Comptroller Lander Releases FY 2025 Executive Budget Analysis and Testifies to City Council

New York, NY — New York City Comptroller Brad Lander released his office’s Fiscal Year 2025 Executive Budget Analysis and testified to the City Council on New York City’s economy and City finances today.

Excerpts from Comptroller Lander’s testimony: 

“Stronger fiscal management is not contrary to deeper investment in programs that create opportunities and address severe affordability challenges facing working class New Yorkers. Quite the opposite, it helps us to preserve and target resources to where they are most needed, so that New York City can remain a place of opportunity for New Yorkers at all income levels, and the city can continue to grow and flourish in the years ahead.”

“Strategic investments in areas like special education services may cost money in the short run but will ultimately improve student outcomes and reduce a billion in annual spending on special education Carter cases.”

“Instead of cutting core services, the City’s fiscal health and the lives of New Yorkers would be better served by planning and implementing long-term efficiency measures in each financial plan that gradually build over time and reduce waste, not service delivery.”

The Comptroller’s Office’s FY 2025 Executive Budget Report is available here. 

The hearing can be viewed online here. 

Full remarks to City Council, as prepared:  

Good morning, Speaker Adams, Chair Brannan, members of the Finance Committee and the City Council. Thank you for having me here today to talk about the FY 2025 Executive Budget. With me is Francesco Brindisi, Executive Deputy Comptroller for Budget and Finance, and Krista Olson, Deputy Comptroller for Budget. 

The $111.6 billion FY 2025 Executive Budget reflects a modestly stronger fiscal position for the City than the Preliminary Budget. It includes a combined $2.3 billion increase in projected tax revenues for this year and next, and the FY 2025 gap is manageable even with the cancellation of the third round of PEGs that the Mayor had announced last fall, and with the restoration of funding for some of the cuts to the Department of Education and the NYPD. 

While these more positive indicators are heartening, my Office continues to project substantial outyear gaps which will take careful planning, honest budgeting, and strong fiscal management to close. 

The Economic Picture and NYC’s Financial Outlook 

New York City’s economy has been reasonably strong and is expected to continue growing at a moderate pace. The number of private sector jobs in the city is higher now than before the pandemic started and the proportion of New Yorkers that are employed is higher than it has ever been before. 

However, most of the new jobs added in the past year have been in just a few relatively lower-wage industries—namely, health care, social services, and food services. Job growth has stagnated in some of the higher-wage service industries that are key to New York City’s economy–and tax revenues–such as finance, technology, and professional services. The lack of momentum, combined with an anticipated cooling off of economic growth nationally, suggests that the city’s economic activity will grow at a slower pace over the next few years. As members of this Council know all too well, residential rents are near record highs at an average of $3,500 per month and rising – a sign of continued attractiveness but far too high for so many families in neighborhoods all across our city and a deterrent for job growth. The slumping commercial real estate market caused by the shift to remote and hybrid work continues to be a serious challenge, but thus far the “doomsday” scenario that many have worried about during the last few years has not materialized. 

The stronger economy enabled OMB to restore some of the cuts that had previously been announced to cultural institutions, schools, and the NYPD, and to put downpayments on some chronically underbudgeted costs and fiscal cliffs. But the funds, including additional support from the State, only partially cover the true needs. Important education programs funded with expiring federal stimulus dollars have been maintained, but in some cases only for one year. While more realistic funding was provided for the CityFHEPS program as currently implemented, we estimate an additional $500 million will actually be spent in each year of the plan. And, of course, while the April Financial Plan did not further reduce essential city services, cuts to critical services and institutions remain. 

The Administration reported gaps of $5.5 billion in FY 2026, rising to $5.7 billion by FY 2028 in the Financial Plan. However, with more accurate estimates for the true costs of services underbudgeted by OMB, my Office sees revised gaps of $2.6 billion in FY 2025 (2.3 percent of total revenues) growing to approximately $8.5 billion in FY 2026 and out (about 7 and a half percent of total annual revenues). 

Beyond the relatively more predictable costs of traditional areas of underbudgeting, there are three fiscal risks that are more uncertain: the cost of providing services to asylum seekers, the cost of implementing the State’s class size mandate, and the cost of the expansion of rental assistance. 

My Office expects that the costs associated with asylum seekers will be lower than budgeted in FY 2025 by $1.32 billion. This is mainly due to a lower projection of households in shelter, which extends the relatively stable trend established in 2024. The projection is subject to an unusual degree of uncertainty due to the unknown trajectory of border crossings and arrivals in New York City, to the uncertainty of federal policy over time, especially given the upcoming election, and to recent changes to City policies, including the haphazard implementation of shelter time-limits which lacks promised case management to help families establish themselves. Further, expenses have been unnecessarily high because of the over-use of emergency procurement without adequate cost controls, as my Office has repeatedly documented, and the slow pivot to competitive procurement. 

In FY 2026 and FY 2027, however, my Office estimates additional City funds will be necessary to cover costs if future State budgets will not include the $1 billion in annual aid assumed by the City. In FY 2028 the Financial Plan does not include any expenses for asylum seekers while my Office projects a risk of $3.19 billion, which could be offset by future State aid. 

Implementation of the class size mandate is not fully funded in the current budget; we estimate that fully funding it would cost an additional $467 million in FY 2026, $933 million in FY 2027 and $1.40 billion in FY 2028, which we have factored into our re-estimate. 

Our re-estimate of expenditures, however, does not include the cost of expanding the rental assistance program as legislated by the City Council, given the uncertainty of pending litigation. However, both the Administration’s and the Council’s fiscal estimates indicate significant potential impacts. 

With those adjustments, my Office projects a surplus of $341 million in FY 2024, and gaps of $1.27 billion in FY 2025, $9.17 billion in FY 2026, $10.61 billion in FY 2027, and $13.00 billion in FY 2028. 

Protecting Opportunities for New Yorkers 

Despite the threat of substantial gaps in future fiscal years, the Executive Budget did make some positive moves to restore core services; but additional investment is still required. 

The Department of Education’s budget was under threat with the imminent expiration of federal COVID-19 stimulus aid. The Financial Plan provided a substantial, if partial, reprieve with over $500 million in combined local and state funding for many important services. The plan includes funding in each fiscal year for coordinators for Students in Temporary Housing, mental health support, Pre-K special education, and community schools. However, other critical programs such as arts education, Summer Rising, and the 

Learning to Work program, are only funded for the coming year. And the restorative justice program saw no reprieve and still faces a shortfall of $8 million. I encourage the Mayor to fulfill his commitment to provide ongoing, annual support for all of these programs. 

Similarly, while this budget restored $92 million for expiring COVID-19 funds for 3K in FY 2025, a fiscal cliff remains in the outyears, and the restoration does not address larger cuts of $170 million that were made to early childhood education, including both 3K and UPK, and Early Learn programs for infants and toddlers. In addition, the DOE must strengthen its outreach efforts to ensure that all families know of the City’s commitment to provide a 3K seat to every family that wants one. The City should also make good on its prior commitment to pay early childhood education workers in community-based organizations at the same level as their public school peers.  

Funding for Promise NYC, the City’s nascent child care program for children whose immigration status disqualifies them from other federal or state child care subsidies, is already insufficient to serve the many children in need, and not yet included in next year’s budget at all. I support the Council’s request to provide ongoing funding for Promise NYC at the higher level of $25 million. 

Students with disabilities must be able to attend schools in their own neighborhood; family members and staff with disabilities should have access as well. With two thirds of schools in NYC still inaccessible, the City should increase its capital commitment by $450 million over the next five years to make more schools fully accessible. 

CUNY, New York’s best driver of economic mobility has borne successive rounds of cuts over the last few years, totaling over $95 million in FY 2025, in addition to annual reductions tied to tuition reimbursement as student enrollment continues to decline. In addition to restoring baselined PEGS, the City should expand critical programs like ASAP|ACE and Reconnect, that keep students on track to initiate and complete their higher education goals. 

And while providing only small fiscal relief, cuts to libraries and cultural programs leave an outsized impact on the students, immigrants, and many others they serve. Libraries face a $40 million cut next year when two successive years of PEGs go into effect. And despite some recent restorations, $8 million in cuts remain to the Cultural Institutions Group and the Cultural Development Fund, which support over a thousand organizations every year. I was also concerned to see that cultural institutions are not seeing any City funding for compensation increases for their staff, even while City staff are now essentially all under contract for multi-year cost of living adjustments, and many human service organizations received at least some funding in their contracts to provide salary increases in light of ongoing inflation. 

The Executive Budget appropriately included an update to the City’s Capital Commitment Plan with increases for the School Construction Authority and the borough-based jails program following State budget legislation that raised the City’s capacity to incur capital debt by $14 billion over two years. 

The City should now also increase capital funding for the critical housing development programs called for in the Council’s budget response. An additional capital investment of $2.5 billion over the next five years will fund the construction and preservation of affordable community-controlled homes, providing stability and equity-building opportunities for low-income and working-class New Yorkers. This is especially crucial now, as the housing legislation passed by the State failed to provide opportunities for real affordable housing solutions – New York City can lead by example here. 

As part of the Executive Budget, OMB also extended the restoration of the Water Authority’s rental payments to the City to FYs 2026-2028, and it is now included in all five fiscal years for a total of $1.44 billion, with the revenue accruing to the General Fund. The FY 2024 and FY 2025 rental payments, which had been included in the Preliminary Budget, contributed more than one third to the proposed 8.5 percent increase in FY 2025 water rates. 

While these resources are covering essential services in the City budget, the proposed rate structure is regressive, falling on the backs of low-income homeowners and renters. The water rate structure should be reformed to provide relief for low-income New Yorkers and sound enforcement mechanisms. In addition, in the face of the climate crisis – as highlighted in my Office’s investigation on flash flood preparedness, which found the City woefully underprepared for extreme rainfall events – the City should dedicate these resources to address our urgent stormwater management and sewer maintenance needs, and also consider instituting a stormwater fee to ensure costs are equitably shared. 

A Stronger Fiscal Framework 

While we should be ambitious in our capital program to make the infrastructure investments that are necessary for our city’s long-term thriving, we must manage responsibly. The expanded debt capacity should be accompanied by a policy that ensures debt service remains below the long-standing threshold of 15 percent of tax revenues. And the City needs a comprehensive, accurate assessment of infrastructure needs to better inform the City’s capital planning and spending decisions. 

The City’s budget should accurately reflect the City’s known expenses and hold agencies accountable when budgets, like that of uniformed overtime, are exceeded year after year. Strategic investments in areas like special education services may cost money in the short run but will ultimately improve student outcomes and reduce the $1 billion in annual spending on special education Carter cases. And instead of cutting core services, the City’s fiscal health and the lives of New Yorkers would be better served by planning and implementing long-term efficiency measures in each financial plan that gradually build over time and reduce waste, not service delivery. Outside fiscal monitors, the Council, and the public should be able to evaluate the success and impact of savings initiatives over time through greater visibility into where and how reductions are made. 

Finally, and perhaps predictably, I continue to advocate for a formula-based approach to contributing to our long-term reserves, which are still far from sufficient to see us through the length of an average recession. My Office has offered a thoughtful approach for such a formula, and I urge the Council and the Administration to adopt it, or something similar. 

Stronger fiscal management is not contrary to deeper investment in programs that create opportunities and address severe affordability challenges facing working class New Yorkers. Quite the opposite, it helps us to preserve and target resources to where they are most needed, so that New York City can remain a place of opportunity for New Yorkers at all income levels, and the city can continue to grow and flourish in the years ahead. 

Thank you. 

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