Testimony of New York City Comptroller Scott M. Stringer Comments on New York City’s FY 2020 Preliminary Budget Before The New York City Council Finance Committee

Good afternoon, Chair Dromm and members of the Finance Committee. Thank you for the opportunity to discuss the City’s Fiscal Year 2020 Preliminary Budget. Joining me is our Deputy Comptroller for Budget, Preston Niblack.

Each year we have an opportunity to consider how best to ensure our City is serving working families and promoting policies that empower historically disenfranchised New Yorkers. The budget is a statement of our values, and I hope that my testimony today will help you craft a budget that lifts people up, while also managing our finances for the long term.

The national economy has now experienced a nearly decade-long expansion – the longest and strongest in recent history. Since the end of the Great Recession, New York City has added close to 90,000 jobs per year. A booming economy and growing tax revenues has enabled us to invest in critical initiatives, such as Pre-K For All, eviction prevention, and legal services for immigrants.

I am happy to see additional new investments in this budget, from the expansion of 3K, to speeding up the slowest buses in the nation with traffic signal priority, and a commitment to remove lead paint from housing. And I hope we will be able to fund other important programs, like the Citizenship Fund that I proposed two years ago. About 670,000 New York City immigrants are eligible to become U.S. citizens but have not done so, in part due to the high application fee. I was pleased that the City Council included $3 million in your Preliminary Budget Response last year to seed this initiative. I urge you to once again include this critical funding in your response and to help push this new fund over the finish line this year.

But today, while the economic expansion continues for now, the rate of growth is slowing, and the risks are multiplying. Slowing global growth; the waning impact of the brief sugar rush of economic stimulus from last year’s federal tax law; continuing risks of federal budget showdowns; and the growth of high-yield corporate debt, all could undermine the continuation of the expansion. Locally, my office predicts that over the next four years, job growth in the City will decline to under 35,000 per year.

Fiscally responsible management of the City’s budget requires taking the long view: not just balancing this year’s budget, but ensuring that actions taken today protect our ability to provide the critical services that New Yorkers rely on tomorrow.

Given the uncertainty on the horizon, I am increasingly concerned that we simply have not done enough to hedge against the risks. We know from experience that a downturn will hurt our most vulnerable residents the hardest. But the window for action is closing.

With this in mind, I want to begin with a review of the City’s Fiscal Year 2020 Preliminary Budget and the Financial Plan.

Over the City’s Financial Plan, through FY 2023, spending is projected to grow at an average annual rate of 2.2 percent. In contrast, revenues are projected to grow at an average rate of 1.8 percent each year, resulting in budget gaps of $3.5 billion in FY 2021, $2.9 billion in FY 2022, and $3.3 billion in FY 2023.

My office expects tax revenues to rise by 3.7 percent per year, slightly higher than the Administration’s assumption of 3.2 percent per year on average. As a result, we expect additional revenues of $434 million in FY 2020, $974 million in FY 2021, and more than $1.2 billion in each subsequent year. The biggest contributor is the property tax, due to both higher anticipated growth in the near term, and a lower level of reserves than what the Administration is forecasting.

However, we have also identified several large risks on the spending side of the budget, including overtime, charter school tuition, and reimbursements for special education services.

Taken together, our revenue and expense projections result in a minimal change to the FY 2020 budget gap and modestly smaller gaps in the last three years of the plan.

As you work with the Mayor to adopt a final budget, I would like to urge you to take action to protect the important gains we have made toward creating a more equitable and just City.

As I’ve said every year that I’ve testified here, my office has determined, based on analysis of historical experience and the advice of credit rating agencies, that the City should have a budget cushion of between 12 and 18 percent of spending. But since FY 2017, progress in increasing the cushion has stalled at around 11 percent.

To put things in perspective, at the start of the last recession in FY 2009, the City’s budget cushion was equivalent to nearly 18 percent of spending. Despite those resources, and even with the help of the Obama stimulus bill, we still were forced to raise taxes and cut services to weather the storm.

So I think it’s past time for a firm roadmap for increasing our savings to ensure we reach the optimal range of our financial cushion. I cannot emphasize enough how critical it is that we set and reach these targets. We should have gotten to work on this five years ago.

In the FY 2020 budget, we should at least reach the bottom of the optimal range. To do that, we need $2.4 billion more by FY 2020 budget adoption than the $3.2 billion surplus in the Preliminary Budget.

And we should plan to increase our target by 1 percentage point each year, reaching 15 percent by FY 2023. This is completely realistic, and it is urgent that we start now to increase our savings if we are going to protect the services our communities rely on.

In order to achieve these targets we need to generate more recurring agency savings.

The most recent Citywide Savings Plan is expected to provide budget relief totaling $770 million this year, and $270 million per year on average through FY 2023.

However, nearly half of the FY 2019 savings is due to reimbursement from NYC Health + Hospitals for debt service, tort claims, and fringe benefits payments made on its behalf in prior years.

In fact, the $3.1 billion surplus that has been built up so far this year relies too heavily on “one-shots” – that is savings that you only get once, and can never use again, including reducing the reserve for categorical aid disallowances, selling assets, and using bank settlement revenues.

To be clear, I’m not arguing that we should never use one-shots. What I am saying is that we should use one-time revenues for one-time spending needs – or we should hold those funds aside for a time when we may really need them.

The Mayor also committed to a $750 million Program to Eliminate the Gap (PEG) for Fiscal Years 2019 and 2020 in the Executive Budget. This is a good, but modest, start. In fact, since this Administration began instituting savings programs, agency savings have represented just over 1 percent of total agency spending – a far lower bar than in the prior administration. The PEG target of $750 million represents less than 1 percent of agency spending in Fiscal Years 2019 and 2020.

I hope that the majority of the actions in the PEG program will involve real and recurring agency efficiencies. I was somewhat disappointed to read reports yesterday that agency savings account for $550 million of the $750 million total, with debt service savings and the hiring freeze accounting for the rest. I think we can do better.

Not only must City agencies contribute more to savings, they must be accountable for the public money they spend.

Last year I introduced the Comptroller’s Watch List to highlight agencies with high spending growth and lackluster results. This year the agencies on the list include two from last year – the Department of Correction, and spending on homeless services – and one new agency – the Department of Buildings.

Despite great efforts and increased spending, the number of New Yorkers who sleep in homeless shelters continues to rise. We are now spending more than double what we spent in FY 2014 on homeless services – $2.9 billion next year across all agencies. It is unacceptable to continue spending nearly $3 billion a year and not make a dent in the homeless population.

Similarly, our City jails now spend more than $300,000 per year to house one person on Rikers Island. As we have reported for five years now, the jail population has been steadily falling, yet the costs are growing and despite a concerted effort, the culture of violence has not abated. Again, we cannot simply spend more and more money, year after year, and not see results.

This year we added a new agency to the watch list, where, despite greatly increased resources, we’re just not seeing results for New Yorkers. That’s the Department of Buildings (DOB).

Since 2014, DOB has increased its budget by over 60 percent and its staffing by 50 percent. And yet, there has been no measurable impact on construction safety. In fact, accidents, injuries, and fatalities are on the rise. I know that the Council is well aware of the problem, and passed essential legislation in 2017 to address the issue, but we need to ensure that the new spending and requirements are on a path to make a meaningful difference.

To conclude, I hope my message today is clear because it’s urgent.

The economic growth we’ve relied on in recent years is slowing down, especially when we look ahead to 2020. The Mayor’s agency savings are a start, but we need to do a lot more.

We cannot take these risks lightly. We need to prepare our City so that regardless of what we face down the line, the critical services that lift up New York’s working families and low-income communities will weather the storm.

Thank you very much.

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