation, City contributions to the MTA (even before the proposed increase in the Governor’s Executive Budget), and uniformed overtime.  

As a result, despite the revised revenue projection, budget gaps are estimated to grow from modest and manageable amounts this year and next — $1.30 billion (1.2% of expenditures) in FY 2023 and $1.51 billion (1.5%) in FY 2024 – to significant levels in the outyears – $7.07 billion (6.7%) in FY 2025, $10.22 billion (9.6%) in FY 2026 and $11.66 billion (10.6%) in FY 2027.   

These gaps do not include the additional risk derived from asylum seekers service costs or the impact of the Governor’s executive budget.  

For FY 2023, the City has access to $1.8 billion in the General Reserve and Capital Stabilization Reserve, and the Mayor’s Executive Budget later this spring will likely include additional savings and resources to balance the FY 2024 budget – with some room for restorations of harmful cuts.   

In the outyears, however, the size of these budget gaps, along with the need for substantial additional investments in affordable housing, child care, and mental health necessary for the city’s economic thriving, indicates the need for structural interventions on both expenses and revenues.  

Critical Needs for FY 2024  

Within the City’s FY 2024 Preliminary Budget, I’d like to highlight a few critical needs that can  be addressed within the contours of a balanced budget.   

First, we must pivot in how we approach the influx of people seeking asylum. For the past nine months, the City rightly focused on scaling up shelter capacity.   

Now, the City must shift to getting people out of shelter through a mix of scaling up support for work authorizations to accelerating pathways for individuals and families – beginning with long-term shelter residents – to permanent housing. The City can both help families get on a pathway to economic stability while significantly reducing long-term costs of providing shelter.     

Reversing the counterproductive cuts to CUNY and public libraries are essential to preserving critical resources that New Yorkers rely on. Even with big picture risks, we can find $20.5 million to prevent library hour cuts.  

I also urge the Council to prioritize funding for 25 shelter-based education coordinators to strengthen the 6 District 79 English Language Learner programs put in place this past year, Promise NYC’s child care for undocumented children, and the roll-out of universal curbside composting.  

Making Rainy Day Fund Deposits Automatic  

Last year, my office advocated for a new formula for making regular deposits into and codifying withdrawals of the City’s Rainy Day Fund. While the Council and the Mayor made the largest deposit ever into reserves, you did not move to adopt a formulaic approach to remove these deposits from the budget dance. I urge you to do so.   

City Agency Vacancy Challenges  

The FY 2024 preliminary budget includes the impact of several rounds of savings initiatives, primarily through blunt vacancy reductions. While an annual review to identify efficiencies is a necessary component to budgeting, the across-the-board, eliminate-half-the-outstanding vacancies approach is a penny-wise, pound-foolish approach.   

In a new brief we’re releasing today, Understaffed, Underserved, we identify where high vacancies impact direct services to New Yorkers and the City’s long-term planning and risk management. Among the 15 agencies with the highest vacancy rates, the Department of Small Business Services, Department of Health and Mental Hygiene, and Housing Preservation and Development are falling farthest behind on the critical indicators they set for themselves in the Mayor’s Management Report.   

The Department for the Aging is seeing poor performance on home-delivered meals and case management services. The Department of Finance is taking longer to process SCRIE and DRIE applications. And NYC Emergency Management is conducting fewer emergency preparedness drills and tabletop exercises, and – a perennial City Council bone of contention – the Parks Department is completing fewer capital projects on time.  

I was glad to see flexible work arrangements, including hybrid/remote work and targeted salary adjustments for hard-to-recruit positions included in the recent tentative agreement between OLR and DC37. Both my office and the 5BORO Institute recommend expediting hiring, allowing hybrid work for appropriate positions, considering compensation levels for key hard-to-recruit slots, and designating Chief Talent/Recruitment Officers to drive this work.  

Capital Budget  

A few words about the Capital Budget (which, as many of you know, is really my favorite part). The January 2023 Capital Commitment Plan totals $96.55 billion in all-funds authorized commitments for FY 2023 – FY 2027.  

New York City also has a once-in-a-generation opportunity to draw down funds from the federal Infrastructure Investment and Jobs Act (which, for the first time, allows a focus on local hiring), the New York State Environmental Bond Act, and the Inflation Reduction Act for decarbonization.  

These resources collectively represent an extraordinary opportunity to improve our infrastructure, improve our economy, address the affordability crisis, ready the city for climate change, and create union jobs for New Yorkers.   

For that to work, we have to reform the City’s capital process to deliver projects on-time and on-budget. Last week I was in Albany with leaders in the Administration, talking with state legislators about changes to streamline capital approvals, improve procurement processes, and manage projects more effectively. My office proudly updated and modernized Comptroller’s Directive 10 and are registering contracts in record time. Later this spring, I look forward to the long-awaited Citywide Capital Projects Tracker, which I sponsored as a Councilmember.  

The City must also ensure that projects are equitably distributed to diverse contractors. Our report last week on the still-abysmal share of City contracts going to M/WBEs showed that construction lags farther behind other sectors when contracting with firms owned by women and people of color.  

Strengthening NYC’s Capital Investments in Affordable Housing  

As NYC confronts a housing crisis, investing capital dollars at scale in housing must be a top priority. The City should allocate at least $4 billion this year for housing, including $1.5 billion for NYCHA, to meet the need. And as we know from past years, allocating that capital funding is not enough, HPD must be adequately staffed to get projects reviewed and construction underway.   

We also have an opportunity and obligation to ensure that housing construction spending makes the biggest impact for the people who most need affordable housing. That means targeting our affordable housing dollars to the level of affordability – not subsidizing market-rate development – and investing in housing outside the speculative market that will remain permanently affordable. What if we started a Mitchell-Lama 2.0, allowing developers to receive capital subsidies, tax breaks, and density increases to create permanently affordable, multi-family, shared-equity cooperative homeownership?     

Planning and Investing for the Long Term  

Last fall, the Governor and Mayor brought together 59 business leaders and policy experts to craft a plan for the city’s future. The “New New York” proposal agreed that we must first invest in the fundamentals that make the city a stimulating place to live, work, and play. They recommended significant investments in affordable housing, transit, child care, climate resiliency, and public realm in order to ensure New York’s long-term economic vitality.   

For just a moment, let’s imagine following and building upon the recommendations of that report. We could be a city that provides pathways for working-class families to affordable homeownership, universal child care, first-class mental health, and high-quality education for all kids through university. If we did, our families, our economy, and our city would flourish.    

Let’s be clear: While savings and efficiencies are necessary, they won’t be near enough to allow us to invest in the ambitious programs to secure NYC’s economic success, while also closing the budget gaps we face. New funding will be necessary.   

This budget cycle is the time to ask Albany for the resources and authority to raise revenues necessary to invest in the City’s future. Any new revenues should come from those who can afford to contribute more (NY State saw the number of millionaires rise this year as the wealthy became wealthier) and benefit from a thriving city. We sure can’t let the State short-change the City on our own revenues and obligations. My office will be working over the ensuing months as we move toward budget adoption; I would welcome conversations with you.  

As we look to the long-term, we have very real challenges, and also very real opportunities. The best path forward is to build a city that spends wisely and prudently, that sets aside adequate resources for a rainy day, and that invests in the future that New Yorkers deserve, this year and for the years to come.  

Thank you. 

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