Comments on New York City’s Executive Budget for Fiscal Year 2025 and Financial Plan for Fiscal Years 2024 – 2028

I. Executive Summary

The Mayor’s FY 2025 $111.62 billion Executive Budget reflects a modestly stronger fiscal position than the financial plan updates that preceded it this fiscal year. It includes a combined $2.33 billion increase in forecasted tax revenues for this year and next. The Office of the New York City Comptroller projects a manageable FY 2025 gap, even with the cancellation of the third round of the Program to Eliminate the Gap (PEG) that the Mayor had announced last fall, and the restoration of some cuts to the Department of Education (DOE) and the NYPD. While these more positive indicators are heartening, the Comptroller’s Office continues to project substantial outyear gaps, which will take careful planning, honest budgeting, and strong fiscal management to close.

The New York City economy has been reasonably strong and is expected to continue growing at a moderate pace. The number of private sector jobs in the city is higher now than before the pandemic started, and the proportion of New Yorkers that are employed is higher than ever before. Most of the new jobs added in the past year, however, have been in just a few relatively lower-wage industries—health care, social services, and food services. Job growth has stagnated in some of the higher-wage service industries that are key to New York City’s economy–and tax revenues–such as finance, technology, and professional services. The lack of momentum, combined with an anticipated cooling off of economic growth nationally, suggests that the city’s economic activity will grow at a slower pace over the next few years.

Most of the Mayor’s increase in projected tax revenues over the five-year April Financial Plan period comes from upward revisions to the City’s income taxes (business and personal) and real-estate transaction taxes. Despite sustained high interest rates, corporate profits have outpaced previous estimates and total wages in the city continue to grow. The Mayor’s Office of Management and Budget (OMB) projects this growth will continue into FY 2025, along with a rebound in real estate sales as interest rates are expected to decline. The Comptroller’s Office forecasts somewhat higher tax revenues than the Mayor, largely due to higher forecasted property and sales taxes, offset by lower estimates of the City’s business income and real estate transaction taxes.

The April Financial Plan uses these higher revenues to partially fund some longstanding chronically underbudgeted costs. For example, it accounts more realistically for the cost of the City’s rental assistance programs adding a net amount of about $480 million in funding annually in FY 2025 and forward. However, the cost of rental assistance is growing, and budgeted amounts drop sequentially in FY 2025 and FY 2026. The Comptroller’s Office estimates about $500 million more will need to be needed each year to continue the programs as currently implemented. In other areas, underbudgeting is worsening. For instance, due to the rapid growth in public assistance recipients, a realistic budget should also add $500 million in FY 2025 expenses.

Overall, the Comptroller’s Office estimates that the April Financial Plan does not account for billions in expenditures the City has shown little capacity to manage, (overtime and special education Carter cases) and others on which it has limited control (such as rental assistance, public assistance, and others).  These funding drops are neither justified nor reasonable.

In addition, the City is facing the remaining DOE fiscal cliffs (permanent programs funded with temporary COVID-19 aid), higher pension costs due to changes made in the State budget, and other costs. The City used more than $300 million in increased State aid to continue many of the education programs currently funded with time limited Federal COVID aid over the life of the financial plan. Yet, other such stimulus-funded education programs are extended into FY 2025 alone, leaving a $365 million fiscal cliff beginning in FY 2026.

The Administration reported gaps of $5.45 billion in FY 2026, rising to $5.75 billion by FY 2028 in the April Plan. However, with more accurate estimates for the true costs of services underbudgeted by OMB, the Comptroller’s Office sees revised gaps of $2.59 billion in FY 2025 (2.3 percent of total revenues) growing to an average of about $8.50 billion in FY 2026 and out (7.4 percent of total revenues). For FY 2024, this Office projects a surplus of $449 million. Beyond the more predictable costs of traditional underbudgeting, however, there are three more uncertain fiscal risks not included in these restated gaps: the cost of providing services to asylum seekers, the cost of implementing the State’s unfunded class size mandate, and the cost of the expansion of rental assistance.

The Comptroller’s Office expects that the costs associated with asylum seekers will be lower than budgeted in FY 2025 by $1.32 billion. This is mainly due to a lower projection of the number of households in shelter, which extends the relatively stable trend established in FY 2024. The projection is subject to an unusual degree of uncertainty due to the unknown trajectory of border crossings and arrivals in New York City, to the uncertainty of Federal policy over time, especially given the upcoming election, and to recent changes to City policies. This includes the haphazard implementation of shelter time-limits. Further, expenses have been unnecessarily high because of the over-use of emergency procurement without adequate cost controls, as this Office has repeatedly documented, and the slow pivot to competitive procurement.

In FY 2026 and FY 2027, however, this Office estimates additional City funds will be necessary to cover costs if future State budgets do not include the $1 billion in annual aid assumed by the City. In FY 2028 the financial plan does not include expenses for asylum seekers resulting in a risk of $3.19 billion, which could be partially offset by future State aid.

Implementation of the class size mandate is not fully funded in the current budget; and funding it represents a risk to City expenses of $467 million in FY 2026, $933 million in FY 2027, and $1.40 billion in FY 2028. The Comptroller’s Office is not including in this report a risk from the expansion of the City’s rental assistance programs to households at risk of eviction given the uncertainty of pending litigation. However, both the Administration’s and the City Council’s fiscal estimates indicate significant potential impacts.

With these adjustments based on asylum seeker spending and the class size mandate, the Comptroller’s Office projects a surplus of $341 million in FY 2024, and gaps of $1.27 billion in FY 2025, $9.17 billion in FY 2026, $10.61 billion in FY 2027, and $13.00 billion in FY 2028.

The April Financial Plan does not include a significant savings plan, contrary to what was announced in September 2023. PEG savings total $670 million over FY 2024 and FY 2025, primarily through reduced cost estimates for asylum seeker services. The savings total includes the restoration of two Police Academy classes for FY 2025 that were eliminated in November, and of subsidies that had been previously reduced for some of the city’s cultural groups. Prior cuts to the City University of New York (CUNY) and the City’s libraries remain, however. While providing only small fiscal relief, their cuts leave an outsized impact on those they serve.

The April Financial Plan also extends the restoration of the Water Authority’s rental payments to the City to FYs 2026 – 2028, and it is now included in all five fiscal years for a total of $1.44 billion, with the revenue accruing to the General Fund. The FY 2024 and FY 2025 rental payments, which had been included in the Preliminary Budget, contributed more than one third to the proposed 8.5 percent increase in FY 2025 water rates.  While these resources are covering essential services in the City budget, the proposed rate structure is regressive. The water rate structure should be reformed to provide relief for low-income homeowners and renters and contain sound enforcement mechanisms. In addition, in the face of the climate crisis—as highlighted in the Comptroller’s Office’s investigation on flash flood preparedness—the City should dedicate these resources to address urgent stormwater management and sewer maintenance needs, and consider instituting a stormwater fee to ensure costs are equitably shared.

The April Financial Plan also included an update to the City’s Capital Commitment Plan. New York State budget legislation raised the City’s capacity to incur capital debt by $14 billion by the start of FY 2026. This growth in capacity is reflected in increases in planned capital spending. The updated FY 2024 – FY 2028 Capital Commitment Plan totals $97.66 billion, an increase of $9.2 billion compared to the Plan released in January. Over the full 10-year planning period from FY 2024 through FY 2033, authorized commitments total $169.86 billion, a $13.07 billion increase over the January Plan. The additional commitments fully reflect the School Construction Authority’s (SCA) FY 2025 – FY 2029 capital plan (but do not yet include the $2 billion to meet the class size mandate recently required by State legislation) and partially fund the additional cost of borough-based jails. After these changes, the Comptroller’s Office estimates that the City’s indebtedness will remain below the Constitutional debt limit and that debt service will remain below 15 percent of tax revenues, the City’s policy threshold to assess the affordability of debt.

While this Office applauds these critical capital additions as keeping vital promises to New Yorkers, it continues to advocate for deeper capital investments in programs targeting housing affordability.

The City should be ambitious in its capital program to make necessary infrastructure investments, but it must manage responsibly. The expanded debt capacity should be accompanied by a policy that ensures debt service remains below 15 percent of tax revenues. The City’s budget should accurately reflect known expenses and hold agencies accountable when budgets, like that of uniformed overtime, are routinely exceeded. This Office also continues to recommend establishing a formula for deposits in the City’s long-term reserves.

Strong fiscal management is not contrary to deeper investment in programs that create opportunities and address severe affordability challenges facing working class New Yorkers. Quite the opposite, it helps preserve and target resources to where they are most needed, so that New York City can remain a place of opportunity for those of all income levels, and the city can continue to grow and flourish in the years ahead.

Table 1.  FY 2024 – FY 2028 April Financial Plan

Source: Mayor’s Office of Management and Budget

Note: Numbers may not add to totals due to rounding. Excludes TSASC debt service costs of $76 million in FY 2024, $76 million in FY 2025, $69 million in FYs 2026-2027, and $68 million in FY 2028, which are paid outside of the City debt service budget (099).

Table 2. Plan-to-Plan Changes, April 2024 Plan vs. January 2024 Plan

Source: Mayor’s Office of Management and Budget

Note: Numbers may not add to totals due to rounding.

Table 3.  Plan-to-Plan Changes, April 2024 Plan vs. June 2023 Plan

Source: Mayor’s Office of Management and Budget

Note: Numbers may not add to totals due to rounding.

Table 4.  Comptroller’s Re-estimates of the April 2024 Plan

$ in millions, positive numbers decrease the gap and negative numbers increase the gap

Source: Office of the New York City Comptroller

II. The City’s Economic Outlook

Final data on U.S. Real GDP showed a 3.4 percent annual rate of growth in Q4 of 2023, completing a strong six months where the economy grew faster than 4 percent. Combined with recently strong growth in payrolls at the national level—which have increased by an average of more than 250,000 in the five months ending in April—the current position of the U.S. economy is stronger than was anticipated in the Office of the New York City Comptroller’s report in March, when an economic slowdown at the national level was believed to have already commenced at the end of 2023.

This stronger-than-expected growth in late-2023 has prompted the Office of the New York City Comptroller to revise its current forecast for U.S. Real GDP to a 2.6 percent average annual growth in calendar year 2024, up from a prior forecast of 1.9 percent growth. The Mayor’s Office of Management and Budget (OMB) has similarly revised its GDP forecast in 2024 to 2.5 percent, up from 1.5 percent.

Despite strong growth in 2023 and an economy considered by most to be at or near full employment, with the U.S. unemployment rate at 3.9 percent, the outlook maintains an expectation of a slowdown in U.S. economic growth for the remainder of 2024. There have been preliminary signs of this slowing, with the advance estimate of Q1 2024 Real GDP rising only at a 1.6 percent annual rate, April payroll growth slowing to 175,000, and both job openings and total separations declining. The Office of the New York City Comptroller’s U.S. GDP forecast for 2025 through 2028 remains at or slightly below its previous levels, with an average annual growth rate of 2.0 percent through those years.

New York City’s economy continues to face unique challenges, with the city’s highest paying sectors continuing to restructure and show few signs that they are ready to increase their payrolls soon. With Federal Reserve policy likely to keep interest rates near their current level until late in this year, the Comptroller’s outlook for the city’s job and wage base remains one of modest growth.

Economic Forecast, 2024-2028

NYC Employment

NYC employment is forecast to grow modestly at an average annual rate of 1.0 percent in 2024 – 2028. Relatedly, the forecast for total wages and salaries in NYC calls for 3.9 percent annual growth. This employment growth forecast is significantly lower than the average annual employment growth of 4.9 percent during the last two post-pandemic recovery years (2022 – 2023), and below the annual growth of 2.3 percent in the five years preceding the pandemic (2015 – 2019). Total wages grew by 5.0 percent per year in both the pre-pandemic period and the last two post-pandemic years. In its Executive Budget, OMB projects a faster annual growth rate of employment and wages over the five-year period than the Comptroller’s at 1.5 percent and 4.4 percent, respectively.

The Comptroller’s outlook for moderate growth in NYC payrolls and total wages derives from a somewhat muted medium-term outlook for job growth in the city’s key office-based industry sectors—i.e., the financial, information, and professional services industries. These industries pay wages well above other sectors in the city, on average, and often sell their services to customers outside of the city. Their growth in prior decades added money that was partially spent in the city on local-demand industries such as food, entertainment, retail, health care, and construction—spurring growth in these additional sectors.

While office-based employment in NYC grew at an average annual rate of 2.6 percent in the five years preceding the pandemic, growth since that time has averaged only 0.9 percent annually. And, by December 2023, NYC office-based employment had fallen by 19,500 (-1.3 percent) versus one year prior. Some of the employment losses were related to film and television industry strikes, and some of these jobs are expected to return in 2024 because of the end of such strikes. But there have also been job reductions within other parts of the information industry including publishing, broadcasting, and web-related employers. The financial industry has shown very little job growth recently and includes payroll declines in the subsector related to securities and other investments. Finally, professional and business services jobs in NYC have declined overall, with notably larger drops in legal services and advertising. The context of these payroll cuts amidst a strong national economy suggests that they are not merely cyclical and may be unlikely to reverse quickly.

By far the strongest industry source of 2023 private sector job growth in NYC was in the lower-average-wage sector of Health Care and Social Assistance (+71,000 jobs or 8.0 percent). Without this industry, NYC private sector jobs would have declined by 10,000. Job growth in the health care sector is primarily driven by growing demand from the local population, including growth in the availability of governmental (Medicaid) funding.

There are multiple reasons to expect the recently high growth rates in the Health Care and Social Assistance industry to slow. As noted last year in a prior report, NY State Medicaid enrollment in NYC is undergoing a decline this year because of the expiration of the COVID-19 pandemic-related emergency measures. This should somewhat soften the demand for the Medicaid-funded Consumer Directed Personal Assistance Program (CDPAP) services that have been a likely driver of much recent job growth in the sector. The Mayor notes in his Executive Budget message that State lawmakers are likely to reform CDPAP. Indeed, one such measure was passed in the NY State FY 2025 Enacted Budget legislation, which consolidated the program’s fiscal intermediaries (entities that formally employ the service providers) into one statewide entity (see Part HH of the Health and Mental Hygiene budget bill), with OMB projecting slowing growth in home health jobs as a result. NYC has also experienced a population decline since 2020, as is discussed below. The current outlook is not for continued population loss, but it may be several years until NYC surpasses its prior peak in population.

Within the context of modest growth in  2024 – 2028, the Comptroller estimates that NYC payrolls will expand by 70,000 in 2024 (measured Q4-to-Q4), up from 34,000 additions projected in the March report. This is a result of three factors. First, the outlook for U.S. economic growth has improved, as was noted above, and this bolsters local growth prospects. Second, while the annual benchmark revision of NYC employment slightly lowered the overall count of jobs, the trajectory of job growth was stronger in 2023, especially in the Information and Securities sectors—with the former shedding fewer jobs than previously thought and the latter showing a slight gain in employment, rather than a loss. Finally, early reports on payroll gains through the first quarter of 2024 already show a gain of nearly 28,000 jobs since December 2023, indicating that job growth is not decelerating as quickly as the Comptroller’s prior estimates expected. The data continued to show a disproportionate concentration of job gains among low-wage sectors, with Health Services and Accommodation and Food Services growing by 25,000 jobs.

Chart 1 shows how the annual revisions in payroll data changed the 2023 picture by sector. It also shows the most recent year-over-year growth rates based on preliminary data through March.

Chart 1. 12-Month Percent Change in Employment, by Sector

Source: NY State Department of Labor

Wall Street Profits and Bonuses

Full-year profits of New York Stock Exchange member firms increased slightly in 2023, reaching $26.3 billion, up from $25.5 billion in 2022 (see Chart 2). However, compared to the 2019, 2023 profits were down roughly 6.4 percent and down 22 percent when adjusted for inflation.

But despite a tepid 2023, the Comptroller’s Office expects Securities industries profits to rebound in 2024, growing by $6.0 billion (23.0 percent) amidst strong growth in the equity values and a recovery in debt underwriting, and an apparent rebound in loan underwriting and mergers and acquisition activity. The S&P 500 index is nearly 25 percent higher than it was at the end of October 2023. And the largest banks have reported surprisingly strong growth in Q1 2024 on their net income on investment banking activities—between 16 percent and 35 percent versus Q1 2023 at Goldman Sachs, JPMorgan Chase, Bank of America, Morgan Stanley, and Citigroup. Multiple banks cited higher levels of equity and debt issuance underwriting as well as increased M&A dealmaking.

With a slowing U.S. economy and growing global uncertainties, the longer-term outlook for Wall Street profits is less optimistic, with the Comptroller’s forecast falling in 2025 and rising moderately thereafter.

Chart 2.  Pre-Tax Profits of NYSE Member Firms ($ Billions)

Source: Intercontinental Exchange and Office of the New York City Comptroller

Economic Forecast

Table 5 summarizes both OMB’s and the Comptroller’s forecasts for selected U.S. and NYC economic measures.

Table 5.  Forecast of Selected Economic Indicators, Calendar Years 2023 to 2028

Source: Mayor’s Office of Management and Budget, Office of the New York City Comptroller

NYC Housing Market

The NYC Comptroller’s Office has recently published three reports about housing in NYC. The first highlights the unique aspects of the NYC rental market and demonstrates how the city’s rent regulation structure  maintains relative affordability for many, but not all, renters. The tight housing market for hopeful new NYC residents—or even for those who need or wish to move within the city—prompted the second report. This report focuses on how housing supply has lagged economic growth for many years and that, despite recent population decline, there is a great need for accelerated production of housing at all income levels. The third report examines NYC’s home purchase market and finds that home ownership is not the place to find any relief from the city’s tight rental market.

The tax exemption for residential construction available under the Affordable New York program (§421-a(16) of the Real Property Tax Law – RPTL), expired on June 15, 2022. As shown in Chart 3, the expiration lead to a rush to start new developments, as it did before the expiration of Affordable New York’s predecessor (§421-a(1-15)) in 2015.³ In the report on the FY 2025 Preliminary Budget, this Office established a baseline permitting activity of approximately 5,900 units per quarter between 2017 and the first quarter of 2020. Had permits proceeded at the baseline pace in 2022 and 2023, a total of 47,200 units would have been permitted. The actual number as of the 2023 Q4 data was instead 85,000, suggesting that 37,800 permitted units (roughly 1.5 years of baseline permitted units) in excess of the baseline remained at the end of 2023. The extension of the construction deadline for Affordable New York and the introduction of a new tax exemption program in the FY 2025 State budget (discussed in Section III of this report) are likely to sustain the pace of construction and permitting activity going forward.

Chart 3. Permitted Housing Units in New Buildings (‘000s)

 Source: NYC DCP, Office of the New York City Comptroller

Since late 2021, several commercial buildings have filed permits for conversion or partial conversion to residential use. The projects in Table 6 include all those with at least 100 additional units, filed in 2020 or after, classified as alterations, and that are not being converted to hotel, other Class B multiple dwelling, or known to become homeless shelters.

Table 6.  Filings of Large Residential Conversions as of 2023Q4 Data.

Source: NYC DCP, Office of the New York City Comptroller

Additional conversions are being planned for 222 Broadway (600-800 rental units), 750 3^rd Avenue (540 rental units), and the Flatiron Building (luxury condominiums). A recently traded office building at 80 Pine Street (previously occupied by AIG and renovated as recently as 2021) could also be a target for conversion, while a prime candidate like 175 Water Street (previously AIG’s headquarters) is under renovation and received tax benefits under the M-CORE Program.

A new property tax exemption for the conversion of commercial space to residential was created in the FY 2025 NY Enacted State Budget legislation (see section III of this report). The tax exemption requires that a fraction of the residential units become income-restricted in perpetuity. The new program should expand conversions to submarkets where property values have not dropped as much as they have in the Financial District, where most of the permitted projects are located. However, this means that the tax exemption is likely over-subsidizing income-restricted units in the Financial District. Developments with permit dates after December 31, 2022 can apply for the new tax exemption.

NYC Office Market

While the post-2020 rise in vacancy in NYC office real estate with its accompanying drop in office rental rates seemingly tell a simple story of demand reduced by remote and hybrid work, the NYC Comptroller’s May Spotlight on the office market suggests a more complicated picture. While vacancy rates are up across all categories of office properties, the period has also included the delivery of a significant amount of new office inventory at the most expensive and desirable end of the market. Total occupied space in the highest-grade office buildings has actually increased during this period even though the rate of occupancy—which includes newly delivered space in its denominator—has dropped.

Office rents have remained mostly flat in nominal terms since 2021, but, as seen in Chart 4, they have continued to fall in inflation-adjusted terms. The outlook is for nominal rents to rise slightly in the next few years, but real rents will continue to decline. Only in 2027 and 2028 are rental rates projected to grow at the inflation rate and begin to emerge from their descent in real terms. But with the pipeline of new office construction soon to run dry—CoStar expects net deliveries (less demolitions) to turn negative by mid-2025 and to stay there indefinitely—the city is expected to approach a time where demand at lower prices will start to fill both newer and older buildings and upward pressure on rents will resume.

Chart 4.  NYC Office Market Nominal and Real Rent per Square Foot

Source: CoStar, Bureau of Labor Statistics, Office of the New York City Comptroller

Tourism

The number of visitors to NYC continued to rise in 2023, by nearly 10 percent, but remained below its pre-pandemic level from 2019, according to NYC Tourism + Conventions. The outlook is for more gradual growth in the coming years now that the post-pandemic recovery is complete. Leisure travel is expected to surpass its pre-pandemic level as soon as next year, but business travel may take longer to reach its prior highs as remote conferencing has seemingly displaced a segment of in-person meetings.

For the 12-months ending in March 2024, the average NYC hotel occupancy rate was 83.1 percent, about 4 percentage points above March 2023 but 4 percentage points below levels in 2019. Average daily room rates have continued to rise and stood at $324 for the 12-months ending March 2024, up from $265 pre-pandemic, a 22 percent increase that has outpaced inflation. The outlook is for room rates to continue to rise faster than inflation in the next few years, as rooms under construction currently number less than 4,000, the lowest level experienced since 2011. [1]

NYC’s Broadway theaters’ gross revenue for the 2023-24 season is running slightly below 2022-2023 (-3.1 percent), although total attendance is close to the same as last year, at 11.7 million through the first week in May.[2] And both attendance and revenues picked up in April and have nearly recovered to 2019 pre-pandemic levels.

NYC Population and Demographics

The annual Census population estimates released in March showed New York City lost 78,000 residents between 2022 and 2023. One aspect of recent Census estimates is that while population in households (excluding group quarters such as shelters, dorms, jails, and others) has been declining, the estimates of occupied housing units have increased in 2022 and 2023, as shown in Chart 5. This means that estimated average household size has decreased and is one of the contributing factors for the tightness of the housing market.

Chart 5. NYC Household Population and Occupied Housing Units (2020 = 100)

Source: Census Bureau 2020 Census, Census Population Estimates 2023 Vintage, 2021 and 2022 American Community Survey, 2023 Housing and Vacancy Survey, NYC Department of City Planning (Table 3), Office of the New York City Comptroller

As well-known, NYC has historically had a negative domestic migration balance. The balance narrowed substantially in the aftermath of the Great Recession but widened over the 2010s before spiking during the pandemic. Chart 6 shows that the domestic migration balance has returned to levels consistent with the pre-pandemic trend. In other words, remained elevated in 2023 but returned to levels consistent with its prior to the pandemic.

Chart 6. NYC Net Domestic Migration vs. Pre-Pandemic Trend

Source: Census Population Estimates 2020 and 2023 Vintage, Office of the New York City Comptroller

Chart 7 shows the balance of international migration. The balance has historically been positive but declining since 2016 due to federal immigration policies and then the pandemic. The Census data for 2023 shows net international migration of 51,500, little changed from 2022. However, this is an underestimate that does not take into account the arrival of asylum seekers. As initially remarked by the Department of City Planning, the Census Bureau’s estimate of population in group quarters, which includes homeless shelters, remained essentially unchanged between 2022 and 2023. To give a sense of the undercount, Chart 7 includes the change in the number of asylum seekers in shelter between 2022 and 2023 (45,100) as well as the total number of asylum seekers receiving shelter at some point over the same period (75,300).

Chart 7. Net International Migration and Asylum Seekers Inflow

Source: Census Population Estimates 2020 and 2023 Vintage, Mayor’s Office, Office of the New York City Comptroller. The growth in asylum seekers is the change between the week of 8/31/2022 (earliest available to this office) and the week of 7/2/2023 to keep with the Census convention of population estimates as of July 1^st

Risks to the NYC Economy

The commercial property market continues to be a source of uncertainty in the NYC economy, with ongoing weakness in the office leasing market. Higher-for-longer interest rates from a Federal Reserve wary of stubborn inflationary signs could further strain property owners leading to increased mortgage defaults. This could, in turn, threaten certain local financial institutions that could be expected to respond with tightened credit conditions.

The continued high cost of housing in NYC could drive more potential job seekers to other, less expensive locations. And with today’s flexibility of remote work reducing many of the advantages of locating in a dense central business district such as Manhattan, this could gradually induce employers to relocate to other locations.

III. The FY 2025 Executive Budget and April Financial Plan

The FY 2025 Executive Budget and April Financial Plan, as presented by the Mayor, totals $114.54 billion in FY 2024 and $111.62 billion in FY 2025. In the outyears, expenditures are budgeted to grow to $117.21 billion in FY 2026, $119.94 billion in FY 2027, and $121.78 billion in FY 2028, while revenues increase more slowly. This results in OMB projected gaps totaling $5.45 billion in FY 2026 and FY 2027, and $5.74 billion in FY 2028.

The City increased its projections of both revenues and expenditures in each year of the Plan period compared with the financial plan released in January. For FY 2024 and FY 2025, this resulted in a combined $2.62 billion increase. On the revenue side, growth is largely the result of higher forecasted tax revenues in each year of the Plan period, along with additional subsidies from New York State for education beginning in FY 2025 and the City’s assumption of $1 billion more in State aid for asylum seeker costs in each of FY 2026 and FY 2027.

On the expenditure side, some of the largest changes over the five-year plan period include: the baselining of some (but not all) of the education programs currently funded with time limited Federal Covid aid; more realistically (but still not fully) budgeting for the City’s rental assistance programs; and increasing planned spending for asylum seeker costs in the out years, among other changes.

Unlike the two financial plans that preceded it this fiscal year (released in November and January), the April Plan did not include a large Program to Eliminate the Gap (PEG). Overall, PEG savings taken in the April Plan total $670 million over FY 2024 and FY 2025. This includes the restoration of two Police Academy classes for FY 2025 and reinstating subsidies that had been previously cut for some of the city’s cultural groups. The largest savings taken in the April Plan is a $586 million reduction in budgeted asylum seeker costs in this fiscal year and next.

As described in more detail in the following sections, the Comptroller’s Office restates City gaps and surpluses based on its own estimates of City-funded revenues and expenditures. The Comptroller’s Office presents these restated gaps and surpluses with and without two sets of less certain, and largely longer-term, costs: this Office’s projection of asylum seeker costs and the estimated impact of the State’s unfunded mandate to reduce class size. Excluding these costs, the Comptroller’s Office projects additional resources of $449 million in FY 2024, and a $2.59 billion gap in FY 2025 (2.3 percent of total revenues). The Comptroller’s Office projects larger outyear gaps of $8.53 billion in FY 2026, $8.50 billion in FY 2027, and $8.42 billion in FY 2028 (averaging 7.4 percent of annual total revenues).

Because the Comptroller’s Office projects that asylum seeker costs will be less than currently budgeted in FY 2025, including this re-estimate decreases the restated gap to $1.27 billion (1.1 percent of total revenues). Including these costs increases gaps in the outyears, however, to $9.17 billion in FY 2026, $10.61 billion in FY 2027, and $13.00 billion in FY 2028, representing 8.2 percent of total projected revenues in FY 2026, growing to 11.1 percent of total revenues in FY 2028.

FY 2024 Changes Since the January Plan

The FY 2024 budget included in the April Plan is a $438 million increase from the budget released in January. This is the result of $619 million more in anticipated City-funded revenues and $249 million in additional Federal grants, offset by a $329 million reduction in State funding, largely due to the City’s revision in anticipated funding for services to asylum seekers, and a $120 million reduction in Other Categorical funding. Most of the increase in City-funded revenues compared to the January Plan comes from upward revisions to the City’s business income taxes ($213 million), real estate transaction taxes ($160 million), property tax ($95 million), and tax audit revenue ($100 million).

As shown in Table 7, City-funded expenditures increased by a net $460 million. This includes $858 million in new agency expenditures, offset by $684 million in PEG savings, and a $170 million reduction in the City’s labor reserve due to a re-estimate of funding required for contract settlements for the remainder of the fiscal year. While the City reduced its overall budget for asylum seeker costs by $461 million as part of the PEG, because of the reduction in State aid for these costs, the City increased its own funding by close to the same amount, for a net decrease of about $15 million. The largest new agency expenditures in FY 2024 include $397 million for shelter costs at the Department of Homeless Services (DHS), and $248 million in budgeted overtime spending– two costs that the Comptroller’s Office has previously highlighted as underbudgeted. The City also increased its reserve for judgements and claims by $150 million due to higher-than-expected settlements related to a class action lawsuit against the Department of Correction (DOC). These and other increases, were offset by decreases in other areas, including a $289 million reduction in Medicaid costs due to the rolling of payments from FY 2024 to FY 2025 and $128 million in tuition reimbursement to the City University of New York (CUNY) due to lower-than-budgeted enrollment.

Lastly, the City added $159 million in surplus FY 2024 resources to the Budget Stabilization Account to pre-pay FY 2025 debt service and close that year’s budget gap.

FY 2025 Changes Since the January Plan

The FY 2025 Executive Budget reflects an increase of $2.18 billion from the Preliminary Budget. This is the result of $1.72 billion more in anticipated City-funded revenues, $296 million in additional State grants, and $114 million in Federal funding, along with smaller increases in Other Categorical and Interfund Agreements funding.

Most of the increase in City-funded revenues comes from a $1.65 billion upward revision of tax revenues, which are concentrated in three main taxes – the City’s business income taxes ($768 million increase), property taxes ($498 million) and the personal income/pass-through entity taxes ($256 million). As to non-City sources, the increase in State grants is largely the result of additional school-based formula aid ($316 million), which is being used to baseline a variety of Department of Education (DOE) programs currently funded with time-limited Federal COVID-19 aid. (See the Education section of this report for more details.) This increase is offset somewhat by a decline in expected State social services funding. About half the increase in Federal funding in FY 2025 is COVID-19 aid, mostly rolled from FY 2024.

As shown in Table 7, City-funded expenditures increased by a net $1.88 billion in FY 2025. This includes $1.83 billion in agency spending and other adjustments, $70 million in restorations of previously planned PEGs, and $41 million due to the State budget changes that shifted costs to the City. These additions are somewhat offset by $64 million in PEG savings, almost exclusively from a $125 million reduction in expected asylum seeker costs, offset by an increase in debt service costs (which OMB classifies as a negative PEG).

Of the new agency City-funded spending in FY 2025, the largest overall increase is for the Department of Social Services ($908 million), including $615 million added for rental assistance—a cost that the Comptroller’s Office has highlighted as being substantially underbudgeted, and $289 million rolled from FY 2024 to FY 2025 for Medicaid costs. A total of $429 million was added to the DOE including $198 million, in FY 2025 only, for programs previously funded with expiring Federal COVID aid (in addition to the programs funded with State support) and $154 million for school cleaning, among other changes. In addition, centrally budgeted healthcare costs were increased by $90 million annually beginning in FY 2025. (See the Health Insurance section for details).

Table 7.  Changes to FY 2024 City-Funds Estimates from the January FY 2025 Plan

Source: Mayor’s Office of Management and Budget, Office of the New York City Comptroller

(No?) Program to Eliminate the Gap (PEG)

In September 2023, OMB sent a letter to City agencies announcing a savings program in an effort to close projected budget gaps. The letter notified them of three upcoming Program to Eliminate the Gap (PEG) exercises, each aiming to reduce agency City-funded spending by 5 percent: one in the November Plan, one in January, and one in April. The November Plan PEG saw nearly all agencies reduce their City-funded budget. The January Plan PEG was smaller and included cuts to the asylum seeker budget, exemptions for select agencies, and limited savings restorations (6 percent of total November reductions).

Then, on February 21^st the Mayor announced that the planned third round of PEG initiatives would be canceled (except for asylum seeker-related PEGs), and hiring and OTPS spending restrictions would be eased – all items initially included in the September savings letter.^[3] (For more details on the hiring freeze see the Headcount section and for OTPS restrictions see the Expenditure Analysis section of this report.)

As a result, the April 2024 Financial Plan includes a relatively small savings program of $684 million in FY 2024 (primarily lower costs for asylum seekers totaling $461 million) and $63 million in FY 2025 (asylum seeker savings of $125 million and other smaller spending reductions were offset by debt service increases). The April Plan also reversed almost $80 million of prior savings initiatives across FY 2024 and FY 2025 – the majority ($62.4 million) for the restoration of two NYPD academy classes (for a total restoration of three of the five classes initially cut in November). In the outyears, the PEG largely comprises changes to the City’s debt service budget, which in fact increase City expenditures in each year, despite being categorized as PEG initiatives by OMB. For more information on the capital commitment plan and debt service costs, see the Capital Budget and Financing Program section of this report.

Cuts Across Plans

Even with a small April savings program, the November, January, and April Plan PEGs total $3.59 billion for the ongoing fiscal year and $3.66 billion in FY 2025.^[4] Many agencies are also facing cuts that have accumulated from previous financial plans, including prior fiscal years. The sections below shed light on select areas where the fiscal benefit of savings is often low (due to small incremental adjustments in each Plan) and service provision is adversely affected over time.

Focusing on Culture

Department of Cultural Affairs (DCLA)

DCLA provides funding for the City’s major cultural institutions and funds projects for many smaller organizations. The agency also helps New Yorkers access culture regardless of background or financial status. Across the current budget cycle (November 2023 Plan to April 2024 Plan), DCLA has received $13.5 million in FY 2024 PEG reductions, and faces $8 million in cuts per year in FY 2025 and the outyears. These totals are net of $7.4 million in restorations in FY 2024 and $7.6 million in FY 2025 and forward, which were included in the April Plan.

The cuts include decreasing the operating subsidy of the Cultural Institutions Group (CIGs), 34 cultural organizations that – in addition to being located on City land – receive financial support from the City on an ongoing basis.^[5] CIG cuts total $5.8 million in FY 2024, $6.5 million in FY 2025, and $6.6 million in each of the out years. Since the start of the Adams Administration, CIG subsidies have been reduced by $2 million in FY 2023, $9.9 million in FY 2024, $8.4 million in FY 2025, and $8.6 million in FY 2026 and out.

Also included is a reduction to DCLA’s Cultural Development Fund: a $2.6 million FY 2024 reduction and a $1.4 million baselined reduction from FY 2025 onwards (after accounting for April restorations). The program distributed $52.2 million in its latest annual funding round in February.^[6] Of the 1,031 organizations that received funding in 2024, 942 received grants totaling under $100,000 in funding – the vast majority small organizations.^[7]

NYC Libraries 

The City provides operations, energy, and capital dollars to each of its library systems. While libraries were not subject to PEGs in January, operating subsidies were reduced in the November Plan ($23.6 million in FY 2024, $22 million in FY 2025, and $22.3 million in the out years) resulting in the elimination of seven-day service. The April Plan did not restore any library funding, although the Mayor signaled that restorations would be part of Administration negotiations with the City Council before the final budget is adopted.^[8] Libraries also face previously baselined subsidy cuts of $20.5 million per fiscal year (introduced in the November 2022 Plan) starting in FY 2025 – as only the FY 2024 amount was restored in last year’s budget negotiations. When combined with cuts from the current budget cycle, libraries face a $42.5 million reduction per year starting in FY 2025.[9] Even if the Administration does restore funding cut during this budget cycle at Adoption, it is unlikely to include any baselined reductions implemented in plans prior to November 2023.

Education

CUNY

This Office recently released a Spotlight demonstrating the local economic benefits of CUNY, its students, and staff. As noted there, in the City’s Preliminary Budget released in January, the Mayor proposed cutting CUNY’s budget by $20 million per fiscal year as part of the citywide PEG. Combined with earlier PEG programs of the Adams Administration, CUNY now faces $95 million in baselined PEG cuts per fiscal year compared with funds budgeted in January 2022. The April Plan did not restore any funding for the system. Additionally, while not part of the PEG program, CUNY is also facing tuition reimbursement reductions of $128 million in FY 2024 due to lower enrollment and thus lower tuition revenue than planned, as noted above.

Early Childhood Education 

On the other end of the education spectrum are some of NYC’s youngest. In November 2022, the Administration adjusted the universal 3K budget (previously expanded using temporary Federal stimulus funds). What would have been a significant increase in FY 2024 and then a steep drop (of $393 million) from FY 2025 to FY 2026 was flattened out by reducing the FY 2024 and FY 2025 budgets. In June 2023, the City reduced the 3K budget further for FY 2025 leaving the fiscal cliff of $93 million beginning in FY 2025 (which has now been funded but for one year only in the April Plan).

The April Plan also includes $170 million in PEG savings for early childhood education programs that were added in the November and January plans. This includes an unallocated $116 million annual reduction for the City’s 3K and UPK programs beginning in FY and an annual $54 million cut to the City’s Early Learn programs for infants and toddlers.​

Cuts and Impacts in Other Areas

In addition to culture and education, numerous other areas are still facing PEG reductions from earlier Financial Plans this year. A few are highlighted below.

Human Service Agencies

• Funding was reduced for the Administration for Childrens Services’ (ACS) prevention services programs (cuts of $760,000 in FY 2025 growing to $3 million by FY 2028) and Close to Home (baselined savings of $6.8 million in FY 2025 and out) based on re-estimates due to underutilization of the programs, according to OMB.
• The Department for the Aging (DFTA) reduced Older Adult Center spending by $18.9 million in FY 2024, $2.2 million in each FYs 2025 and 2026, and $15.7 million in FYs 2027 and 2028
• The Department of Homeless Services (DHS) closed drop-in centers at a savings of at least $3 million per fiscal year and seeks additional $5.5 million in FY 2025 and FY 2026 savings by utilizing existing medical care at centers
• The Department of Youth and Community Development (DYCD) reduced FY 2024 spending by $20.6 million in programs including Advance and Earn, Summer Youth Employment Metrocards, and the Precision Employment Initiative (facing an additional $10.3 million in FY 2024 cuts from the January Plan).

Parks

• A number of community programs (community gardening for at-risk youth, the NYC SPARX project for girls in technology, swim safety, trail formalization, and tree risk management) that were originally delayed for one year in the November Plan were then cancelled outright in the January Plan at a savings of $10.9 million per fiscal year.

Comptroller’s Office’s Re-estimates

The Comptroller’s Office restates the City’s projected gaps and surpluses based on its own estimates of revenues and expenditures. As shown in Table 8, the Comptroller’s Office restates this gap with and without two more uncertain expenditure costs—this Office’s re-estimate of asylum seeker costs and the impact of the State’s unfunded mandate to reduce class size.

Projecting the number of asylum seekers arriving in the City, and the cost of providing services to them, is challenging. On the one hand, their population dropped at the beginning of 2024 and has remained relatively stable since March, breaking historical trends, and adding uncertainty to the future path. Furthermore, little data is made available by the Administration on the actual costs of providing shelter and services, making an independent projection impossible. In addition, there is still much uncertainty about the cost of implementing the State’s unfunded mandate to reduce class size in City schools, which will begin to affect the City budget in FY 2026.

Excluding these two costs, the Comptroller’s Office projects that FY 2024 will end with a surplus of $449 million. For FY 2025, while OMB projects a balanced budget, the Comptroller’s Office projects a gap of $2.59 billion (2.3 percent of total projected revenues). The Comptroller’s Office is projecting higher gaps than OMB in each outyear. For FY 2026, the Office projects a gap of $8.53 billion, $8.50 billion in FY 2027, and $8.42 billion in FY 2028 (averaging 7.3 percent of total revenues).

Including this Office’s re-estimate of asylum seeker costs reduces the restated gap in FY 2025 to $1.27 billion (1.1 percent of total revenues), as the City has yet to reflect downward trends in arrivals in its estimates. In FY 2024, the Office expects the City will receive $108 million less in Federal funding than currently budgeted, increasing City costs slightly. In the outyears, however, including asylum seeker re-estimates and the class size mandate costs increases restated gaps to $9.17 billion in FY 2026, growing to $13.00 billion in FY 2028 (8.2 percent of total revenues increasing to 11.1 percent, respectively). These estimates assume that in those years the number of asylum seekers in City shelter remain at the Comptroller’s Office’s FY 2025 projected levels.

Table 8.  Comptroller’s Re-estimates of the April 2024 Plan

$ in millions, positive numbers decrease the gap and negative numbers increase the gap

Source: Office of the New York City Comptroller

Revenue Differences

The Comptroller’s Office estimates that City-funded revenues, including tax and non-tax revenues, will exceed OMB’s projections in each year of the Plan – by $287 million in FY 2024, $622 million in FY 2025, $527 million in FY 2026, $290 million in FY 2027, and $603 million in FY 2028.

The Comptroller’s Office forecast of tax revenues somewhat exceeds OMB’s in each year of the plan period, as shown in Table 8. For FY 2024, the Comptroller’s Office’s total tax forecast is $255 million more than OMB’s, largely due to higher estimates property tax revenue ($82 million more) and audit income ($100 million more). In FY 2025, the Comptroller’s Office projects $502 million more in total tax revenue.  In fiscal years FY 2026 through FY 2028, the Comptroller’s Office projects more tax revenue than OMB by $393 million, $182 million, and $505 million, respectively.

The Comptroller’s Office estimates that miscellaneous revenues, which include fines, fees, interest, and other income, will come in higher in each other year of the Plan period. The Comptroller’s Office projects miscellaneous income will exceed the current budgeted amounts by $32 million in FY 2024, $120 million in FY 2025, and $134 million in FY 2026 before falling to about $108 million annually in FY 2027 and $98 million FY 2028, due to the Comptroller’s higher forecast of fines and interest income.

Expenditure Differences

The largest cumulative driver of the different expenditure estimates between OMB and the Comptroller’s Office are chronically underbudgeted costs. These are costs that can be reasonably anticipated and are tied to ongoing programs with established spending patterns, but instead of being included in the Financial Plan, they are added in through modifications over the course of the ongoing fiscal year. For FY 2024, many of these costs underbudgeted at adoption have now been corrected. However, overall, the Comptroller’s Office estimates that funding needs due to chronic underbudgeting remain large, totaling $266 million in FY 2024, $2.81 billion in FY 2025 and averaging $2.51 billion annually in the outyears.

As shown in Table 8 and described in more detail in subsequent sections of this report, chronically underbudgeted cost—for which the Comptroller’s Office estimates additional funding will be necessary in FY 2025 and forward—include: overtime, special education Carter Cases, public assistance costs, shelter costs for non-Asylum seekers, funding for charter school leases, DOE custodial costs, and subsidies to the Metropolitan Transportation Authority (MTA). While the Administration added substantial funding for City’s rental assistance voucher programs in the April Plan, funding amounts in FY 2025 and the outyears are still below anticipated spending levels, resulting in a need of $450 million in FY 2025 and $500 million annually thereafter.

Similarly, while the Administration added baseline funding using State assistance for many of the long-term DOE programs currently paid for with expiring Federal COVID aid, there are a handful of programs that are funded with City funds only in FY 2025.  The Comptroller’s Office estimates that $365 million in City funding will be necessary in FY 2026 through FY 2028 to pay for these fiscal cliffs.

Other expenditure re-estimates include increased pension costs due to changes made to pension rules in the State budget, but not yet reflected in the City budget; higher than budgeted spending on temporary and professional services in FY 2025; and increased funding for foster care costs. Additionally, for FY 2024, the Comptroller’s Office projects that the City will not receive a $112 million budgeted payment from the Health Insurance Stabilization Fund to offset health insurance costs for City employees and that an equal amount of City-funds will be required to offset the revenue.

As previously mentioned, there are two large, but less certain risks that lead the Comptroller to have higher expenditure estimates than OMB in the outyears of the Plan period – the cost of services to asylum seekers and the State’s unfunded mandate to reduce class size. For asylum seekers, the Comptroller’s Office estimates that the City has $1.32 billion more than necessary budgeted for these costs, creating an offset. In the outyears, however, the Comptroller’s Office, estimates more funding than currently budgeted will be required. Greater details on these estimates can be found in the City Services to People Seeking Asylum section of this report.

The Comptroller’s Office’s higher expenditure estimates also include the impact of the State’s unfunded mandate that the City reduce class sizes, the impact of which has yet to be included in the City budget. Greater details on these estimates can be found in the Department of Education  section of this report.

One area where the Comptroller’s Office estimates that the City will spend less than currently budgeted is non-overtime personnel spending. Given actual expenditures thus far this fiscal year, the Comptroller’s Office projects that PS costs will total $600 million less than currently budgeted for FY 2024 and $150 million less for FY 2025. See the Headcount section of this report for more details.

Revenue Analysis

The Mayor’s April 2024 Plan revises expected City-funded revenues (tax and miscellaneous revenues) upward by $642 million in FY 2024, $1.68 billion in FY 2025, $1.15 billion in FY 2026, $1.19 billion in FY 2027, and $1.44 billion in FY 2028 compared to the January 2024 Plan. The FY 2024 revision reflects total tax collections that have exceeded OMB’s forecast in the January 2024 Cash Plan by $462 million as of March 2024: mostly from property taxes and audits of business taxes returns. The increase to revenues from FY 2025 to FY 2028 are primarily due to revisions to the property and business taxes and the City’s decision to collect the rental payments from the Water Board. The Mayor forecasts that City-funded revenues would be $82.29 billion in FY 2024, $84.72 billion in FY 2025, $85.73 billion in FY 2026, $88.46 billion in FY 2027 and $90.78 billion in in FY 2028. The Comptroller’s Office estimates that revenues will be above the April Financial Plan projections by $287 million in FY 2024, $622 million in FY 2025, $527 million in FY 2026, $290 million in FY 2027, and $603 million in FY 2028.

Table 9 shows FY 2024 tax collections through March 2024 and full-year estimates in the April 2024 Plan. Collections through March declined by 1.0 percent, driven by drops in PIT/PTET, real estate transaction taxes, and audits. The April Plan projects tax revenues to increase by 0.3 percent in FY 2024, with PIT/PTET regaining some of the ground lost in the first 9 months of the fiscal year and a recovery in the real estate transaction taxes. The Comptroller estimates that total tax revenues in FY 2024 will increase by 0.6 percent.

Table 9.  FY 2024 Collections through March versus April 2024 Plan

Source: Office of the New York City Comptroller and Mayor’s Office of Management and Budget

Table 10. compares the Comptroller’s and OMB’s forecast of tax revenue growth. Table 11. compares tax revenue levels. Table 12. shows the Comptroller’s re-estimates as risks (negative) and offsets (positive) relative to the Financial Plan forecast.

Table 10.  Comparison of Tax Revenue Projections: Growth Rates

Source: Office of the New York City Comptroller and Mayor’s Office of Management and Budget

Table 11.  Comparison of Tax Revenue Projections: Levels

Source: Office of the New York City Comptroller and Mayor’s Office of Management and Budget

Table 12.  Tax Revenues Risks and Offsets

Source: Office of the New York City Comptroller

Real Property Tax

The Comptroller projects that property tax revenue for FY 2024 will total $33.0 billion, an increase of $216 million since our March forecast, primarily due to a reduction in the delinquency rate estimate, the restoration of exempted properties on the tax roll, the reduction in the allowance for J-51 abatement, and residual payments to the city for prior lien sales.

The Comptroller projects FY 2025 property tax revenue of $33.99 billion, an increase of 3.0 percent from the current fiscal year. Revenue is expected to grow at an average annual rate of 2.7 percent through 2028, when property tax collections are expected to reach $36.86 billion.

The Comptroller’s property tax forecast exceeds OMB’s by $82 million in 2024, $168 million in 2025, $45 million in 2026, $361 million in 2027 and $720 million in 2028. For FY 2024 and FY 2025, the differences are due to the forecast of the reserve components of the property tax (cancellations, refunds, delinquencies, and others). The differences in FY 2026 and beyond are primarily the result of the Comptroller’s higher levy growth of 2.7 percent versus OMB’s 2.4 percent.

Property Tax Delinquencies

Table 13. shows delinquency rates as of March FY21 through FY24 for the July, October, and January bills. The table reports rates for Class 1 (mostly made of 1-3 family homes), Class 2 (multifamily buildings), and Class 4 (commercial buildings), with a breakdown for the largest sub-categories within Class 2 and Class 4. Class 3 is excluded because the delinquency rate is not significant. The table updates the results previously published in the February 2024 Economic Newsletter.

The overall FY 2024 delinquency rate as of March was 2.73 percent ($851.6 million), 19 basis points above a comparable period in FY 2023. The property types with the highest annual increase in the delinquency rate in FY 2024 are residential condominiums (50 basis points), hotels (70 basis points), and commercial condominiums (91 basis points). The category with the largest decline was elevator apartments (-57 basis points).

The property types with the highest increase between FY 2021 and FY 2024 are walk-up apartments (85 basis points) and elevator apartments (48 basis points). The category with the largest decline is hotels (-2 percentage points).

Table 13.  Delinquency Rates as of March of Each Fiscal Year

Source: NYC DOF, Office of the New York City Comptroller

As delinquency rates decline over the course of the fiscal year, the Office revised its estimate of the final delinquency rate to 2.3 percent (a 20-basis point reduction of the previous projection). As negotiations for re-authorizing the City’s property tax enforcement program appear to be underway, the forecast assumes that it is reauthorized in FY 2025 and that the delinquency rate drops to 2.0 percent.

Personal Income Tax and Pass-Through Entity Tax

NYC OMB’s FY 2024 PIT forecast published in April remained unchanged from January. However, actual PIT collections in the month of April were more than $450 million below their January projection,^[10] due mainly to the issuance of $703 million in refunds versus an expectation of $264 million. Part of the shortfall is due to faster processing of tax returns: 37.3 percent of the April refunds and 41.3 percent of their value were paid in just the last four business days. NY State, and Yonkers saw comparable accelerations. Refund activity in May has slowed, through May 10^th running about $160 million below the May 2023 total through the same date, providing a partial offset to the April increase.

Besides processing speed, however, OMB and the Office of the Comptroller expected refunds to decline from the levels seen in 2023 which reflected the double payment of PTET and PIT on 2022 income. The opposite has been the case: between January and May 3, 2024, the City issued nearly $1.5 billion in refunds, only $32 million shy of the amount paid out from January through the entire month of May 2023.

Chart 8 shows the 12-month rolling sum of NYC PIT and PTET collections. For the 12 months ending in April 2024, the index was 12.2 percent higher than in December 2019.[11] The new data show that the index did not rebound in April 2024. In its forecast published in early March, the Office of the Comptroller estimated FY 2024 PIT and PTET revenues to exceed budgeted amounts by approximately $400 million. Following the April data, the estimate was revised downward by $450 million.

Chart 8. NYC PIT and PTET Tax Collections, 12-month Rolling Sum Indexed to December 2019

Source: NY State Department of Taxation and Revenue and Office of the New York City Comptroller

The Office of the NYC Comptroller’s forecast for PIT and PTET in 2025 has been revised upward by $537 million (3.2 percent) as a result of an increased employment and wage growth assumption through calendar year 2024, a higher level of U.S. GDP emanating from a delay in the predicted economy-wide slowing, and an expectation that at least some of the unexpectedly low payments and high refunds in April 2024 will be made up for in higher City/State offsets in the fall when late-filing tax returns are fully processed. PIT and PTET revenue levels in 2026-2028 were also revised upward by an average of 1.6 percent, an effect of a higher baseline assumption for employment, wages, and U.S. GDP heading into these years, although the annual growth rates in each of these years were revised downward (3.0 percent per year, down from 3.7 percent). Table 14 summarizes the PIT+PTET differences and the Comptroller’s revisions.

Table 14.  PIT and PTET Combined Revenue Forecast, Fiscal Years 2024-2028

Source: Office of the New York City Comptroller and Mayor’s Office of Management and Budget

Sales Tax

Taxable sales in NYC were $56.4 billion in the first quarter of 2024 (not seasonally adjusted)^[12] or 19.8 percent above the last reading before the start of the pandemic, as shown in Chart 9. Adjusted for inflation,^[13] taxable sales were 1.9 percent higher than right before the start of the pandemic.

Chart 9.  NYC Taxable Sales: Nominal vs Inflation-Adjusted (2020Q1 = 100)

Source: NYS Department of Taxation and Finance, Bureau of Labor Statistics, Office of the New York City Comptroller

The City collected $7.08 billion in sales tax in the first nine months of FY 2024, a 4.5 percent increase relative to the first nine months of FY 2023. The Comptroller projects FY 2024 sales tax revenues of $9.97 billion, for a growth rate of 4.5 percent. Revenues are projected to increase by 4.5 percent per year on average, reaching $11.89 billion in FY 2028. These rates of growth are reflecting the NYC wage base, which is forecast to grow by a 3.9 percent annual average together with a strong forecast growth in equity market valuations in 2024 that are sustained into future years. The Comptroller’s forecast exceeds the April Financial Plan assumptions by $183.0 million in FY 2025, $106.0 million in FY 2026, $180 million in FY 2027 and $165 million in FY 2028. The forecast incorporates the NYS extension of the sales tax intercept directed toward the Distressed Provider Assistance Account.

Business Income Taxes

In the first three quarters of FY 2024, NYC net business income tax collections (including the Business Corporation Tax, the General Corporation Tax, the Unincorporated Business Tax, and the remainder of the Banking Corporation Tax) were 10.1 percent above the same three quarters in the prior fiscal year. Growth has been strongest for corporations, whose net tax collections rose by 12.0 percent, while collections from unincorporated business rose 5.5 percent.

Chart 10 shows the year-over-year growth in net tax payments by both financial and non-financial businesses in NYC. For six straight quarters, both financial and non-financial business have paid more in taxes than in the same quarter one year prior. And collections in FY 2024 are on pace to be 50 percent above FY 2019. But while payments have not receded, there has been a narrowing of the four-quarter gain in the most recent quarter.

Chart 10.  NYC Business Income Tax Payments (Percent Change Year-Over-Year)

Source: New York City Department of Finance

In its April Plan, OMB increased its forecast of business taxes in FY 2024 by $213 million, in FY 2025 by $768 million, and by an average of $435 million in each year of FY 2026- FY 2028. The FY 2024 change was primarily in response to fiscal year-to-date collections, which were 12.0 percent above FY 2023 and already about $200 million above OMB’s prior Plan forecast through February. Subsequent to OMB’s forecast, March 2024 collections—the month in which most quarterly payments are made—came in 12.1 percent above the prior year, continuing the elevated levels established in prior months of FY 2024. OMB’s increases to collections in FY 2025 and thereafter are a result of a rise in their expectations of corporate profitability nationally, embedded within their economic assumptions.

While the Comptroller’s Office estimates that profitability is currently strong—especially for securities industry firms recently, as noted above—a decline in future profitability at the national level and for NYC corporations overall is expected beginning later this year and into 2025. U.S. corporate profits before tax rose by nearly 50 percent in 2020-2022, nearly reaching a 12 percent share of the U.S. economy (i.e., GDP)—which matches the level achieved once in 2006, and before that in 1951. Some of the causes for such profitability growth were unique to the pandemic itself and the fiscal and monetary stimulus that accompanied it and were thus temporary in nature. The Comptroller’s economic outlook is for U.S. corporate profits to decline in 2025 and 2026 as they move away from their current level, still above 11 percent, and closer to a historic norm as a share of GDP (with 1990-2019 averaging 8.3 percent).

As seen in Table 15, the forecasted decline in profits results in projected business tax revenues for Fiscal Years 2025-2028 that are below the 2024 forecast. (OMB also projects a decline in business tax revenue to occur in FY 2026, but their overall expected decline is not as large and their forecasted business tax revenue in FY 2027 and FY 2028 exceeds the Comptroller’s by roughly one-half billion dollars in each year.) Note also that the Comptroller’s forecast has been revised upward, especially in FY 2025 but also in each subsequent year, because of recent collections and economic data indicating that the anticipated fall in profitability has not commenced. If it does decline as predicted, it will be starting from a higher level.

Table 15.  Business Income Taxes Forecast, Fiscal Years 2024-2028

Source: Office of the New York City Comptroller; Mayor’s Office of Management and Budget

Real Estate Transaction Taxes and Other Taxes

NYC collects taxes based on the value of two types of real estate-related transactions: (i) the real property transfer tax (RPTT) applies to the sale or transfer of a controlling interest in real property; and (ii) the mortgage recording tax (MRT) is charged on mortgages for most categories of real property—including mortgage refinancings but excluding mortgages on cooperative apartments. As of March 2024, the City collected $1.29 billion from transaction taxes, a drop of 25.0 percent from the same period in FY 2023.

The Comptroller forecasts that total real-estate transaction taxes collection will be $1.77 billion in FY 2024 ($1.16 billion in RPTT and $608.0 million in MRT), an 18.8 percent decrease from FY 2023. This is a $120.0 million upward revision from the March forecast, due to higher than anticipated collections so far in the fiscal year. The Comptroller is forecasting collections of $1.85 billion in FY 2025, $2.05 billion in FY 2026, $2.18 billion in FY 2027, and $2.31 billion in FY 2028.

For all other taxes, the Comptroller forecasts collections of $3.15 billion in FY 2024, $3.25 billion in FY 2025, $3.37 billion in FY 2026, $3.48 billion in FY 2027, and $3.55 billion in FY 2028. The Comptroller’s forecast of the hotel occupancy tax drives revenues above the Financial Plan assumptions by $32.0 million in FY 2024, $52.0 million in FY 2025, $59.0 million in FY 2026, $75.0 million in FY 2027, and $53.0 million in FY 2028. The City collected $518.0 million in hotel occupancy tax in the 9 months of FY 2024, a 10.1 percent increase relative to the first 9 months of FY 2023.

Risks to the Tax Revenues Forecast

There is continued uncertainty about future income and valuations for commercial property in NYC. Further declines in property values would negatively impact City tax revenues via lower real estate transaction taxes and the Real Property Tax. Bankruptcies and financial strains developing from a prolonged commercial real estate slump could also create downstream effects on business income taxes.

Further population loss in NYC, especially among higher-earning workers in office-related occupations, is a risk to multiple sources of revenue, especially the Personal Income Tax base. The rapid change in location of work flexibility in office settings creates the possibility of sustained net outmigration driven by high relative costs of living in NYC, especially housing and childcare.

Miscellaneous Revenues

In the April Plan, OMB left its FY 2024 net miscellaneous revenue projection unchanged from the January Plan forecast at $6.35 billion, a 6.4 percent increase over the previous year. As Table 16 shows, the Plan increases miscellaneous revenue projections in the outyears by $71 million in FY 2025, $357 million in FY 2026, $370 million in FY 2027, and $413 million in FY 2028.[14]

Table 16.  Changes in Miscellaneous Revenue Estimates, January 2024 Plan vs. April 2024 Plan

Source: Office of the New York City Comptroller, Mayor’s Office of Management and Budget

Adjustments to the current fiscal year forecast reflect a decrease in charges for services totaling $88 million driven primarily by lower tuition revenue due to lower-than-budgeted enrollment in CUNY colleges (a $128 million reduction), and a decrease of $38 million in water and sewer charges.  These are offset by anticipated increases in other revenue categories including fine revenue, which increased by $54 million in FY 2024 in line with the Comptroller’s projection in its March report on the January Plan.

For FY 2025 and beyond, changes stem mainly from upward adjustments to anticipated revenues from water and sewer charges. In the January Financial Plan, the City reflected rental payments from the Water Board worth $145 million in FY 2024 and $295 million in FY 2025. The April Plan reduces the FY 2025 rental payment by $6 million but reflects additional rental payments of $313 million in FY  2026, $325 million in FY 2027, and $369 million in FY 2028 for a combined $1.44 billion in rental payments over FY’s 2024-2028.

In addition to receiving reimbursement from the Water Board for the operation and maintenance of the City’s water and sewer systems, the agreement between the City and the Water Board allows the City to request an additional rental payment each fiscal year in an amount not to exceed the greater of: (a) the principal and interest payable on general obligation bonds issued by The City for water and sewer purposes or (b) 15 percent of principal and interest payable on the bonds of the Authority.[15]  The City did not require a rental payment in FY’s 2017-2019 and FYs 2022 – 2023. On May 3rd, the Water Board recommended a rate increase of 8.5 percent effective July 1st, 2024, the highest percentage rate increase since FY 2011. Of the total increase, 3.1 percent was due to City’s collection of the rental payment in FY 2024 and FY 2025. Higher debt service from the capital program also contributed 3.1 percent.

Table 17 shows the City’s January projections for all categories of miscellaneous revenues over the Plan period. Total miscellaneous revenue is expected to grow by 6.4 percent in FY 2024 to $6.35 billion following a 17.5 percent growth in FY 2023. Although the current Plan increases miscellaneous revenue projections for FY 2025 and the outyears, total miscellaneous revenue is forecast to decline steadily throughout the Plan period and average $6.08 billion in FYs 2025-2028. The lower projections are mostly driven by a projected decline in non-recurring revenues and interest income, as Federal-Funds rates are expected to gradually fall throughout the Plan period.

Table 17.  Miscellaneous Revenue Forecast, April 2024 Plan

Source: Office of the New York City Comptroller, Mayor’s Office of Management and Budget

The Comptroller’s Office expects total miscellaneous revenue will be above OMB’s forecast by $32 million in FY 2024, $120 million in FY 2025, $134 million in FY 2026, $108 million in FY 2027 and $98 million in FY 2028. While the City raised its FY 2024 fine revenue projection by a combined $140 million since budget adoption, the Comptroller’s Office anticipates fine revenues could be higher than the City’s current projection by $32 million in the current fiscal year, $20 million in FY 2025, and $15 million in each of FYs 2026 – 2028. These offsets are mainly attributable to higher projections for camera fines and Department of Buildings (DOB) penalties. In addition, based on the Comptroller’s forecast of short-term interest rates and the City’s cash balance in the outyears, the Office projects interest income will be above the OMB’s current projections by $100 million in FY 2025, $119 million in FY 2026, $93 million in FY 2027, and $83 million in FY 2028.

Federal and State Aid

The April Financial Plan projects total categorical Federal and State aid of $32.64 billion in FY 2024, supporting about 29 percent of the City’s expenditure budget. Compared with the January Plan, the City has reflected a net decrease of $80 billion in the current year consisting of an increase of $249 million in Federal aid and a decline of $329 million in State grants. The lower State aid assumption is largely driven by the City’s continued revision of State assistance for asylum seekers spending.

The increased Federal aid in FY 2024 is mainly concentrated in education grants, totaling $244 million of the total Federal aid increases recognized in the April Plan. The additional education grants include $131 million in Title I grant for economically disadvantaged students, $45 million in residual American Rescue Plan (ARP) education funding, and $30 million in homeless student assistance and $25 million in school meal subsidy. The remainder of the Federal aid increase is mainly scattered across various agencies such as Police, Fire, Housing and Preservation, partly offset by lower re-estimates of Epidemiology and Laboratory Capacity grants.

The April Plan revisions bring total Federal COVID assistance anticipated by the City to $4.36 billion in FY 2024-FY 2028 (including unrestricted aid for prior-year FEMA reimbursement), as shown in Table 18. Together with grants already recognized in FY 2020 through FY 2023, tallied at about $22 billion, overall COVID assistance is expected to reach a total of $26.4 billion. The largest components comprising this figure are FEMA reimbursement currently estimated at $7.24 billion, American Rescue Plan- Coronavirus Response and Relief Supplemental Appropriations Act (ARP-CRRSA) education grants totaling $6.94 billion and ARP-State and Local Fiscal Recovery Fund (SLRF) grants of $5.88 billion. Federal COVID assistance is expected to decline precipitously after the current year as ARP education grants will expire and fall by $2 billion. After which, COVID funding sources would drop further by FY 2026 as ARP SLFRF grants would also come to an end after FY 2025.

Table 18.  Projected Federal COVID Assistance-April 2024 Plan

Source: Mayor’s Office of Management and Budget.

As for budgeted aid from Albany, State aid in the April Plan largely drops in FY 2024 because of the changes in the City’s recognition of asylum seeker aid, a downward revision of $475 million. This decline is partially offset by increases in the State Family Homelessness and Eviction Protection Supplement (FHEPS) of $32 million; recognition of education aid including $32 million in Foundation Aid and additional funding for charter leases of $52 million; and $29 million in State school building aid. Changes in FY 2025 State aid were used to largely offset the expiration of Federal COVID-19 assistance including: $74 million to maintain mental health services in schools, $27 million for the Public Schools Athletic League, $17 million towards coordinators for students in temporary housing, $17 million for dyslexia programming, $10 million for bilingual education, $48 million in community schools funding and an additional $8 million to replace community schools cuts from a prior City plan. The April Plan also reflects the City’s expectation of an additional $1 billion in State aid for asylum seekers in FYs 2026 and 2027.

State Enacted Budget

A $237 billion State budget was passed on April 20^th, three weeks after the April 1^st deadline but still earlier than last year’s May enactment. The Mayor’s Message included with the City’s April Plan states that the State Enacted Budget addresses all of the City’s top priorities: funding for newly arrived migrants, increased bonding authority, extension of mayoral control over public schools, housing reform, and various local safety and enforcement provisions.

Local Impacts

To the extent that this Office can track State budget impacts before the release of the actual State Enacted Budget Financial Plan (legally due 30 days after the signing of the last budget bill), impacts for City FYs 2024 and 2025 are included in Table 19 below.

Positive impacts for the City are largely captured in the State’s aid for asylum seekers and education funding. A significant portion of the State’s $2.4 billion increase for newly arrived migrants flows directly to New York City. Foundation Aid to the City, the primary vehicle for the State’s share of school funding, was increased by $466 million year to year. This was higher than the Governor’s initial proposal in January, but lower than the City originally expected (the Governor proposed an inflation factor increase of 2.3 percent in the Executive Budget; ultimately the legislation came in at 2.8 percent). The State Enacted Budget also includes $1 million for a Rockefeller Institute study on Foundation Aid formula updates.

The largest cost impact for the City is Tier 6 pension reform that will increase City contributions for its employee pensions due to an updated formula that averages three years of salary instead of five when determining payment amounts (see Pensions section for more detail). Also, the extension of the sales tax intercept for distressed hospitals through 2027 will reduce the City’s sales tax receipts by $37.5 million in City fiscal year 2025, $150 million in each of City fiscal years 2026 and 2027, and $112.5 million in City fiscal year 2028.

Table 19.  Impact of FY 2025 State Enacted Budget

Source: Office of the New York City Comptroller, Mayor’s Office of Management and Budget

Impacts from the State Enacted budget were generally not reflected in the City’s Financial Plan (most will be part of the Adopted Budget release), save for a few key items: a portion of the State’s Foundation Aid for education; the negative revenue impact from the extension of the sales tax intercept for distressed hospitals; and $41 million in expense impacts in various areas starting in FY 2025. State asylum seeker contributions were already reflected in the City’s budget in the Preliminary Plan – April Plan updates include a downward revision in FY 2024 State revenue in this area (discussed below) and adds (not yet confirmed by the State) of $1 billion in each of FYs 2026 and 2027.

In addition to the impacts on the City’s expense budget, the Enacted State Budget raised the City’s capacity to incur debt. Budget legislation increases the amount of Transitional Finance Authority Future Tax Secured (TFA FTS) debt that is not subject to the City’s debt limit by a total of $14 billion over the next two fiscal years. On July 1, 2024, the amount not subject to the limit increases by $8 billion to $21.5 billion, and on July 1, 2025, it increases by an additional $6 billion to $27.5 billion. As part of the budget legislation, the State also required that $2 billion in City capital be added for classroom construction above the School Construction Authority’s (SCA) current capital plan to help the City meet the State’s mandate to reduced class size. While the April Plan added $6.8 billion to fully fund the SCA’s current plan as proposed in February, it did not include this additional $2 billion mandate.  For more details see the Capital Budget and Financing Program section of this report.

Asylum Seeker Aid in the State Enacted Budget: What Flows Through the City?

The State Enacted Budget’s aid for newly arrived migrants was unchanged from the Governor’s Executive Budget proposal: an overall increase in aid of $2.4 billion (to a total commitment to-date of $4.4 billion). Not all of this aid will flow through New York City’s government. Table 20 breaks out the entirety of the $4.4 billion that the State has committed for asylum seekers, more than $3 billion of which flows directly to the City government.

Aid for asylum seeker costs included in the City’s April Plan was approximately $450 million below what the City budgeted for FY 2024 in January. This was partly due to different accounting of the cost of Safety Net benefits: the City does not categorize the expense as a cost of services to asylum seekers, which are largely shelter. Rather, Safety Net spending and associated State aid are already included in the public assistance budget. As a result, while the State counts Safety Net aid as part of the $2.4 billion, it is not an offset for the City. Furthermore, OMB is also only including a portion of the smaller Other Services category case until further clarification from the State.

Table 20.  Total State Funding for Asylum Seekers, as of the State Executive Budget

Source: NYS Division of Budget, Office of the New York City Comptroller

Note: Amounts in State Fiscal Years as provided in the State’s Executive Budget released in January. An updated table is not available at this time because the State Enacted Budget’s details have not yet been released, however the State’s Enacted budget did not include significant changes in asylum seeker funding.

Additional State Actions with Ramifications for NYC

• A two-year extension of Mayoral control/accountability over NYC schools, with caveats:
  • The Chair of the Panel for Education Policy must be selected from candidates proposed by the Assembly Speaker; Senate Majority Leader, and Board of Regents Chancellor; and
  • The City must maintain education funding levels for the coming year at the same level or greater levels as the prior year.
• Housing legislation:
  • A limited version of Good Cause Eviction protections for tenants;
  • Removal of a state cap on floor area ratios (FAR) that will allow for residential building at higher than the current limit of 12 times lot size in specific zoning districts pending planned City zoning amendments or for projects sponsored by the Empire State Development Corporation, and where the zoning districts mandate minimum affordability percentage that are equal to or exceed the City’s Mandatory Inclusionary Housing program;
  • A pilot for legalizing basement apartments in 15 NYC community districts;
  • A deadline extension of the 421-a(16) tax break, a new program to exempt new residential developments (Affordable Neighborhoods for New Yorkers – ANNY), and the Affordable Housing from Commercial Conversions (AHCC) tax credit, which are discussed in the inset following this section.
• Sammy’s Law, allowing NYC to lower the local speed limit from 25 to 20 miles per hour and lower in slow speed zones.
• Enhanced enforcement of illegal cannabis retailers allowing local law enforcement to padlock unlicensed dispensaries; $40 million in Statewide funding for retail crime that includes a $3,000 tax credit for business owners who upgrade security systems.
• $52 million for engineering and design funding of the Interborough Express; $16 million for the planning of the Second Avenue Subway’s westward expansion along 125^th
• Legislation allowing movie theaters to obtain liquor licenses.

Expenditure Analysis

Total fund expenditures for FY 2024, as presented in the April Plan are a 5.2 percent increase over FY 2023 actual expenditures. Expenditures in both years, however, reflect the impact of prepayments, which shift spending between fiscal years, as well as adjustments for prior year payables in the current year. Net of these adjustments, as well as $50 million in reserve funds budgeted in this year, FY 2024 expenditures total $116.43 billion. This is an increase of 5.9 percent from the similarly adjusted FY 2023 actual expenditures of $109.98 billion. In FY 2025, expenditures—adjusted for prepayments and reserves— are budgeted to total $114.11 billion, a $2.32 billion (2.0 percent) decline compared with FY 2024.

Adjusting for these costs in each year provides a more accurate measure of the growth of City expenditures over time. Notably, the prepayment budgeted in FY 2024 of FY 2025 expenses as of the April Plan is less than the prepayment made in FY 2023 of FY 2024 expenses meaning the City is budgeted to spend more this year than it will earn.

The increase in budgeted spending in FY 2024 compared with FY 2023 is driven by a 12.2 percent increase in planned OTPS spending (excluding debt service). Excluding asylum seeker spending in both years, the growth in the OTPS budget falls to 7.7 percent over FY 2023, with most of the increase in contracted services. Debt service costs are budgeted to increase 0.1 percent in FY 2024 compared with FY 2023 actuals, while personnel services spending is budgeted to grow by 1.0 percent.

The growth in OTPS spending in FY 2024 comes despite a freeze on spending on certain OTPS categories as part of the series of PEGs beginning in September. While the freeze was lifted for some spending categories in March, it remains in effect for most of the impacted areas, including all consulting contracts, IT-related expenditures over $250,000, advertising, and travel costs. Overall, the freeze impacted about 10 percent of OTPS spending currently budgeted in FY 2024, excluding asylum seeker costs. Actual and budgeted spending in the impacted categories as of the end of April are about 12 percent below actual and budgeted at the same time last year, again excluding asylum seeker costs in both years.

As for FY 2025 compared with the current year, expenditures—adjusted for prepayments and reserves—decline compared with FY 2024, as shown in Table 22. This decline is driven by a $3.04 billion drop in Federal COVID-19 aid and stimulus funding. Netting out the spending supported by COVID-19 stimulus funds in both years, expenditures grow slightly, by 0.8 percent. Personnel costs in FY 2025 are budgeted to grow by 3.9 percent in FY 2025, largely driven by an 11.1 percent increase in pension costs. This is before the impact of the State legislation that will increase pension costs beginning next year, however. With this change included, pension growth is 12.9 percent over FY 2024 costs.  (See the Pensions section of this report for more details.)  OTPS costs are budgeted to decline, however, as described in the Re-Estimates section in this report, the Comptroller’s Office estimates that OTPS costs are underbudgeted, and that actual FY 2025 OTPS costs will be higher than currently reflected in the Financial Plan.

After FY 2025, expenditures are budgeted to grow at an annual rate of 3.0 percent from FY 2025 through FY 2028. This growth is driven by spending on PS costs, which are projected to grow at an annual rate of 3.6 percent from FY 2025 through FY 2028, and debt service costs, which are projected to increase at an annual rate of 8.2 percent from FY 2025 through FY 2028. Spending on OTPS costs is budgeted to decline at an annual rate of 1.6 percent.

Table 22.  FY 2024 – FY 2028 Expenditure Growth, Adjusted for Prepayments and Reserves

Source: Office of the New York City Comptroller, Mayor’s Office of Management and Budget

Note:  Intra-City adjustments are reflected in each of their respective expense categories. Excludes TSASC debt service costs of $76 million in FY 2024, $76 million in FY 2025, and $69 million in FYs 2026-2027, which are paid outside of the City debt service budget (099).

Headcount

The April Plan, as shown in Table 23, projects total full-time authorized headcount of 301,338 for FY 2024, with the number of authorized full-time employees declining by more than 2,500 positions each year in both FYs 2025 and 2026, to 298,813 and 296,175 respectively, and settling at 296,120 in FY 2028. The overall year-over-year decline is driven primarily by lower projections of full-time pedagogical and civilian employees. Authorized pedagogical headcount is budgeted to decline by 2 percent to 127,658 by FY 2028, and civilian headcount is also budgeted to decrease by 2 percent to 107,603 by FY 2028. Uniformed authorized full-time headcount is projected to decline by less than 1 percent over the plan period and is primarily driven by reductions in Department of Sanitation (DSNY) authorized headcount from a previous financial plan.

Table 23.  Total Funded Full-Time Year-End Headcount, April 2024 Financial Plan

Source: Office of the New York City Comptroller, Mayor’s Office of Management and Budget

Compared with the January Financial Plan, the April Financial Plan’s total full-time authorized headcount rose by 499 positions in FY 2024 and by 700 positions in FY 2025. Over 60 percent of these positions are newly funded.  Agencies accounting for these positions include:

• Fire Department to cover additional ambulance tours and for civilian staffing throughout the department (70 in FY 2024 and 193 in FY 2025);
• Campaign Finance Board to administer the campaign finance systems during the upcoming election cycle (126 in FY 2025);
• Department of Finance to expand the Sheriff’s electronic monitoring program (51 in FYs 2024 and 2025);
• Department of Buildings to support compliance with Local Law 97 decarbonization targets (36 in FY 2025);
• Department of Youth and Community Development for the Job Connection Program, connecting youth at risk of gun violence with career readiness and green job placement programs (28 in FY 2025);
• Law Department’s Tort Division (25 in FYs 2024 and 2025); and
• Department of Sanitation for its Waste Containerization program beginning in Fall 2024 (17 in FY 2025).

The remaining additional positions are from headcount adjustments made by OMB, and are funded by Federal, State, or other categorical grants now recognized in this financial plan. The two largest additions to note are:

• An addition of 205 civilian positions (115 Traffic Enforcement Agents and 90 other civilian positions) in the Police Department in FY 2024 only, and
• An addition of 120 federally funded positions in the Office of Emergency Management in FY 2025 only.

Table 24.  Full-Time Headcount Changes, April 2024 Financial Plan vs. January 2024 Financial Plan

Source: Office of the New York City Comptroller, Mayor’s Office of Management and Budget

In terms of actual full-time headcount, the City’s full-time workforce is at 284,042 positions as of April 2024, a decrease of 527 positions since its recent peak of 284,569 in November 2023 following increased hiring efforts citywide. This is likely the result of the hiring freezes implemented in October 2023. In late February 2024, the Administration announced the cancellation of the next round of spending cuts and a relaxation of the freeze. City agencies moved from a nearly full hiring freeze to a 2-for-1 model, where one employee can be hired for every two that leave or retire. This Office will continue to monitor staffing levels and note any rebounds in hiring.

The City’s vacancy rate remains high by historical standards at 5.7 percent as of April’s preliminary data. As Chart 11 shows, the City’s workforce is still well below authorized hiring levels. Based on actual spending thus far this year, the Comptroller’s Office projects that full-time salaries are about $600 million less than budgeted by the City in FY 2024 and about $150 million in FY 2025, including fringe costs.

Chart 11.  Full-Time Headcount, Actual vs Plan, FY 2017—FY 2024

Source: Office of the New York City Comptroller, Mayor’s Office of Management and Budget

Note: Plan values are assigned to specific months – July through October are assigned the Adopted Plan value, November and December are the November Plan value, January through March are the Preliminary Plan value, April through May are the Executive Plan value, and June is the final June Plan value. Data on actual full-time employment is preliminary for March through April FY 2024; they are derived from initial payroll results and have not yet been published by OMB.

Overtime

Overtime expenditures are budgeted at $1.53 billion in the FY 2025 Executive Budget, 31 percent lower than the City’s current estimate of $2.21 billion for FY 2024. The planned spending for FY 2024 overtime has increased by $248 million since the January Plan, for a total increase of $860 million or 64 percent when compared to the FY 2024 Adopted Budget projection, including an increase of $720 million for uniformed employees ($216 million since January update). The increase to the FY 2024 overtime estimate resulted from adjustments for wage increases and the use of overtime for day-to-day operations at the City’s agencies. Although the City recently eased its hiring freeze, higher than normal vacancy rates have exerted upward pressure on overtime usage for FY 2024. At this time, the Comptroller’s Office estimates that FY 2024 overtime spending will be even higher at $2.47 billion, for a total additional need of $266 million. However, with renewed efforts to hire employees and the restoration of two NYPD classes for FY 2025, the Comptroller’s Office projects a decline in FY 2025 overall overtime cost to $2.27 billion, exceeding the Executive Budget projections by $734 million as shown in Table 25.

Table 25.  Projected Overtime Spending, FY 2024 and FY 2025

Source: Mayor’s Office of Management and Budget, Office of the New York City Comptroller

For FY 2025, most of the additional funding estimated for overtime by the Comptroller’s Office is for uniformed overtime spending, specifically at the NYPD and DOC. The Comptroller’s Office projects that NYPD FY 2025 overtime spending will be approximately $950 million, $473 million higher than budgeted. The FY 2025 budget reflects the City’s proposal to cancel two incoming NYPD classes for that fiscal year, down from the original plan to cancel four incoming classes for FY 2025 (two incoming classes were restored in the FY 2025 Executive Budget). This action will have a positive effect on the usage of overtime, resulting in lower overtime costs of $900 million for FY 2026 and $850 million in each of FYs 2027 and 2028. For FY 2024, the department is on target to spend $900 million for uniformed overtime in FY 2024, about $66 million more than currently budget and $79 million more than the FY 2023 overtime cost ($821 million).3F[17]

DOC faces ongoing challenges in hiring uniformed staff.  As shown in Chart 12, the department has not been able to hire up close to the authorized level for uniformed employees and has a vacancy rate of 14 percent at the end of April 2024. The department is on target to spend $250 million for uniformed overtime in FY 2024, about $20 million lower than the FY 2023 overtime cost.  If DOC is successful in hiring uniformed employees, overtime costs will be lower for FYs 2025 through 2028. At this time, the Comptroller’s Office is projecting uniformed overtime costs of $200 milllion annually for FYs 2025 through 2028, $72 million more than budgeted in each year.

Chart 12.  DOC Full-Time Uniformed Headcount, Actual vs. Plan FY 2024

Source: Mayor’s Office of Management and Budget, Office of the New York City Comptroller

Note: Plan values are assigned to specific months – July through October are assigned the Adopted Plan value, November and December are the November Plan value, January through March are the Preliminary Plan value, April through May are the Executive Plan value, and June is the final June Plan value. Data on actual full-time employment is preliminary for March through April FY 2024; they are derived from initial payroll results and have not yet been published by OMB.

Spending for civilian overtime has averaged about $61 million a month for FY 2024 and is on target to be about $737 million for the fiscal year. The average cost per month is slightly lower than the FY 2023 average monthly cost of $63 million. With an increase in civilian employees over the fiscal year, the reliance on overtime usage has somewhat declined. However, certain agencies, such as the Department of Social Services (DSS) and the Department of Homeless Services (DHS) continue to utilize higher than normal overtime to meet the agencies’ needs to serve the increasing asylum seeker population in New York City. DSS spent $96 million for overtime cost in FY 2023 up from $85 million in FY 2022 and DSS is on target to spend $110 million for overtime in FY 2024. DHS spent $26 million for overtime cost in FY 2023 up from $20 million in FY 2022.  DHS is on target to spend about $28 million for FY 2024. Despite the increase to the City’s workforce level, continuing demands will exert upward pressure on overtime usage. The Comptroller’s Office projects civilian overtime cost for FY 2025 at $625 million, $189 million more than currently budgeted.

Contracted Temporary Services and Contracted Professional Services

City agencies often contract with outside vendors to staff and perform essential functions, including legal services, accounting services, architectural and engineering services, and other consultant services. These contracts can be used to counter high vacancy rates in particular areas or titles. Since FY 2019, agencies have consistently spent upwards of $1 billion on these services (excluding spending on asylum seeker and COVID related costs). The April Plan increased funding for these services in FY 2024 by $129 million from $1.12 billion in the January Plan to $1.3 billion (all funds or a $399 million increase since adoption). As of April 2024, the City has committed to spend $1.2 billion of that total. Funding for these services, however, sharply falls to $894 million in FY 2025, and then slowly ramping down to $792 million in FY 2028.

Historically, the City underbudgets these expenses in the Adopted Budget and then adjusts spending during the fiscal year.  Over the past several years, the total addition to April Plans since Adoption averages about $370 million. It is likely that agencies will still require these services at a similar level in FY 2025, which the Comptroller’s Office estimates would require an additional $132 million in City funds. The City could reduce its reliance on these services if it hires up to its authorized headcount in the outyears.

Health Insurance

Employees and retirees’ pay-as-you-go health insurance cost in the FY 2025 Executive Budget is $9.15 billion, $1.17 billion higher than the budgeted amount of $7.98 billion for FY 2024. The FY 2024 estimate is net of a $500 million prepayment in FY 2023 for retirees’ health care. After adjusting for this prepayment, the FY 2025 budgeted amount is $667 million higher than the FY 2024 forecast. As shown in Table 26, health insurance costs are then projected to increase at an average annual rate of 4.7 percent to $9.7 billion in FY 2026, $10.09 billion in FY 2027, and $10.51 billion in FY 2028. Compared to the January Plan, the budgeted amounts for health insurance remained relatively flat for FY 2024 and increased by $161 million in FY 2025 and approximately $155 million in each of FY 2026 through FY 2028.

Table 26.  Projected Pay-As-You-Go Health Expenditures

Source: Office of the New York City Comptroller, Mayor’s Office of Management and Budget

Note: All Other includes all active employees as well as retirees.

The projections assume annual increases in health insurance premium rates for active employees and pre-Medicare retirees of 7.7 percent in FY 2025, 5.5 percent in FY 2026, 5.25 percent in FY 2027, and 6.25 percent in FY 2028. The finalization of the Health Insurance Plan of Greater New York (HIP) rate for FY 2025 resulted in a 1.95 percent increase to health insurance premium rate over the previous assumed rate increase of 5.75 percent. This resulted in additional cost to the City of $90 million annually beginning in FY 2025.3F^[18]

There were no changes to the FY 2026 through FY 2028 rate increases for active employees and pre-Medicare retirees. These rates are lower than the assumed increases to the rates used in calculating the City’s Other Postemployment Benefits Valuation (OPEB) liability as of June 30, 2023. The OPEB calculation assumes increases to the premium rates of 6.75 percent in FY 2026, 6.5 percent in FY 2027, and 6.25 percent in FY 2028. There is some level of uncertainty since the City is currently reviewing responses to a Negotiated Acquisition request released in the Fall of 2022 and expects to negotiate more favorable health insurance costs with the health care provider chosen to provide health services for active employees and pre-Medicare retirees.

The projected increases for senior care health insurance premium rates remained unchanged at 4.7 percent in FY 2025 and in FY 2026 and by 4.6 percent in FY 2027 and in FY 2028.^[19]

The New York State Supreme Court Appellate Division recently heard oral arguments on the City’s plan to switch to a Medicare Advantage Plan for retirees. This was in response to an appeal filed by the City against the permanent injunction issued by the Court in August 2023. A decision is now being awaited. The implementation of the Medicare Advantage Plan would result in lower health care costs of $600 million annually, which will then be deposited into the Health Insurance Stabilization Fund. [20]  The proposed switch to a Medicare Advantage Plan was challenged in court by retirees claiming that the plan would not offer the same quality of benefits to members. Citing a low balance in the Health Insurance Stabilization Fund, the City and Municipal Labor Committee, an organization of labor unions that controls the fund, agreed to forgo $112 million budgeted payments from the fund to the City’s general fund beginning FY 2023. However, the April Plan still reflects this payment. As such, the Comptroller’s Office increases its estimates of City-fund expenditures by $112 million in FY 2024 to reflect that this offset is not likely to be received this year.

Pensions

The FY 2025 Executive Budget projects pension expenditures of $10.27 billion, just over $1 billion higher than the current FY 2024 estimate of $9.24 billion. Pension contributions are then projected to grow to $10.69 billion in FY 2026, $10.81 billion in FY 2027, and $11.75 billion in FY 2028. The current projections incorporate adjustments to reflect collective bargaining agreements and the financial impact of the FY 2023 investment gain of 7.98 percent and the FY 2022 investment loss of 8.65 percent.

The projections also include funding of approximately $6 million in each of FY 2024 and FY 2025 and $27 million annually in the outyears for various pension bills enacted at the end of 2023. These costs include $21 million in each of FY 2026 through FY 2028 to fund automatic enrollment of eligible existing and incoming members to the Board of Education Retirement System (BERS) with the choice to opt-out within 90 days. The projections, however, do not include funding for additional pension bills recently enacted with the passage of the State’s budget. These bills are projected to cost the City $165 million in FY 2025, $161 million in FY 2026, $172 million in FY 2027, and $186 million in FY 2028. The additional cost stems primarily from the enactment of legislation reducing the number of years from five to three in calculating the final average salary to determine pension benefits for TIER 3 and TIER 6 members of the New York City Retirement Systems (NYCRS). This modification will result in a higher final average salary for members and is projected to cost the City $163 million in FY 2025, falling slightly to $158 million in FY 2026 before growing to $183 million by FY 2028.

The pension investment earnings for FY 2024 will impact pension contributions beginning in FY 2026. Following the end of each fiscal year, the City’s Office of the Actuary measures the investment returns earned by the pension funds and compares them to the returns that would have been generated if investment earnings has equaled the Actuarial Interest Rate (AIR). [21] The Financial Plan projections assume pension investments will earn the AIR of 7 percent each year. Through March 31, 2024, audited figures indicate that pension investments have earned 8.5 percent for the fiscal year.  A one percent return above or below the AIR of 7 percent will decrease/increase pension cost to the City by approximately $52 million in FY 2026 growing to $182 million by FY 2028.

Department of Education

The April Plan shows a net increase of $434 million in the Department of Education (DOE) budget for the current year. For FY 2024, the DOE budget now totals $32.92 billion net of intra-city funds, an increase of nearly 5 percent from actual FY 2023 spending of $31.42 billion, as shown in Table 27. Compared to the January Plan, the increased funding in the current year includes $85 million for charter school leases, $50 million for pupil transportation, $41 million for collective bargaining transfers, partly offset by $76 million in fuel and energy savings. Moreover, re-estimates of Federal and State aid provide a boost of $313 million in FY 2024, mainly from higher assumptions of $131 million in Title I funding, $45 million in ARP education grants, $30 million in homeless student assistance, and $32 million in Foundation Aid.

Table 27.  Department of Education Funding Detail-April 2024 Plan

Source: Office of the New York City Comptroller, Mayor’s Office of Management and Budget
Note: *Net of intra-city funds

For the FY 2025 Executive Budget, the City has reflected additional funding of $745 million for DOE, raising its budget to $32.21 billion from $31.46 billion in the January Plan. The majority of this increase are State and City funds allocations totaling $514 million for the continuation of various initiatives supported by Federal stimulus education grants in FY 2024. Comprising this total is the recognition of $316 million in Foundation Aid and additional City funds of $198 million. Initiatives supported by the State funds include mental health services ($74 million), Pre-K special education ($56 million), community schools ($56 million), Student Pathways ($53 million), PSAL ($27 million), Literacy and Dyslexia program ($17 million), and bilingual education ($17 million). Funding for these initiatives has been fully extended in the plan through FY 2028. Meanwhile, the City funds increase would maintain funding mainly for 3K ($92 million), arts education ($41 million), Learning to Work program ($31 million), and Project Pivot ($15 million). However, unlike the State-funded programs, these allocations are reflected in FY 2025 only, leaving these initiatives (or at least the stimulus-funded share) unfunded in FY 2026 to FY 2028. Rounding out the remainder of the FY 2025 increases are $47 million in collective transfers and $154 million in custodial costs.

The FY 2025 Executive Budget also has not fully captured education aid increases from the recently enacted State Budget. The aforementioned $316 million in Foundation Aid represents only slightly more than half of the formula school aids approved for the City. The DOE budget will likely recognize an additional $276 million in State funding once the formula aids are fully accounted for, consisting of $182 million in Foundation Aid and $94 million in net all other aids.

Despite the additional funding provided in the April Plan, significant additional needs remain in the DOE budget with emphasis towards the latter years. As shown in Table 28, risks to the DOE budget are estimated at $60 million in the current year and $727 million in FY 2025, before expanding to a range of $1.48 billion in FY 2026 to $2.32 billion in FY 2028. For Carter Cases, the April Plan shows baseline funding of $1.19 billion in the current year declining to a range between $646 million and $846 million annually in FY 2025-FY 2028, leading to projected shortfalls of $540 million in FY 2025, $410 million in FY 2026, and $340 million annually in FY 2027 and FY 2028. The Department has also overestimated Medicaid reimbursement for special education related services, mainly for speech and occupational/physical therapy, that will likely result in annual needs of $60 million in FY 2024 – FY 2028.

Table 28.  Projected Education-Related Risks-April 2024 Plan

$ in millions (Negative numbers indicate risks to the Financial Plan and increase the gap)

Source: Office of the New York City Comptroller

Note: Numbers may not add to totals due to rounding.

Further, while the City is not required to continue programmatic spending currently supported by Federal ARP education grants, the April Plan has provided significant funding towards this end—an indication that these initiatives will likely remain in place over the longer term. Given this scenario, the City will need to provide $80 million annually for the continuation of Summer Rising beginning in FY 2026, $87 million for contracted nurses each year starting in FY 2025, as well as $198 million annually in FY 2026-FY 2028 to support stimulus initiatives funded only through FY 2025 under the April Plan changes. The Department has also underbudgeted costs for charter leases and custodial services by a combined $40 million to $174 million annually, as spending in these areas will likely be higher than currently assumed.

Finally, the April Plan does not include funding to address the State’s class size reduction mandate. The law requires New York City, the only school district in the State subject to this mandate, to phase in smaller class size caps over a five-year period and achieve full compliance by September 2028. The State has given no indication that it would provide the City with any additional funding specifically for the implementation of this law. Based on the latest DOE estimates, the implementation cost could range between $1.4 billion and $1.9 billion annually when fully phased in. The City is currently meeting the FY 2025 target of 40 percent compliance but will require additional resources beginning in FY 2026. Using the lower end of the cost estimate, the new mandate could lead to DOE budget risks of at least $467 million in FY 2026 and $933 million in FY 2027, and $1.4 billion annually by FY 2028 upon full implementation.

According to DOE, the lower estimate would provide funding to schools strictly based on their respective need to create new classes. As such, the majority of the funding would be reserved for schools that are significantly noncompliant with the class size caps, which comprise 60 percent of overall number of schools, or about 1,000 schools. Low-need schools, defined as having fewer students living in poverty,[22]  are disproportionately included in the group of schools that would receive additional funding because classrooms in high-need schools (higher proportion of students in poverty) are more likely to already be in compliance with the mandate. The higher cost estimate ($1.9 billion) represents a more inclusive funding approach through Fair Student Funding (FSF), whereby the per-student funding amount would be increased across all schools to support a higher teacher to student ratio. Under this approach, even students who are in classes that already comply with the class size caps would receive some degree of additional funding. At this point, it is unclear what modifications would be needed in the FSF methodology to accommodate the delivery of the new funding to schools to ensure that the increased funding would go towards lower class sizes, given that the purpose of FSF funding is to maximize flexibility at the school-level.

In addition, under both approaches, the DOE assumes certain flexibility with regard to teachers being able to teach outside their licensed subject areas on a very limited extent. The law may allow such exemptions provided the DOE can come to an agreement with the United Federation of Teachers. The DOE currently projects that up to 12,000 teachers will need to be hired to fully address the mandate. Failing to reach agreement on these exemptions could significantly increase the number of new teachers needed and hence higher cost estimates.

Moreover, the hiring of teachers on such a large scale over the next three years could pose significant logistical challenges to the implementation schedule prescribed by the law. The Department has already signaled it will step up ongoing staffing and recruitment efforts to meet the staffing needs, such as providing greater support to ease the school-level hiring process, reducing teacher attritions, strengthening the pipeline of candidates from existing staff of paraprofessionals and teacher aides, and recruiting from national and local universities as well as through alternative certification programs such as NYC Teaching Fellows. If the DOE is unable to hire the needed teachers at the pace required, the financial impact could be lower than anticipated initially (though financial penalties at the State level may then be triggered). In addition, it could be difficult to prevent teachers from moving significantly between schools as vacancies open up at low-need schools, reversing the progress made at higher-need schools.

City Services for People Seeking Asylum

As of May 5, 2024, more than 195,700 asylum seekers have gone through the New York City emergency shelter system, with 65,600 currently in shelter. The City’s response has changed with the growth of the population: starting with emergency shelters provided through the Department of Homeless Services (DHS) and then, beginning in October 2022, adding NYC Health + Hospitals (H+H) Humanitarian Emergency Response and Relief Centers (HERRCs). Over time, other City agencies – including NYC Housing Preservation and Development (HPD), NYC Emergency Management (NYCEM) and the Department of Youth and Community Development (DYCD) – have begun providing shelter. As of May 5, 2024, there were 219 emergency shelters for asylum seekers across these agencies. From November 2022 (when this information first became available) to November 2023, the number of emergency shelters increased from 59 to 211, an increase of 152. With the City implementing time limits through the second half of 2023, the growth of the population has slowed, and the number of shelters has also grown at a slower rate. For additional details, visit the Comptroller’s Office Online Hub for Asylum Seeker Service Provision.

Overview of Financial Plan Changes

Compared to the June 2023 Financial Plan, the total amount budgeted for services for these new arrivals increased by nearly $10 billion in the November Plan, and then fell by $730 million in the January Plan. From the January to April Plan, the budget increased by $2.4 billion due to additions in the outyears.

Table 29.  Budgeted Amounts by Financial Plan (All Funds)

Source: Office of the New York City Comptroller, Mayor’s Office of Management and Budget

The April Financial Plan allocates $3.76 billion in FY 2024, a decrease of $475 million, and $4.75 billion in FY 2025, a decrease of $125 million. FY 2026 and FY 2027 were each increased by $1.5 billion to $4.00 billion and $3.00 billion, respectively. The Plan currently has no funding for asylum seeker services allocated in FY 2028.

Table 30.  Funding for Asylum Seekers (FY 2023 Actuals and Executive Budget)

Source: Office of the New York City Comptroller, Mayor’s Office of Management and Budget

CITY FUNDS

Compared with the FY 2024 Preliminary Plan, the City-funded portion of the budget decreased by $15 million in FY 2024 and $125 million in FY 2025,  and increased by $500 million in each of FY 2026 and FY 2027. As noted earlier in this report, PEG savings in 2024 were offset by lower-than-anticipated State aid. City funds now total more than $10.7 billion over the Financial Plan ($11.8 billion when including FY 2023 actual spending).

STATE AID

The State’s FY 2025 Enacted Budget was passed on April 20, 2024. It commits $2.4 billion in further support for asylum seekers, most of which will flow through the City’s budget. While this amount did not change from the Governor’s proposed Executive Budget, it was lower than OMB’s assumption of $1.76 billion for FY 2024 in the January Preliminary Plan. Therefore, the City reduced State funding by $450 million in the City’s Executive Budget, backfilling with City-funds as noted above.[23]

FEDERAL AID

The FY 2025 Executive Plan includes $157 million in Federal Emergency Management Administration (FEMA) funding in FY 2024 – $1.8 million more than the Preliminary Plan. Of this budgeted amount, $48.9 million is from the Emergency Food and Shelter Program (EFSP), and $108 million from the Shelter and Services Program (SSP). As of April 30, 2024, the City has received only the $48.9 million in EFSP funding.

As noted in our last report, the SSP program has many stringent reimbursement requirements. While the Federal government has signaled it will waive a cap on hotel spending, other documentation hurdles remain. [24] The Comptroller’s Office continues to include the $108 million that the City has not yet received from this program as a risk, which City funds may need to cover.

AGENCY BUDGETS

The majority of newly arrived migrants in City shelter are in shelters managed by DHS, H+H, and HPD: 82 percent of all asylum seeker funding is contained within these agencies’ budgets. The distribution of funding across City agencies did not change much in the Executive Plan, with DHS’s FY 2024 asylum seeker related budget decreasing by $256 million, from $1.32 billion in the Preliminary Plan to $1.1 billion in the Executive Budget. H+H’s FY 2024 budget decreased less, from $1.7 billion to $1.6 billion, suggesting that – at least currently – the City is continuing to rely more heavily on H+H-managed HERRCs.

Table 31.  Asylum Seeker Budget by Agency

Source: Office of the New York City Comptroller, Mayor’s Office of Management and Budget

Note: Intra-City removed from All Other.

ACTUAL EXPENDITURES

Through the first 10 months of the fiscal year, the City has spent $2.6 billion on services for asylum seekers out of $3.1 billion committed over the same period.

In monthly reports to the City Council, the Administration indicated spending $3.16 billion from July through April. [25] This amount cannot be verified in the City’s Financial Management System.

Population: Trends and Projections

The Comptroller’s Office utilizes demographic updates from City Hall and the City Council’s Asylum Seeker Terms and Conditions to develop projections of the census of people seeking asylum staying in City-managed shelters. Chart 13 shows the historical growth of asylum seekers in emergency shelters since the start of FY 2023 (July 1, 2022).

Chart 13. Asylum Seekers in Emergency Shelters (Individuals)

Following a series of increasingly stringent time limits imposed on single adults and adult families beginning in July 2023, the Administration issued 60-day time limits to families with children in non-DHS shelters beginning in October 2023. These notices began maturing on January 9^th with families forced to vacate their rooms and leave or reapply for shelter, precipitating a temporary decline in the shelter census. Families with children in non-DHS facilities can reapply once their notices come due, while families with children in DHS facilities have generally been able to remain in the same shelter for as long as needed.  See the Comptroller’s report on its recent investigation into the implementation of this rule.

On March 15, 2024, the Adams Administration entered into a stipulation of settlement agreement with the Legal Aid Society and the Coalition for the Homeless regarding the City’s Right to Shelter law, as it applies to single adults.[26] Those seeking an extension of their stay must prove they have a disability or extenuating circumstances. Single adults who do not have extenuating circumstances must depart shelter when their notice matures. Another part of the stipulation requires the closure of waiting rooms or overflow sites, locations where asylum seekers were forced to wait in line for a new shelter assignment.[27] The more recent uptick in the census is likely due in part to those individuals being brought back into shelter.

POPULATION PROJECTIONS

Since this population began coming to NYC in the spring of 2022, the changes to the in-shelter population and rate of arrival have fluctuated. These irregular trends make projections difficult, with forecasts further complicated by federal immigration policies, recent changes to the City’s time-limit rules, and any further policy changes at the Federal, State, or City levels of government.

In its State of the City’s Economy and Finances report released on December 15, 2023, the Comptroller’s Office projected that households would grow by 28 per day. These estimates were not reevaluated for the FY 2024 Preliminary Plan due to the changing policy environment at the time. Since then, the City has entered into a stipulation of the settlement agreement with Legal Aid Society and the Coalition for the Homeless mentioned above, further changing City policies around shelter limits for single adults.

From January 1, 2024, through April 28, 2024, the average daily change in households has been a decline of six households per day. However, this change was uneven: the beginning of the calendar year had large decreases, followed by small increases in March, and large increases in April. The table below highlights these trends.

Table 32.  Average Daily Household Change by Month[28]

Source: Office of the New York City Comptroller

And, because the City’s policies are different depending on whether individuals are single adults, or in families with or without children (and for families with children, whether or not they live in DHS shelter or not), the census trends also vary.

Chart 14.  Asylum Seeker Population by Family Composition (Individuals)

Source: Office of the New York City Comptroller

Notably, the shelter census of individuals who are in families with children increased significantly since June 4^th, 2023 (when these data initially became available to the Office of the Comptroller), before peaking in January prior to the maturing of the first time limits. Single adults peaked in December 2023, but have begun to increase recently as the City is now prohibited from keeping large numbers of newly arrived migrants from waiting for shelter. However, the more stringent criteria to obtain extensions to the time limit have not yet been fully enforced. Finally, the adult family census has declined since the summer.

Following the release of the 2025 Executive Budget, the Administration stated it is not altering its population projections set before the Preliminary Plan. However, the number of households in City-managed emergency shelters on April 28, 2024, was well below the Administration’s projections: approximately 28,600, or 4,200 fewer households than OMB’s estimate of 32,800.

Chart 15.  Actual Asylum Seeker Shelter Census and December Projections (Households)

Source: Office of the New York City Comptroller

Given this trend and its significant financial implications, the Comptroller’s Office has updated its projection, though acknowledges the uncertainty due to the changing policy landscape and the scarcity of information shared by the Administration. The Comptroller’s Office updated its projections using the shelter census from February 1, 2024, through April 28, 2024. This period was chosen to capture the 60-day notices issued to families with children in non-DHS facilities expiring, but not the immediate, one-time decline following the initial expirations on January 9^th. This date range also begins to capture the impact of changes to single adult 30 and 60-day notices from the Legal Aid agreement stipulation which went into effect on April 8^th.

Chart 16 shows the trends as households. (The number of households, along with the per diem rate per household are the two main drivers for the financial projections).

Chart 16.  Asylum Seeker Population by Family Composition (Households)

Source: Office of the New York City Comptroller

The Comptroller’s Office developed separate projections for each type of family household using the median daily change. These changes net to a decrease of 2.3 households per day, which the Office applies through FY 2025 to estimate the future population census. The census projection is held flat for FYs 2026 through 2028, because of the broad uncertainty around long term policy and other factors driving immigration.

This projection revises previous estimates downward, below OMB’s assumptions for the current Financial Plan.

Chart 17.  Updated Projection of Asylum Seeker Shelter Census (Households)

Source: Office of the New York City Comptroller

Per Diem Costs

The total amount spent, including housing and start-up services (constructing and outfitting buildings to make them legally habitable to new arrivals and migrants) as well as supplies, IT costs, medical care, and food, divided by the number of shelter nights provided for the same period, yields the household per diem, or the daily cost of services provided per household.

For the April Plan, OMB did not revise its FY 2024 target per diem of $383, which was released in August. Instead, it states that in recent months the per diem has fallen and is nearing the FY 2025 target per diem of $352. Information provided in the asylum seeker report to the City Council also shows a decline in the cumulative per diem (calculated from July 1, 2022 to current). [29]

Based on recent changes in population and spending, the Comptroller’s Office calculated a projected FY 2024 per diem of $372. Continuing current trends, a further 10 percent reduction is applied to FY 2025 for a projected per diem of $335. This is then reduced to $315 in the outyears. The Comptroller’s Office estimates that this per diem may be the floor for the daily rate for emergency shelter provision. While this per diem is higher than the average non-emergency DHS shelter rates, those shelters typically have much longer leases or be located in City-owned property. The $315 daily rate assumes the average emergency hotel rate combined with the typical cost of DHS services, adjusted for cost-of-living increases.

Again, there is little visibility into the components and trajectory of the per diem cost, making any scenario uncertain.

Alternative Estimate of Total Cost

Combining the population and cost components provides a full fiscal estimate of anticipated total spending. The projected scenario in Table 33 assumes a daily decrease of 2.3 households through June 30, 2025, then holds the population flat at 27,600 households. This population change is combined with the annual per diems described above.

Table 33.  Comptroller’s Office Asylum Seeker Cost Projections

Source: Office of the New York City Comptroller

Comptroller’s Estimate Against the City’s Financial Plan

The Comptroller’s Office estimates a total cost of $3.76 billion in FY 2024, in line with the City’s estimate. For FY 2025, the Comptroller’s Office estimates $3.42 billion compared to the Administration’s $4.75 billion. Table 34 compares the Comptroller’s projections with OMB’s in the April Financial Plan and Table 35 shows the risks and offsets against the Plan.

Table 34.  Comparison of Comptroller’s Estimate against the Executive 2024 Financial Plan

Table 35.  Comptroller’s Expenditure Differences

Source: Office of the New York City Comptroller

Note: Positive City amounts increase the gap.

Other Social Services

Public Assistance

Through March, the City’s public assistance caseload has averaged 502,230 recipients per month thus far in FY 2024. Over the same July-March span in the prior year, during which caseload averaged 443,600, caseload in the current year reflects an increase of more than 13 percent. As shown in Chart 18, since the end of the Federal Pandemic Unemployment Compensation program in September 2021, which provided supplemental unemployment benefits dating back to the early phase of the COVID outbreak, the public assistance caseload experienced a steady rise in the ensuing years.

According to HRA, between September 2021 and March 2024, there was a 96 percent increase in the average number of applicants per month compared to June 2021 (the final month in FY 2021). For applications received between September 2021 and February 2024, the most recent month for which complete data is available, the average monthly case acceptance rate increased to 41 percent from 35 percent in June 2021.

In recent months, the pace of caseload growth has accelerated. This is likely attributable to a 2023 rule change by the Governor to allow asylum seekers meeting certain requirements to start drawing Safety Net Assistance payments. The State Office of Temporary and Disability Assistance indicates that as much as 10 percent of the State’s migrant population could qualify for this supplemental benefit. However, the impact of this incremental population is difficult to pinpoint since the City currently does not separately track these individuals in its caseload reports.

Chart 18.  Public Assistance Caseload and Monthly Changes March 2020-March 2024

Source: NYC Department of Social Services

The City’s projections of baseline grants expenditures remain unchanged in the April Plan, which is estimated at $2.29 billion in FY 2024, $1.48 billion annually in FY 2025 and FY 2026, $1.83 billion in FY 2027, and $2.30 billion in FY 2028. The continued surge in both caseload and grant expenditures will likely push spending to higher levels and remain there for the foreseeable future, resulting in annual City-fund needs of $500 million in FY 2025 and FY 2026, and $150 million in FY 2027.

Homeless Services (Excluding Asylum Seeker Costs)

While the arrival of households seeking asylum has overwhelmingly driven the increases in the census in City shelters, the number of households who are not seeking asylum in Department of Homeless Services (DHS) shelters, which operates most but not all City shelters, has also been growing over the past year, as shown in Chart 19.^[30] The total number of individuals in DHS shelters—not classified by the City as being in households seeking asylum—has increased from an average of 48,965 in March 2023 to 55,254 in March 2024– a 13 percent increase.

Chart 19.  DHS Census, Individuals in Households Not Seeking Asylum July 2017- March 2024

Source: NYC Department of Homeless Services

Note: In September 2022, the Administration began releasing the DHS census with individuals classified as in asylum seeker or non-asylum seekers. Individuals classified as asylum seekers are excluded from this chart.

The April Plan added $312 million in City funding for new DHS shelter capacity in FY 2024, including $245 million for adult shelter and $66 million for family shelter. In addition, the City increased its own funding for family shelter by $85 million to replace previously budgeted Federal funds with City funds. (Family shelter costs are funded based on a households’ public assistance status and can be shared among the City, State and Federal funds. Single adult shelter is primarily City-funded). As shown in Table 36, in the outyears, funds for DHS adult and family shelter operations, excluding funds budgeted for shelter individuals seeking asylum, are currently budgeted below both FY 2023 actual spending and FY 2024 budgeted amounts.

Table 36.  Department of Homeless Services Budget, Excluding Asylum Seeker Costs

Source: Office of the New York City Comptroller, Mayor’s Office of Management and Budget

Note: Includes City, State, Federal and intra-City funding. Excludes all budget codes identified by OMB as funding services for people seeking asylum. This exclusion causes a negative total in the General Administration category as asylum seeker funding is included in this category, as well as financial plan savings holding codes.

The outyear funding drop off is largely the result of chronic underbudgeting for shelter costs. A small part of the decline in funding is due to PEG savings, introduced in the November Plan for FY 2025 and out. The DHS budget was reduced by $31.7 million in FY 2025, $30.1 million in FY 2026 and $24.6 million in FY 2027 based on anticipated savings from placements into permanent housing through a new State-funded rental assistance program, the Special Housing Assistance Resource or SHARE, that targets families and individuals, prioritizing those who have been in shelter the longest.

However, based on the shelter census growth over the past year, current funding levels, as well as the historic breakdown of City/State/Federal funding, the Comptroller’s Office estimates that an additional $350 million in City-funds is needed for DHS non-asylum related shelter capacity costs in FY 2025 through FY 2028. This includes $250 million for adult single adult shelter and $100 million for family shelter. The Comptroller’s Office also estimates $50 million in City-funds is also needed in FY 2025 and the outyears to pay prevailing wages to DHS security guards.

Rental Assistance

Within the Department of Social Services (DSS), the Human Resources Administration (HRA) administers most New York City’s rental assistance programs. HRA oversees multiple rental assistance programs, including legacy programs such as the Living in Communities program (LINC), the Special Exit and Prevention Supplement (SEPS), and the Family Eviction Prevention Supplement (CITYFEPS), which have mostly been replaced by the Fighting Homelessness and Eviction Prevention Supplement (CityFHEPS).

Spending on the City’s rental assistance programs administered through HRA has been rising rapidly in recent years—from $356 million in FY 2022, to $522 million in FY 2023, to $813 million currently budgeted for FY 2024.[31]  The April Plan increased rental assistance costs in the outyears by a net $535 million in FY 2025 and by $461 million annually from FY 2026 through FY 2028. This includes the addition of $615 million in City funds for FY 2025 for CityFHEPS, offset by a $32 million reduction in City funds as part of a PEG announced last January but budgeted to a holding code, as well as a $47 million reduction in State and Federal funding for rental assistance costs. In the outyears, the CityFHEPS budget was increased by $540 million in City funds, but this was also offset by the $32 million PEG and $47 million reduction in non-City funding. As shown in Chart 20, funding for HRA’s rental assistance programs now total $706 million in FY 2025, falling to just over $630 million in FY 2026 through FY 2028.

Chart 20.  Rental Assistance Spending, Actual and Budgeted, Fiscal Year 2017 – FY 2028

Source: Office of the New York City Comptroller, Mayor’s Office of Management and Budget

Note:  Includes spending on City FHEPS, as well as other programs such as SOTA, CFEPS, FHEPS B, LINC, HOME TBRA, and SEPS.

Growth of the program follows earlier reforms that increased payment standards and expanded eligibility. In addition, in June 2023 the City eliminated a rule that households in City shelters must remain for 30 days before becoming eligible for the City’s housing voucher programs. This past fall, a rule change also allowed vouchers to be used outside New York City. As shown in Chart 21, new placements in permanent housing from DHS shelters using City vouchers have grown rapidly over the past year. Overall, in the first eight months of FY 2024, cumulative new placements were up 30.8 percent compared to the same period last year.

Chart 21.  Monthly Housing Placements from DHS Shelter Through HRA-Administered Vouchers July 2017 – February 2024

Source:  NYC Department of Social Services

Note:  Other local voucher programs include SOTA, CFEPS, FHEPS B, LINC and SEPS.

Despite the addition of funds in the April Plan, funding for the program in FY 2025 and the outyears still declines compared to FY 2024 budgeted amounts. As currently implemented and based on monthly spending growth over the past several years related to rent increases and the continued growth in new placements, the Comptroller’s Office estimates that rental assistance costs could reach about $1.1 billion in FY 2025 – about $450 million more than budgeted in FY 2025, all City-funded, and $500 million more than currently budgeted in the outyears. The Office baselines this cost across the outyears of the Financial Plan period in its re-estimate of City costs.

While the City has eliminated the 30-day rule, the Administration has not acted on other legislation passed by the City Council over the Mayor’s veto that would, among other things, expand program eligibility for households at-risk of eviction, but who are not currently in shelter. The Mayor vetoed the rental assistance bills citing cost concerns—estimating that expanding the eligibility rules would increase City costs by $17.3 billion over five years and that the expansion to more households at risk of eviction would make it more difficult for households in shelter to find housing. The City Council estimates a cost of $10.6 billion over the first five fiscal years of implementation, an estimate that, unlike the Mayor’s, includes a partial implementation in the first fiscal year and $2.1 billion in projected shelter savings. Because of ongoing litigation over the implementation of the program changes, the Comptroller’s Office does not yet include an estimate of the expanded costs of the program in its re-estimate of costs.^[32]

NYC Health + Hospitals

In the April Plan update, the City projects NYC Health + Hospitals (H+H; formerly the Health and Hospitals Corporation) will end the current fiscal year with a cash balance of $760 million. The estimate represents a modest decline of $55 million from the previous projection in January, mainly owing to shifting assumptions among Supplemental Medicaid, fee-for-service and managed care revenues, partly offset by reduced assumptions of Strategic Initiatives, resulting in a net reduction in projected income from $69 million to $14 million in the April Plan.

The City projects the H+H budget would remain above $12 billion in both FY 2025 and FY 2026, propped up by funding assumptions for Asylum Seekers of $1.31 billion and $1.39 billion respectively. Thereafter, the H+H budget would drift to $11 billion or below over the remainder of the Plan mainly due to the discontinuation of these funds after FY 2025. Over the initial part of the Plan, H+H estimates it will close out FY 2025 and FY 2026 with cash balances of $823 million and $750 million respectively, which would build on or retain the ending cash balance from the current year. To achieve these projections, H+H would need to rely on Strategic Initiatives totaling $1.89 billion to $2.08 billion in these years, significantly higher than planned revenue and savings of $1.69 billion in the current year.

The higher Strategic Plan assumptions are mainly comprised of increases in Federal and State charity care and Supplemental Medicaid revenues. To this end, the April Plan currently assumes significant declines in Disproportionate Share Hospital (DSH) reimbursement under H+H’s Supplemental Medicaid revenue assumptions. In March, Congress once again delayed the implementation of DSH revenue cuts originally enacted as part of the Affordable Care Act. The latest delay pushes the starting date out to January 2025. Thus far, no DSH revenue reduction has yet materialized as the Federal government has delayed implementation on more than several occasions. Hence, there is good likelihood that the upcoming round of cuts could be deferred again, alleviating the need to generate greater Strategic revenues and savings over the next two years.

In addition, spending projections in the April Plan do not assume assistance from the City for wage increases for nurses that are above the pattern the City established in its contract settlement with DC 37 last year. The increase stems from an arbitration award granted to the New York State Nurses Association (NYSNA) to establish parity with private sector nurses. The cost above the wage pattern is projected to range roughly between $120 million in FY 2025 and $190 million in FY 2028. H+H will likely bear the responsibility for the entire cost above the pattern in FY 2024. However, assuming the City will provide direct support (traditionally the case) or indirect support through other measures in the future, it could further improve H+H’s financial outlook in the outyears of the Plan.

Metropolitan Transportation Authority

The City provides annual operating subsidies to the Metropolitan Transportation Authority (MTA). This includes support for such services as Access-a-Ride paratransit, the MTA Bus Company, and the Staten Island Railway. These subsidies are intended to cover either a portion or all the difference between the agency’s operating expenses and its revenue from fares. The April Plan effectively maintained the funds budgeted for the MTA’s operating subsidies at $1.47 billion for FY 2024. These subsidies include $440 million budgeted for Access-A-Ride paratransit subsidies, $527 million for the MTA Bus Company, $48 million for the Staten Island Railway, and $453 million in other subsidies. Funding, however, continues to be underbudgeted in FY 2025 and the outyears, with total budgeted operating subsidies falling to $1.37 billion in FY 2025, and $1.21 billion in FY 2026 and $1.23 billion in FY 2027 and FY 2028. The Comptroller’s Office estimates an additional $143 million will be necessary for these subsidies in FY 2025, with the need growing significantly to $529 million by FY 2028.

The City also funds the MTA through its Fair Fares program. Fair Fares, administered through the Department of Social Services, provides half-priced fares for New York City Transit subways, buses, and Access-A-Ride paratransit trips for low-income New Yorkers. The program is available to over 1,000,000 eligible New Yorkers. The City’s Financial Plan maintains the $95 million annual cost for the program. Current enrollment still hovers around 30 percent of the eligible population, though the MTA and DSS have coordinated sign up events throughout the boroughs to encourage riders to apply.[33] As of April 30, 2024, $56 million, or 58 percent of the budget, had been committed. This Office will continue to monitor both expenses against the budget and the enrollment rate.

IV. Capital Budget and Financing Program

The New York State FY 2025 Enacted Budget increased the City’s capacity to incur debt to finance capital by $14 billion, facilitating capital investments for the City. As previously discussed, on July 1, 2024, the amount of Transitional Finance Authority Future Tax Secured Debt (TFA FTS) not subject to City’s constitutional debt limit increases by $8 billion to $21.5 billion, and on July 1, 2025, it increases by an additional $6 billion to $27.5 billion. As part of the budget legislation, the State also required that $2 billion in City capital be added to the City’s capital program above the School Construction Authority’s current capital plan need for classroom construction to meet the State’s mandate to decrease class size. Although an additional $2 billion for this purpose is not yet reflected in the April Plan, the overall size of the City’s capital program increased compared with the January Plan.

Capital Commitment Plan, FY 2024 – FY 2028

All-Funds Commitments

The FY 2024 – FY 2028 April 2024 Capital Plan totals $97.66 billion in all-funds authorized planned commitments, an increase of $9.2 billion (10.4 percent) compared to the January 2024 Capital Plan over the same period. City-funds authorized commitments make up $93.41 billion, or 95.6 percent, of the total authorized commitments. In each year of the Plan, the City sets a “reserve for unattained commitments,” which assumes that projects will move more slowly than reflected in the plan, and therefore some authorized commitments will be pushed outside the plan’s five-year window. The result is lower target commitment amounts, which, according to OMB, reflect more realistic contract registration achievement rates.  After adjusting for the reserve for unattained commitments, all-funds planned commitments drop to $88.11 billion, as shown in Table 37. The City-funds planned commitments drop to $83.85 billion.

FY 2024 authorized commitments comprise 21 percent, or $20.53 billion, of the all-funds authorized commitments scheduled of the five-year plan total. When adjusted for the reserve for unattained commitments, the share drops to 19 percent in FY 2024. In the outyears of the Plan, authorized commitments increase to $21.67 billion in FY 2025, then drop to $19.17 billion in FY 2026, to $17.40 billion in FY 2027, and $18.89 billion in FY 2028, resulting in an average of $19.53 billion per year over the five-year period.

Table 37.  FY 2024 – FY 2028 April 2024 Plan Capital Commitments, All-Funds

Source: Mayor’s Office of Management and Budget, FY 2024 – FY 2028 April 2024 Capital Commitment Plan

Note: Numbers may not add due to rounding.

Over 79 percent of the April 2024 Capital Plan is in the five program areas of Education and CUNY Housing and Economic Development, Environmental Protection (DEP), the Administration of Justice, Department of Transportation (DOT) and Mass Transit, and as shown in Table 37. Education and CUNY lead the way at 19.7 percent of total planned commitments, as the administration aligned the City’s DOE Capital Plan with the SCA’s FY 2025 – 2029 Capital Plan. This is followed by Housing and Economic Development at 17.0 percent, Environmental Protection at 17.0 percent, Administration of Justice at 13.0 percent, and DOT and Mass Transit at 12.6 percent of the total Plan.

The $9.2 billion all-funds increase over the FY 2024 – FY 2028 period compared to the Preliminary Capital Commitment Plan released in January is comprised of numerous increases and decreases. Twenty-two project types had increases of $11.21 billion, 15 project types with decreases summing to $2.01 billion, and two project types with no change. Over 91 percent of the increases, or $10.27 billion, are from five project types, which include DOE related capital projects ($6.83 billion), the Department of Correction ($1.81 billion), Citywide Equipment, Resiliency and Sustainability projects ($884 million), Water Supply projects ($417 million), and HPD projects ($323 million).

The large increase to DOE over FY 2024-FY 2028 reflects the April 2024 Capital Plan’s full funding of the separately published SCA FY 2025-FY 2029 Five-Year Plan. The April Plan does not include the additional $2 billion in increased spending beyond what is already included in the SCA plan to help meet the class size mandate ($4.13 billion), as newly required in the State budget legislation increasing debt capacity.

The $1.81 billion increase in the Department of Correction is comprised of increases to the Borough Based Jails (BBJ) projects in the Bronx and Queens. Planned commitments for the Manhattan jail project were unchanged compared with January 2024. (The total increase in the April 2024 Plan for the Bronx and Queens BBJ projects is $3.96 billion, including $2.14 billion in FY 2029 and FY 2030, outside the five-year plan window. Of the $2.14 billion in the outyears, $1.11 billion was reallocated from a lump sum code in the DOC Capital Plan and $1.03 billion is new in April.)

The April Plan also included the City’s first Climate Budget, in which the City will now report annually on how its capital budget aligns with long-term climate goals for sustainability and resiliency. According to the report, the April Plan includes $1.15 billion in new or reallocated climate investments over FY 2024 through FY 2028, $1.06 billion of which is for the acceleration of funds for energy efficiency and electrification work in city facilities. (This $1.06 billion increase is offset somewhat by decreases in citywide computer equipment related projects over the same period for an $884 million net increase for Citywide Equipment, Resiliency and Sustainability projects is over the Plan period.)

Changes to the April FY 2024-FY 2033 Capital Commitment Projections

The City, once again in April 2024, adjusted its interim Ten-Year Capital Program estimates for the period FY 2024 – FY 2033.[34] OMB projects that capital commitments will sum to $169.86 billion over the 10-year period, an increase of $13.07 billion, or 8.3 percent, from the January 2024 Capital Plan estimates over the same 10-year period as shown in Table 38.

Four agencies, the DOE ($8.71 billion), the Department of Correction (DOC) ($2.83 billion), DEP ($782 million), and DOT ($388 million) comprise 97 percent of the projected increase over the 10-year period. Within the DOE, the main ten-year plan category drivers of the increase include $4.17 billion for system expansion projects (including $2.0 billion for new schools), $1.50 billion for emergency, inspection, and miscellaneous projects, $1.40 billion for educational enhancement projects, and other changes. For the DOC, an increase of $3.96 billion is driven by the reforecast of the Bronx and Queens BBJ projects, offset by a $1.13 billion decrease to a holding code for other DOC projects, including $1.11 billion previously earmarked for the BBJ projects. Within DEP, increases to the third water tunnel project ($415 million), water pollution control upgrade projects ($188 million), and water meter replacement initiatives ($173 million) account for almost all of the DEP increase. For the DOT, the $388 million change is driven largely by the $328 million estimated increase for primary street reconstruction projects.

Table 38. FY 2024 – FY 2033 Estimated Capital Plan Commitments, Change from September 2023 Plan Condition

Source: Mayor’s Office of Management and Budget, FY 2024 – FY 2028 April 2024 Capital Commitment Plan

Financing Program

Total projected borrowing in the April 2024 Financial Plan sums to $70.65 billion, an increase of just under $5 billion from the January 2024 Plan condition. Over the Plan period FY 2024 – FY 2028, the total estimated average annual borrowing is $14.13 billion, $996 million per year higher than in January 2024. When excluding the New York City Water Authority (NYW), the combined annual average for General Obligation (GO) and TFA-FTS borrowing drops to $12.05 billion, or about $900 million per year higher than in the January 2024 Plan.

TFA-FTS borrowing, with an increase of $3.89 billion, accounts for over three-quarters of the increase. This is followed by increases of $590 million for GO bonds and $503 million for NYW. Debt service for NYW is paid with water and sewer user fees, and thus does not place a burden on the City’s general fund.

The increase in borrowing is consistent with the $8.7 billion increase in City authorized capital commitments in the April 2024 Commitment Plan over FY 2024 – FY 2028, which result in higher capital cash flow needs over FY 2024 – FY 2028 from the January 2024 Plan capital cash flow estimates.

Table 39. April 2024 Financial Plan Financing Program

Source: Mayor’s Office of Management and Budget, FY 2025 Executive Plan, April 2024

Debt Service

As shown in Table 40, debt service, net of prepayments, in the April 2024 Plan totals $7.55 billion in FY 2024, $8.32 billion in FY 2025, $9.01 billion in FY 2026, $9.69 billion in FY 2027, and $10.51 billion in FY 2028.^[35] These amounts represent a decrease from the January 2024 Financial Plan of $183 million in FY 2024, followed by increases of $62 million in FY 2025, $77 million in FY 2026, $128 million in FY 2027, and $176 million in FY 2028 for a total increase of $261 million over the Plan period.

From FY 2024 through 2028, total debt service is expected to increase by $2.96 billion, or by 39.3 percent. In addition, these estimates for debt-service represent an estimated annual average percent increase of 8.6 percent. As always, these projections exclude debt service of the NYW, which is backed by water and sewer user fees, and the debt service of TFA Building Aid Revenue Bonds (BARBs) which is supported by State building aid.

The net $261 million increase from the January 2024 Plan over FY 2024 – FY 2028 is comprised of $343 million in GO savings, lease-purchase debt-service savings of $23 million, offset by $627 million of estimated TFA-FTS increased debt-service costs. GO debt-service reductions over the five-year period stem largely from $139 million in lowered variable rate support and other fees, along with $130 million in estimated lower variable rate interest costs.  On the TFA side, the increases are driven by higher projected borrowing amounts of $3.89 billion over the five-year period, which result in higher cumulative debt service costs of $760 million over the FY 2024 – FY 2028 period, offset by $133 million of other TFA baseline savings, $79 million of which is from higher debt-service fund earnings on bond proceed balances in FY 2024.

Table 40.  April 2024 Financial Plan Debt Service Estimates

Source: Mayor’s Office of Management and Budget, FY 2025 Executive and April 2024 Financial Plan, April 2024

Note: Debt service is adjusted for prepayments. Amounts do not include TFA BARBs. Numbers may not add due to rounding.

Debt Affordability

As previously described, the New York State Fiscal 2025 Enacted Budget increased the amount of TFA FTS debt not subject to the City’s debt limit by a total of $14 billion over the next two fiscal years. While the State has raised the City’s overall capacity to incur debt, another different but critical measure is whether the service on the debt remains affordable. One key measure of this affordability is debt service as a share of local tax revenue. The City has established a 15 percent policy limit for this ratio, which is a widely accepted benchmark, often cited by the rating agencies and various monitors of the City’s budget.

The Office of the Comptroller estimates debt service as a share of local tax revenues to be 10.1 percent for FY 2024, 10.7 percent in FY 2025, 11.4 percent in FY 2026, 11.9 percent in FY 2027, and 12.5 percent in FY 2028, as of the April Plan, as shown in Chart 22. The nearly two and a half percentage point rise in the ratio is due to disparate growth rates between debt service and local tax revenues. From FY 2024 to FY 2028, debt service, excluding TSASC, grows at an annual rate of 8.73 percent compared to local tax revenue growth of 3.04 percent. Thus, even with the increase in commitments in the April Plan, the Office of the Comptroller projects debt service as a share of tax revenue ratio will remain below the 15 percent through fiscal year 2033. However, if tax revenue growth averages only 2 percent per year, instead of the assumed 4 percent growth in FY 2028 through 2033, debt service as a percent of tax revenue would exceed 15 percent by FY 2033.

Chart 22.  NYC Debt Service as a Share of Tax Revenues

Source: Office of the New York City Comptroller, Annual Comprehensive l Financial Reports, FY 1992 – FY 2023 and the Mayor’s  Office of Management and Budget, FY 2024 April Plan and FY 2025 Executive Budget

As shown on Table 41, as of the April Plan, the Comptroller’s Office estimates that the General Debt Limit will grow from $131.64 billion in FY 2024 to $151.91 billion by FY 2028, an increase of 15.4 percent. Total indebtedness is estimated to grow from $106.7 billion in FY 2024 to $133.4 billion by FY 2028, an increase of 25.1 percent. As a result, the remaining debt margin is forecast to decrease from about $25 billion to $18.5 billion by FY 2028. By FY 2028, the remaining debt margin is $4.1 billion lower than OMB largely attributable to OMB’s higher estimate of the General Debt Limit.

Table 41.  Forecast of Fiscal Year-End Debt Margin, FY 2024 – FY 2028– April 2024 Capital Plan

Source:   Office of the New York City Comptroller and select Capital Plan information from the April 2024 Capital Commitment Plan

Note: The total amount of TFA Bonds not subject to the City’s debt limit increases from $13.5 billion to $21.5 billion beginning July 1, 2024, and to $27.5 billion beginning on July 1, 2025. Numbers may not add due to rounding.

Impact of Additional Needs

In response to the Mayor’s and Governor’s proposals to increase the City’s debt-incurring power, the Comptroller’s Office released a study in March that examined the impact on the City’s 15 percent debt affordability policy threshold as a result of increased borrowing.  The report identified an estimated $17 billion of capital projects, not reflected in the City’s January 2024 Capital Plan, related to fully funding the School Construction Authority’s (SCA) most recent capital plan, reflecting additional needs for the borough-based jails projects, and the Brooklyn-Queens Expressway.  Additional capital commitments estimated for these three projects were $8.6 billion, $4.6 billion, and $3.8 billion, respectively. This was prior to the State budget’s requirement that the City increase the SCA funding for new classroom capacity by $2 billion.

The April Plan increased the funding for the SCA and added some funding to the borough-based jails projects. However, $2 billion is necessary to fulfill the additional funding requirement for schools, an estimated $1.7 billion is still needed for borough-based jails, and the entire estimated $3.8 billion need for the Brooklyn-Queens Expressway remains to be added. Should these amounts be included in the Plan, the Office of the Comptroller projects that the City still has enough debt-incurring power to absorb the commitments. However, the margin is very close and small declines in property values could mean that the City would not have sufficient debt-incurring power to cover the existing and additional commitments.

Current revenue estimates also project debt issuance related to the additional commitments will not cause debt service to exceed 15 percent of tax revenues through fiscal year 2033. However, as described above if tax revenue growth slows to only 2 percent per year, the addition of commitments related to those projects and corresponding debt issuance could result in debt service exceeding 15 percent of tax revenue as early as fiscal year 2032.

V. Appendix

Table A1.  April 2024 Financial Plan Revenue Detail

Note: Numbers may not add due to rounding

Table A2.  April 2024 Financial Plan Expenditure Detail

Note: Numbers may not add due to rounding. Agency expenditures shown above are net of intra-City expenditures.

Acknowledgements

The Comptroller wishes to thank the entire Budget Bureau for their contributions to this report, as well as Archer Hutchinson for design and layout. The Comptroller is particularly grateful to Peter Flynn, Assistant Budget Chief, for his years of keeping a close watch over the City’s capital budget and for all his work in his 27 years at the Office of the New York City Comptroller.

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Endnotes

[1] Data on occupancy, room rates, and rooms under construction from CoStar.

[2] Data from The Broadway League.

[3] https://www.nyc.gov/office-of-the-mayor/news/135-24/mayor-adams-cancellation-next-round-agency-spending-cuts-result-strong

[4] A comprehensive table of PEG initiatives through the January Plan is available on page 40 of the Comptroller’s Comments on New York City’s Preliminary Budget: Comments on New York City’s Preliminary Budget for Fiscal Year 2025 and Financial Plan for Fiscal Years 2024 – 2028 : Office of the New York City Comptroller Brad Lander (nyc.gov)

[5] Cultural Institutions Group (CIG) – DCLA (nyc.gov)

[6] PR-2024-2-21-FY24-Cultural-Development-Fund-Distributes-52-million-to-more-than-1000-arts-nonprofits (nyc.gov)

[7] FY24 CDF grantees.xlsx (nyc.gov)

[8] Mayor Adams calls library funding cuts part of ‘negotiation’ (nypost.com)

[9]Libraries receive additional annual subsidy funding ($15.7 million in FY 2024) from the City Council that is not baselined, leading to a potential funding gap of at least $58.2 million in FY 2025.

[10] April PIT and PTET data are preliminary. Collections are gross of NYC audits and NYS processing fees.

[11] As explained in the June and November 2023 Economic Newsletters, the creation of PTET introduced significant distortions in the timing of tax payments.

[12] The data are published by the NYS Department of Taxation and Finance and are subject to revision. The first quarter covers December-February, the second quarter March-May, etc.

[13] Inflation adjustment uses NYC metro area CPI less shelter (not seasonally adjusted).

[14] Miscellaneous revenue analysis excludes intra-City revenues.

[15] See the lease agreement between the City and the NYC Water Board.

^[16] In May 2023, the State Office of Temporary and Disability Assistance expanded access to the Safety Net Assistance program to certain categories of non-citizens, including applicants for asylum and Temporary Protected Status. Additional details: https://otda.ny.gov/policy/gis/2023/23DC039.pdf.

^[17] The FY 2023 cost includes $118 million, of which $62 million was reimbursed by the State, in overtime spending for the Subway Safety Program implemented that fiscal year. The City has spent $68 million on Transit Safety for the first half of FY 2024.

^[18] The City’s Administrative Code governs health care provisions and requires the City to pay health insurance premiums no higher than the HIP rate.

^[19] The senior care rate is the premium the City pays to supplement shortfalls in Medicare benefits so that Medicare eligible retirees can maintain a similar level of benefits as active employees.

^[20] The Health Insurance Fund created in the mid 1980’s paid the difference between the GHI and HIP health insurance premiums, essentially protecting employees and retirees from paying more to be covered by GHI. Currently, the City contributes $35 million to the fund annually. For several fiscal years, the GHI premium was lower than the HIP premium leading to a higher than anticipated balance in the fund. Over time, the City and unions were able to draw from the fund balance to offset wage increases and other benefits for employees. In recent years, however, GHI health insurance premiums have been about equal or higher than HIP premiums. This has led to a reduction in the balance of the fund and the likelihood that the fund will not be able to meet obligations in coming fiscal years.

[21] Returns above or below the AIR for a given fiscal year are phased into the Actuarial Asset Value over a five-year period in accordance with the Actuary’s Actuarial Asset Valuation Methodology (AAVM).

[22] A school’s economic need is defined by its Economic Need Index (ENI), which determines the likelihood that students at the school are in poverty.  See Diversity in NYC Public Schools for more information.

[23] Note that in its prior report, the Comptroller’s Office had counted State funding for Safety Net as part of the funding for asylum seeker services; however, these funds are already accounted for as part of the City’s cash assistance budget.

[24] https://www.nydailynews.com/2024/03/14/nyc-finally-unlocks-rest-of-over-100m-in-federal-migrant-aid-after-months-of-paperwork-delays/

[25] https://council.nyc.gov/budget/wp-content/uploads/sites/54/2024/05/Asylum-Seekers-Report-April-2024.pdf

[26] Under the stipulation, newly arrived single adults 23 and older will be granted a shelter stay for 30 days, and newly arrived single adults between 18 and 23 will be granted a shelter stay for 60 days.

[27] https://www.curbed.com/article/nyc-migrants-shelter-stories-st-brigid-church-reticketing.html

[28] Census data is provided and available on weekly basis. While the Comptroller’s Office uses the median daily change for its projections, the average change represents a more robust measurement for the shorter time period of one month.

[29] The Comptroller’s Office is no longer using the cumulative per diem as it includes outdated spending patterns from FY 2023 with limited usefulness for calculating upcoming monthly per diems.

[30] The Department of Social Services, the Department of Youth and Community Development, the Department of Health and Mental Hygiene and the Department of Veterans Services also operate shelters for households not seeking asylum.

[31] (Funding for HRA’s rental assistance programs is split between the City, State and Federal governments, with FY 2024 costs budgeted at 71 percent City funded, 26 percent Federally funded, largely with limited COVID-19 funds, and 3 percent State funded.)

[32] Full Package of Rental Voucher Laws Not on Mayor’s Agenda, Despite Veto Override – CityLimits

[33] 2024_pmmr.pdf (nyc.gov)

[34] NYC OMB issues Preliminary and Final Ten-Year Capital Strategies in January and April of each odd-numbered calendar year.

[35] Includes GO, conduit debt, TFA-FTS bonds, and TSASC.