New York by the Numbers
Weekly Economic and Fiscal Outlook

A Message from the Comptroller

We are living through extraordinary times – as a nation, as a City, and as individuals and communities.  A pandemic is raging that has no parallel in the past century. And in an unprecedented move, our economy was put on hold in order to protect lives and “flatten the curve,” resulting in mass layoffs and lost income for hundreds of thousands of New Yorkers, and a dramatic drop in tax revenues.  In these difficult and uncertain times, I offer this weekly update on the state of our City’s economy and finances in order to provide the public, elected officials, advocates and experts with a clear-eyed, sober assessment of the challenges.

Make no mistake – New York City will recover. Together we have overcome many challenges, and I know we will rise to the one ahead.

Sincerely,

Scott M. Stringer

The Economy

National Indicators

• The national unemployment rate fell to 11.1% in June, according to preliminary, seasonally-adjusted figures, down from 13.3% in May and 14.7% in April. The number of unemployed fell to 17.75 million from 21.0 million in May. Labor force participation also picked up as people returned to work, to 61.5%, from 60.2% in May.
• The number of jobs increased by 4.8 million in June, an increase of 3.6% as businesses began to re-open nationally (Table 1).
• The biggest employment increase was in the Food Services and Drinking Places sector. As restaurants and bars began to re-open nationwide, nearly 1.5 million employees in the sector returned to work, although the sector remains 25% below its pre-pandemic (February) level. Retail trade and personal services saw more modest increases: up 5.4% (740 thousand jobs) and 7.4% (357 thousand jobs), respectively.  The only employment sector that did not show growth in June was State government.  Overall, private employment remains 10% below its February level.
• Much of the improvement in national employment figures was in States that re-opened early. The recent surge in infections in many of those same states may slow the rate of recovery in July – even as other States that have opened more slowly and cautiously – like New York – should continue to see increasing employment as workers return to their jobs.

Table 1: U.S. Employment Situation, June

SOURCE: Bureau of Labor Statistics

• Initial claims for unemployment insurance fell modestly to 1.43 million for the week ending June 27^th (Chart 1). Continuing claims rose very slightly on a seasonally adjusted basis during the week ending June 20^th, to 19.29 million (note that figures for the prior week were adjusted downward from 19.522 million to 19.231 million).

Chart 1

• Even as continuing claims under the regular unemployment insurance program decline, continuing Pandemic Unemployment Assistance (PUA) claims are increasing, rising by 1.786 million for the week ending June 13^th (latest available) to a total of 12.853 million continuing claims. PUA, enacted as part of the CARES Act, covers workers who are typically not eligible for state unemployment benefits, including the self-employed or those unable to work due to COVID-19.
• Regular and PUA continuing claims together cover over 30 million unemployed Americans (Chart 2).

Chart 2

New York City

• Initial unemployment claims by New York City residents fell slightly last week, to 43,868 (Chart 3). Initial claims have stayed roughly constant for the last 5 weeks, averaging 46,150.

Chart 3

SOURCE: NYS DOL

• Residential real estate sales volume is down 44% for March through May compared to 2019; commercial sales volume is down by 53% (Chart 4).
• Residential sales volume is 15% below the previous low point in 2009, during the Great Recession, while commercial sales volume is down by 45%.

Chart 4

SOURCE: NYS DOL

• During the week leading up to the July 4^th holiday, weekday MTA ridership averaged 1.11 million on subways and 1.09 on buses, a slight increase from the previous week (Chart 5).
• Average weekday ridership has gradually expanded since mid-April after reaching a low of 416,500 subway riders during the week ending April 17 and 428,700 bus riders during the week ending April 10. Prior to the shutdown, weekday ridership averaged 5.4 million on subways and 2.2 million on buses.
• Ridership growth began well before city businesses were allowed to reopen and has accelerated since the city entered Phase I on June 8 and Phase II on June 22.

Chart 5

SOURCE: Metropolitan Transportation Authority, Day-by-Day Ridership Numbers.

NOTE: Data for the week ending July 3 goes through Wednesday, July 1.

City Finances

Revenues

• Fiscal year-to-date tax collections through May were up 1.0% or $569 million compared to the same period last year (Table 2). This increase stems from 7.0% growth in property tax collections, partially offset by the decline in non-property tax collections.
• Non-property tax collections through May declined by a net $1.36 billion, or 4.7% compared to the previous fiscal year. Most of the decline was due to a $1.3 billion drop in Personal Income Tax (PIT) collections, largely reflecting the extension of the filing deadline to July 15^th. Property transaction taxes (the real property transfer and mortgage recording taxes) were down nearly $400 million, or 17%, reflecting the decline in sales activity (Chart 4).
• Declines in non-property tax sources were partially mitigated by a 12.8% increase in collections from the General Corporation Tax (GCT; shown below combined with residual Banking Corporation collections and refunds).

Table 2: Tax Revenue Collections through May

SOURCE: Office of Management and Budget

NOTE: General Corporation tax includes Banking Corporation Tax.  Property Transaction taxes includes the Real Property Transfer and Mortgage Recording taxes.

COVID Spending

The authorized budget for COVID-related spending has increased by $1.39 billion to $4.01 billion for FY 2020 (Table 3). The increase reflects spending to date and includes $119 million for the Department of Education and $140 million for the Department of Homeless Services, both of which had no COVID related expenses in the April modified budget.[1] The current modified budget also reflects additional expenditures that are eligible for Federal COVID reimbursements, including $351 million for employee health insurance.

Of this total, $2.69 billion has been committed – that is, the City has incurred obligations for that amount – as of July 2.  Medical, surgical and lab supplies account for $1.29 billion of the commitments. Of the total commitments, $1.30 billion has been expended.

Table 3: COVID19 Budget and Expenditures, FY 2020

SOURCE: Office of the Comptroller from FMS.

NOTE: Expenditures in Dept. of Emergency Management and Dept. of Education are net of expenditures for food and forage, shown separately.

COVID Contracts

Through July 1, the City has registered $3.19 billion in contracts to procure goods and services in response to the COVID pandemic (Table 4). Almost 30 percent of the contracts, $944 million, are for the procurement of personal protective equipment (PPE). Other significant contracts include $505 million for medical staffing for COVID-19, food related contracts for $533 million, $349 million for hotels, $146 million for ventilators and $100 million for testing centers, as shown in Table 4.

Table 4: Registered COVID Contracts through 7-1-2020

SOURCE: Office of the Comptroller analysis of NYC FMS data.

NOTE: Includes only contracts with COVID budget codes.

Cash Position

The City’s central treasury balance (funds available for expenditure) stood at $7.011 billion as of Wednesday, July 1. At the same time last year, the City had $6.659 billion (Chart 6).

At the close of FY 2020, the City’s central treasury balance stood at $6.627 billion. FY 2020 average cash balance measured $6.284 billion, compared to $7.562 billion during FY 2019.

The City’s practice is to dedicate any year-end budgetary surplus to a prepayment of the following year’s expenses. This year’s prepayment totaled $3.819 billion, compared to $4.221 billion at the end of FY 2019.

The Comptroller’s Office’s review of the City’s cash position during the first quarter and projections for cash balances through September 30^th, 2020, are available here.

Chart 6

State Revenues

• New York State collected $4.4 billion in personal income taxes (PIT) in June, based on preliminary reports. Monthly collections were down 16 percent from the prior year (Chart 7).
• The tax filing extension to July 15 and steep job losses contributed to a sharp decline in PIT collections through the first three months of the fiscal year. To date, New York State has collected $8.6 billion, compared to $16.9 billion collected over the same period last year.

Chart 7

SOURCE: New York State Department of Taxation and Finance.

NOTE: Data for June is preliminary.

Spotlight of the Week

The Adopted FY 2021 Budget

Shortly after midnight on July 1^st, the New York City Council approved an $88.19 billion city budget for fiscal year (FY) 2021.  After adjusting for prepayments and the use of reserves, the budget is $6.0 billion, or 6.1%, less than the final FY 2020 budget.

Between the Preliminary Budget proposed by the Mayor in January and the final Adopted Budget, the budget gap for FY 2021 grew by $8.4 billion:

• A decline of $7.1 billion in City tax and non-tax revenues;
• $763 million in cuts and cost shifts in the State budget;
• $508 million in additional expenditures, including $376 million in City Council initiatives and $132 million in other agency spending, including restoration of some cuts proposed by the Mayor in the Executive Budget.

To balance the FY 2021 budget, the City put forward $2.8 billion in savings proposals.[2]  Of these, less than half ($1.2 billion) have recurring outyear value.  One-time actions for FY 2021 include savings from closed or cancelled programs due to COVID restrictions; non-recurring savings, such as the $328 million reduction in NYPD overtime; and one-time revenues (such as a $137 million payment from the Water Board, and a $40 million sale of mortgages by HPD).

The City will draw down $1.6 billion from the Retiree Health Benefits Trust (RHBT) to partially pay for retiree health and welfare benefits for FY 2021, and reduced budgeted reserves by $1.15 billion – leaving just $100 million in budgeted reserves for the year.  The budget also relies on $1 billion in unspecified labor savings.

The plan reversed a number of cuts proposed by the Mayor, including $116 million for summer youth programs and $100 million in Fair Student Funding.

Numerous risks threaten the viability of the City’s plan, including the unknown trajectory of the coronavirus, State threats to cut local aid by as much as 20 percent, and to-be-determined labor and NYPD overtime savings plans. As of the beginning of the FY 2021, the City has just $100 million in budgeted reserves, and can draw down not more than an additional approximately $1 billion from the Retiree Health Benefit Trust.

A more detailed analysis will be included in the NYC Comptroller’s review of the adopted financial plan, to be released later this month.

[1] DOE COVID budget is net of $26 million for food and forage which is shown as a separate expenditure item in Table 3.

[2] The savings are net of a reversal of approximately $200 million of cuts propose in the April Citywide Savings Program.