Comptroller Levine Remarks to the Financial Control Board

Good morning. I’m grateful to join Governor Hochul, Mayor Mamdani, Comptroller DiNapoli, former Comptroller Bill Thompson and board members Marjorie Henning and Kathryn Wylde. It’s great to see all of you, and thank you for the opportunity to share my Office’s assessment of New York City’s Fiscal Year 2027 Adopted Budget. 

Let me begin by acknowledging that Mayor Mamdani and his administration have taken important steps to provide a more honest and accurate picture of the City’s finances than we have seen in recent years, in particular by largely ending the practice of underbudgeting known costs and by adopting revenue forecasts that are, on the whole, reasonable. These actions have helped establish a more credible foundation for the City’s financial plan and for the budget decisions that lie ahead. 

I also want to thank Governor Hochul for providing additional State aid and flexibility that helped the City address important fiscal challenges this year. I am grateful to Comptroller DiNapoli for his continued partnership and for his responsible stewardship of the State’s finances. I also want to thank the private members of the Financial Control Board for their service and ongoing engagement. 

The City’s fiscal health depends on continued partnership with the State, and with its fiscal oversight institutions. That partnership is especially important as we work to preserve the City’s economic strength while addressing the longer-term challenges that remain in the financial plan. 

A Strong Economy — But No Room for Complacency 

New York City’s tax base remains strong and is in fact at record levels. I know there has been some attention paid to a recent increase in the City’s bond yields, so let me address that directly: that movement does not reflect an eroding tax base or an expectation of a rating downgrade. The yields simply followed broader market dynamics and the City’s credit remains strong. 

The strength of our city’s economy, and the financial industry in particular, has provided a major boost to our budget: from business income, to bonuses, to capital gains, the City’s coffers are the beneficiaries of the bull market—and specifically the AI investment boom. Indeed, this year’s revenues exceeded what the Mayor himself had characterized back in February as an “aggressive” projection. This momentum makes, in my Office’s and most fiscal monitors’ views, the administration’s forecast for FY 2027 and beyond a reasonably cautious foundation for the upcoming budget cycle.   

But we should not take economic strength for granted: the City must support and cultivate the conditions that allow us to achieve greater competitiveness, and robust expansion. 

We must recognize that economic conditions can change quickly. Periods of strength, such as that which we enjoy now, should be used to improve the City’s long-term fiscal position and prepare for uncertainty ahead. The unpredictable federal policy environment, a geopolitical climate that moves oil prices daily, and the still-unresolved question of the extent to which the artificial intelligence investment boom will disrupt labor markets or is running on inflated expectations, are all downside risks to the City’s projections.  

The Financial Plan: Real Progress, Real Gaps 

The administration has achieved some progress in addressing the structural imbalance between revenues and expenditures, but that work is not done.  Unfortunately, the financial plan leans heavily on short-term and one-time measures — $6.1 billion between the re-amortization of the pension liability, State aid, and extraordinary accounting adjustments. These measures closed gaps in the near term but did not resolve the underlying imbalance between what the City spends and what it takes in every year.  

This imbalance is evident not only in the financial plan, but also in the necessity of increasingly active management of the City’s cash position. Just last June the City used the Retiree Health Benefits Trust to delay the annual payment of retiree health benefits in order to disburse contractual advances to not-for-profit vendors. This should not become a reoccurring practice.  Instead, we must improve our structural imbalance, pay vendors on time rather than relying on large advances, and avoid shifting the timing of other outlays to manage cash flow.   

While these challenges remain, the City’s fiscal outlook has benefited from some important and good news. The returns on the portfolios constructed by our Office’s investment professionals for the pension systems have once again exceeded their target and will therefore lower the City’s pension costs. In FY 2026, the combined return across the five pension funds was 13.0%, well above the 7.0% actuarial assumption.  This will lower the City’s pension contributions by $6.3 billion between FY 2028 and FY 2032 and will provide $600 million in additional budgetary savings beyond what has already been incorporated in the Financial Plan.   

Inclusive of these pension gains, the outyear gaps are not as large as those we projected in early June, but they remain significant: $7.25 billion in FY 2028, narrowing to $6.84 billion by FY 2030.  

It is true that should the economy continue to expand at the current pace tax revenues could exceed projections, but the potential upside must be balanced against significant spending risks. The financial plan does not account for the potential costs of future labor agreements, or the possibility that spending on CityFHEPS, overtime or due process cases will prove hard to control and contain. 

The Savings Program 

These risks increase the importance of achieving recurring savings and engaging in long-term fiscal planning, and I was heartened by the Mayor’s newly announced savings target for City agencies — 2.5% of City tax levy funding annually through Fiscal Year 2030 — which is an important step in the right direction. Announcing it early gives agencies real time to find genuine efficiencies rather than one-time cuts dressed up as savings. By our preliminary estimate, a target of this size could save the City up to $1.5 billion a year, depending on how exemptions are applied. 

To build on its progress in improving budget transparency, the administration should commit to clear, regular public reporting on these and its previously announced savings plans. My Office would welcome the opportunity to partner with the administration and other fiscal monitors, as we did in years past, to assess implementation progress. Regular and transparent reviews will help identify what is working, where additional action is needed, and whether planned savings are being achieved. 

The Rainy Day Fund 

A strong economy is not a time to relax.  It’s not a time to let our fiscal guard down. It’s a time to prepare for the moment when conditions turn — and they always eventually do. Well-funded reserves are what stands between an economic downturn and cuts to the essential services New Yorkers depend on. That is why my Office has spent this past year pushing for clear, formal rules governing how reserves are built and when they may be used. 

Unfortunately, no deposit was made into the Rainy Day Fund in Fiscal Year 2026 — this, in a year of record tax revenues. Using the formula my Office put forward, the deposit for FY26 would have ranged between $1.4 and $1.7 billion, depending where tax revenues ultimately settle.   

I welcome the Charter Revision Commission’s attention to this issue and the proposal it has advanced represents substantive progress. But the commission’s proposal is weaker than what I and many other advocates had pushed for: the construct gives leeway to commingle the Rainy Day Fund with other reserves, and the framework for the deposit formula could make it too easy to circumvent. There is also no improvement in the withdrawal rules already in effect in State law. Nonetheless, I believe the proposed Charter amendment represents an important step in the right direction, and should it be enacted, I look forward to exercising my Office’s influence and consultative role in the derivation of the Fund’s governing methodology. Getting this right is one of the most consequential things we can do to ensure that vital City services can continue in an economic downturn – when New Yorkers need them most. 

Closing 

I’ll end with this: New York City enters this budget year from a position of real economic strength. This administration deserves credit for meaningful progress toward a more transparent and responsible budget. But significant work remains to reduce reliance on temporary measures, to convert savings targets into real savings, to build adequate reserves, and to prepare for economic uncertainty. 

If we do that work now, we can protect both the City’s fiscal health and the essential services New Yorkers rely on through whatever challenges come next. My Office looks forward to continuing to work constructively with the Mayor, the Governor, City and State legislators, and with this Board to build a fiscally sustainable future for New York City. 

Thank you. 

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