Testimony Of New York City Comptroller Scott M. Stringer Before Members Of The New York State Financial Control Board
August 2, 2016
I am honored to join Mayor de Blasio, Comptroller DiNapoli, State Budget Director Mujica and the members and staff of the Financial Control Board.
Today the rigor of oversight of the City’s finances creates a culture of sound fiscal stewardship, in no small part due to the creation and history of the financial control board.
We all remember that history decades ago and we are far from that crisis today. But across the globe we continue to see the dire consequences of governments losing their ability to pay workers and provide citizens with critical services, from Puerto Rico to Rio de Janeiro to Kansas.
Nonetheless, the role of the FCB and the City’s other budget monitors remain as important today as they were back then, and the City continues to face challenges. The nation has recovered from severe job losses brought on by the 2008 financial crisis, but since the recession, economic growth has been slow and gains have disproportionately accrued to those near the top. The weak recovery makes our economy vulnerable to shocks, and signs of a potential slowdown are beginning to mount.
Despite increases in consumer spending, business investment has declined for three consecutive quarters. Of particular concern for our local economy, investment banking revenues from trading and underwriting have fallen over the past year, fueling anticipation of reduced profits and compensation in the financial sector. Later in the year, a monumental presidential election and the Federal Reserve’s intention to normalize interest rates may further create uncertainties about the economy. I want to commend the Mayor for appropriately noting concerns about the national and global economic forecast in his discussions of the city budget and underscoring the importance of planning for an uncertain future.
At the same time, in the City we have begun to see a slowdown in tax revenue growth. Tax revenues for the last fiscal year are expected to reflect growth of only 3.6 percent, far less than average annual growth over the last four years of 6.5 percent. In terms of dollars, the City increased the FY 2016 forecast by $1.6 billion during the course of the year, a little more than half the $3.1 billion increase in FY 2015. For the coming year the Administration prudently based the adopted budget on a conservative tax revenue estimate. Therefore, my office anticipates additional revenues, but our forecast over the four-year financial plan is only $1.6 billion above the City’s, two-thirds less than our forecast at this time last year.
The Administration has wisely committed additional funding to address challenges in our homeless shelters and our public hospitals. In collaboration with the City Council, the Adopted Budget also improved access to library services and expanded summer employment opportunities for our youth. The future of our city depends on such investments in our people and our infrastructure.
We also must be cognizant of budget challenges ahead. My office projects upcoming budget gaps of $3.6 billion in FY 2018 and $4.0 billion in FY 2019. The largest risk to city spending is the potential need for additional city support for our public hospital system. I continue to stand with the Mayor in his calls to the federal government to reverse planned Medicaid cuts to safety net hospitals and support the system’s planned investments in restructuring for a more stable future. Additional risks to the budget include understated uniformed overtime costs and lower federal Medicaid reimbursement for special education services. Our preliminary estimate for FY 2016 pension investment returns – net of fees – of 1.46 percent will also increase city contributions by approximately $122 million in FY 2018, growing to $366 million in FY 2020.
I am pleased that for the second consecutive year the Mayor has implemented a citywide savings program, including savings from refinancing city bonds. Working together with my office, the Administration has capitalized on low interest rates and will save $688 million over the life of the bonds.
For the third consecutive year, the Mayor has also set aside additional resources to bolster our financial cushion against a potential downturn. The Adopted Budget maintains the existing level of reserves; increased the prepayment from $3.5 to $4 billion in FY 2017 and deposited an additional $500 million into the Retiree Health Benefits Trust Fund. Altogether, these actions increase our total budget cushion by $900 million. We should strive to do more.
The City’s fiscal challenges should not be underestimated, but I know by working together we can ensure the City remains in sound fiscal health.