Stringer creates new ‘agency watch list’ to spotlight City agencies that must deliver better results

Despite warning signs, budget cushion remains inadequate

Stringer renews call for more vigorous citywide savings program

(New York, NY) — Amidst growing indications that the economic expansion of the last decade is waning, and as a hostile federal government targets the nation’s urban centers, New York City Comptroller Scott M. Stringer today presented his analysis of the Mayor’s fiscal year (FY) 2019 Preliminary Budget and Financial Plan. The Comptroller’s annual presentation rolled out a new ‘agency watch list’ to spotlight City agencies that raise the most budgetary concerns, and for which data-driven approaches are critically needed to measure and improve performance. Agencies included on the list for FY 2019 are the Departments of Homeless Services (DHS), Education (DOE), and Correction (DOC).

“Our economy is in solid position, but it won’t last forever, as economic and job growth slow in the years to come. With President Trump’s proposed budget cuts going after the most vulnerable New Yorkers, and his tax bill targeting our economy, it’s absolutely critical that New York City prepare today for whatever comes tomorrow. That means spending our limited resources in a way that achieves maximum impact,” said New York City Comptroller Scott M. Stringer. “Budgets are about priorities, and ours need to be on making sure that those who need our help the most get it, and that we can continue to provide all New Yorkers the critical City services they count on—in both good times and bad. Mayor de Blasio has offered a Preliminary Budget that puts forward a number of laudable initiatives that I support. But as we confront the challenges ahead, we will have to grow our budget cushion and implement a more vigorous agency savings program. That’s why this year, I’m introducing an ‘agency watch list,’ to shine a light on the departments that absolutely must deliver better results if we’re going to maintain City services, while keeping our fiscal house in order.”

The Comptroller’s wide-ranging presentation covered several aspects of the City Preliminary Budget and the state of the City’s economy, including:

Overview of the FY 2019 Preliminary Budget.

  • Spending grows a modest 1.4% in FY 2019;
  • Spending is projected to accelerate to an average annual rate of 2.6% over the entire Plan period, fiscal years 2018 to 2022;
  • In contrast, revenues are projected to grow at an average 2.2% each year until FY 2022, resulting in budget gaps of $2.2 billion in FY 2020, $1.5 billion in FY 2021, and $1.7 billion in FY 2022; and
  • So far this year, the February Plan shows a $2.6 billion budget surplus in FY 2018, down nearly $1.6 billion from the $4.2 billion budget surplus of FY 2017.

The Comptroller’s Economic Outlook

While the City’s economy is still growing, the Comptroller’s office forecasts that growth will slow.

  • Any short-run stimulus effects of federal tax cuts and spending are likely to wear off quickly as the Federal Reserve and markets react to rising federal deficits and inflationary expectations.
  • As a result, job growth in the City is expected to decelerate from an average of nearly 90,000 new jobs per year since the end of the Great Recession in 2010, to 22,700 in 2020, 15,900 in 2021, and 16,300 in 2022; and
  • The City’s declining cash balances constitute an early warning signal, as they currently sit more than $2 billion below last year’s level, after falling to a low in December of $1 billion – the lowest point since 2010.

Agency Watch List

This year the Comptroller is introducing an Agency Watch List of the City agencies that are of most concern when it comes to budgeting.

DHS: Citywide Spending for Homeless Services Continues to Rise While Homeless Population Grows

  • Citywide spending on homelessness across all agencies has more than doubled from $1.1 billion in FY 2013 to a projected $2.6 billion in FY 2019;
  • Spending on shelters alone has nearly doubled since FY 2013 – from just over $1 billion to $1.9 billion dollars in FY 2019; and
  • Despite major investments in prevention and housing, the number of individuals residing in shelters has steadily increased from 49,673 in 2013 to 61,029 as of February 2, 2018.

DOE:  More for the Classroom, Less for the Bureaucracy

  • Since 2012, Central Administration staff has increased by more than 400, a 24% rate of growth – twice the rate of teaching staff growth, at 12%.
  • There is rampant waste and lack of accountability at DOE. Comptroller audits have found:
    • In a sample of just 8 schools and one administrative site, one-third of computer hardware was unaccounted for, with no follow-up action to implement basic controls;
    • $1 billion investment in high-speed broadband while one in three teachers remain dissatisfied with the service; and
    • $2.7 billion in no-bid contracts.

DOC: Inmate Population is Down, but Spending – and Violence – Are Up

  • In the last decade, the average daily inmate population has declined by over 30 percent, from 13,850 in 2008 to 9,500 in 2017;
  • But over the same period, the average annual cost of housing an inmate on Rikers has more than doubled, from about $117,000 in 2008 to over $270,000 in 2017; and
  • The number of violent incidents against both inmates and correctional officers has more than tripled over the same period, from 441 per 1,000 average daily population in 2008 to 1,332 per 1,000 average daily population in 2017.

Budget Cushion Must be Bolstered

The City’s projected budget cushion – the budget resources available at the beginning of each fiscal year to help the City weather unexpected events – is currently insufficient, at just 9% of adjusted FY 2019 spending.

  • The optimal range for the City’s reserve cushion is between 12% and 18% of spending;
  • At the start of the last recession in 2009, the City’s budget cushion was equivalent to more than 17% of spending;
  • At the start of FY 2018, the City made progress towards the lower bound of the optimal range by boosting the budget cushion  to 11.7% of adjusted spending, up from 11.1% at the start of FY 2017;
  • As of the February Plan, the City’s accumulated FY 2018 surplus is over $1.5 billion less than at the start of the year;
  • That means that in the absence of adding more to the accumulated surplus or reserves before the end of the fiscal year, the City would start FY 2019 with a cushion equal to just 9% of projected spending – about $8.5 billion; and
  • To reach the lower bound of the optimal range, the City needs to add more than $2 billion to the budget cushion.

Need for Vigorous Agency Savings Plan

The Mayor has proposed a $3.3 billion dollar Citywide Savings Program over the Financial Plan period. In the past, City agencies contributed more relative to the City-funds budget, and Comptroller Stringer once again recommends that City agencies do a serious scrub of their budgets and operations to identify more savings and efficiencies to help address potential risks – something City agencies have not been asked to do in the last four budget cycles.

  • The average agency savings was about 2.7% of City-funds agency expenditures in FY 2008 through FY 2013; and
  • However, the average agency savings in the Citywide Savings Program since amounts to 1.1%.