In New Report, NYC Comptroller Lander Urges Stronger Management to Address City Budget Gaps

Today, New York City Comptroller Brad Lander laid out the city’s economic and fiscal outlook in his office’s annual State of the City’s Economy and Finances. The Comptroller’s Office sees economic growth at a moderate pace that continues the city’s economic recovery, though below the strong growth trajectory in the years before the pandemic. Overall, the outlook for the City’s economy is one of stability following the pandemic-induced recession and the uncertainty of just one year ago.   

“Notwithstanding the anxious vibes, New York City’s economic recovery is strong with jobs back above pre-pandemic levels. With stronger management from City Hall to address challenges of affordability and quality-of-life, well-targeted plans to address fiscal stress, and strategic investments in our city’s future, New York City’s economy can continue to thrive and grow in the years to come,” said Comptroller Brad Lander. 

Fiscally, the Comptroller’s Office projects tax revenues to exceed currently budgeted projections, but those revenues alone will not be sufficient to close the budget gaps the City is facing next year and beyond. The gaps are a combination of long-standing areas of overspending, appropriate salary increases for City workers in a high-inflation environment, the growth in asylum seekers without sufficient Federal support, and the expiration of Federal pandemic stimulus. 

Based on its forecast of revenues and expenses, the Comptroller’s Office is projecting a small surplus of $517 million for FY 2024. For FY 2025, the City faces a projected gap of $7.77 billion. When FY 2024 surplus funds are applied to prepay FY 2025 expenses, as they typically are, the projected FY 2025 gap shrinks to $5.80 billion. When the Comptroller’s Office’s adjustments to OMB’s projections are included (including habitual areas of underbudgeting), restated gaps are projected to grow in the out years, reaching $12.24 billion in FY 2027. 

Addressing these gaps without harming core services that New Yorkers rely on will require stronger management from City Hall. The Comptroller calls for redoubling efforts to control ballooning costs in areas such as claims against the City, special education Carter Cases, and overtime spending, rather than cuts to agency programs and staffing (including public libraries, CUNY, community schools, job-training programs, alternatives to incarceration, parks programs, and a tax savings program for low- and moderate-income New Yorkers). The Comptroller urges the Mayor and City Council not to use the City’s long-term reserves to cover the budget gaps, but instead to preserve their use for periods of recession.  

In order to continue valuable programs funded by now expiring Federal Covid aid including 3-K, Summer Rising, student mental health services, and others (at a cost of $470 million), the Comptroller urges Albany to consider modest revenue increases on the top 1% households in order to provide support municipalities across the state to continue these critical investments for New York’s future.  

Stronger management to address fiscal challenges will also require more detailed and up-to-date information on policy impacts and cost trends, including the population of asylum seekers and real-time cost data on the price of emergency procurements as well as more specific reporting on the progress of implementing PEGs to assess whether projected savings are being achieved. To this end, the Comptroller calls on OMB to reinstate recurring oversight meetings with the City’s fiscal monitors, as previously recommended by the NYS Comptroller and the Citizens Budget Commission. 

In addition to the State of the City’s Economy and Finances, the Comptroller released an updated analysis on asylum-seeker spending. The Comptroller’s Office estimates that asylum seeker costs could total $465 million less than the City budgeted this year, and $1.61 billion less than planned for FY 2025. The Comptroller’s Office estimate of total asylum seeker costs in FY 2024 and FY 2025 is about 20 percent lower than what the Mayor projects over the two years. When the Comptroller’s Office’s estimates of reimbursements from the Federal government (less than currently budgeted) and the State (more than currently budgeted) are taken into account, this results in City-fund offsets of $674 million and $1.60 billion in FY 2024 and FY 2025, respectively. For FY 2026 and FY 2027, the Comptroller’s Office projects asylum seeker costs will be $1.99 billion and $2.49 billion more than currently budgeted (all City funds). 

After releasing the November Plan, OMB issued a letter to agencies that the FY 2025 Preliminary Budget will include a 20 percent reduction to the asylum seeker budget in FY 2024 and FY 2025. Given that the current fiscal year is nearly halfway over, more of the cost reduction will take place in FY 2025. In order to achieve savings, the City would need a combination of lower expenses per household (through more competitive pricing and/or a more efficient provision of services), a lower overall population, and/or increased Federal or State reimbursement.  

Despite the City instituting time limits on the shelter stays of asylum seekers that require households to leave and reapply, the November Plan’s increase of asylum seeker funding is based on estimates made before the changes were put in place and this restriction’s impact is yet to be established empirically. In addition, projecting the number of asylum seekers in City shelter is challenging, and the variation in the inflow of asylum seekers fluctuates the need to stand up shelter at a given moment. 

While OMB did not revise its FY 2024 per diem of $383 for the November Plan, per diems rose in the first quarter of FY 2024. According to the City Council’s October Terms and Conditions report, the per diem reached $396. Therefore, the Comptroller created cost scenarios based on the assumption that the per diem will remain at $396 in FY 2024 and will be lower afterward. Maintaining the higher per diem in FY 2024 and reducing per diems in FY 2025 and the outyears is plausible for several reasons: 

• If service levels remain the same, costs will remain high until emergency contracts expire and competitive procurement begins, which should contribute to lower per diems in FY 2025.  

• Historically, the cost of sheltering families with children is greater than that of single individuals or adult families. The proportion of families with children has grown through the first part of the fiscal year. 
• Thus far in FY 2024, H+H has spent more than any other City agency, and the November Plan raises its asylum seeker budget in FY 2024 and FY 2025 to levels exceeding those of DHS. Generally, H+H services have been more expensive due to high start-up costs of building out, renovating and maintaining entire non-traditional structures for shelter use, as well as high contract costs. DHS services have proven relatively less expensive through the utilization of non-profits and existing shelter providers in contracted hotel space.  
• To decrease the per diem in FY 2024 the Administration must spend well below current levels to significantly reduce the average, which is unlikely.   
• If the City can maintain operating its current sites and the census does begin to stabilize, the City will have fewer startup and other one-time costs in the outyears and the per diem should decrease. 

The Comptroller is strongly opposed to displacing homeless families from shelter and further disrupting the education of young people who recently experienced trauma. He urges more focus on expanding access to the legal services, case management, and workforce development that will help new arrivals obtain work authorization and employment as a path out of shelter, which is a more humane and economically productive way to reduce shelter costs. 

Lander continued, “The newly-opened clinic that helps process the estimated 15,000 recently eligible Temporary Protective Status (TPS) applications in partnership of the City, State, and Federal government is a promising model to build upon. Instead of kicking families out of shelter in the middle of winter and displacing kids from their schools, we should worker harder and smarter to help families get work authorization and get connected to jobs, so they can get on their feet, move out of shelter, and become the next generation of New Yorkers. That’s how New York City’s economy has thrived for generations – and how it can for generations to come.” 

Click here to view the State of the City’s Economy & Finances, and here to view the Comptroller’s accounting of asylum seekers, including a new analysis on the City’s spending on new arrivals. 

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