New York City Cash Balance Projection

In the second half of FY 2023, the City’s cash balances reached record high amounts, benefitting from robust tax collections and Covid-19 Federal aid. The City began FY 2024 with $12.387 billion in cash-on-hand, an increase of $4.228 billion from $8.159 billion at the beginning of FY 2023. Cash balances remained historically high in the first half of FY 2024, and then began to gradually decline in January 2024.

During FY 2024 through May, the City collected $112.6 billion in revenues and incurred $115.4 billion in expenditures, for a net loss of $2.84 billion. This year’s revenues have grown 1.3%, or $1.4 billion from the same period last year. At the same time, expenditures increased 9.4%, or $10 billion.

Despite elevated inflation and interest rates, the NYC economy is continuing to grow at a moderate pace and the City’s revenues are up primarily due to strong property, business, and sales taxes, and due to non-recurring Covid relief funds.

At the same time, the City’s spending keeps climbing. The City is facing higher payroll expenditures, mostly due to the implementation of collective bargaining agreements. The City is providing housing and shelter to asylum seekers, and the number of public assistance recipients is growing.

In addition, while capital expenditures are fully reimbursed over the long term, in the first three quarters of FY 2024, expenditures exceeded reimbursements by $1.2 billion, or 11.9%.

On May 31, 2024, the cash balance measured $9.547 billion, $4.3 billion lower than at the same time last year. During the last twelve months, cash balances averaged $11.104 billion, versus $10.774 billion during the same period last year.

Balances declined significantly in the second half of FY 2024 to date and are projected to stay close to FYs 2021 and 2022 cash balances over the next 4 months.

While in our March Cash Letter, cash flow balances were projected to average $11.766 billion between March and May 2024, they averaged $10.935 billion. PIT + PTET collections fell below forecast, as discussed in more detail in May Economic Newsletter. Also, the City received about $1 billion less in capital reimbursements than projected.

Going forward, the projection outlined below shows the expected cash balances in the NYC Central Treasury for the period June 4 to September 30, 2024, and incorporates guidance provided in the FY25 Executive Budget.

NYC Projected Cash Balances

The City’s cashflow is healthy in the near term. The City has sufficient cash to sustain its operations, and does not anticipate issuing short-term debt in FY 2025. The projection indicates a fiscal year-end (June 28, 2024) closing balance in the range of $9.2 billion to $10.6 billion, compared to $12.387 billion in FY23, $8.2 billion in FY22, $8.5 billion in FY21, $6.6 billion in FY20, and $7.1 billion in FY19.

The April 2024 Financial Plan assumes that in June the City will pay $2.936 billion into the Retiree Health Benefits Trust (RHBT) for FY 2024 pay-as-you-go retiree health and welfare benefits. It is possible that at year-end the City will prepay a portion of FY 2025 pay-as-you-go costs as well. Last year’s payment into the RHBT equaled $2.398 billion for FY 2023 benefits and $500 million for FY 2024 benefits.

The April 2024 Financial Plan also projects a prepayment of debt service in the amount of $3.938 billion, which includes $1.495 billion of General Obligation (GO) debt service and $2.443 billion of Transitional Finance Authority Future Tax Secured (TFA FTS) debt service. We assume that the surplus of $341 million projected by this Office in its review of the April 2024 Financial Plan, will bring the final prepayment to $4.279 billion. The prepayment at the end of FY23 equaled $5.478 billion.

The forecast assumes higher NYS aid in FY25. The enacted State Enacted Budget includes an additional $881 million for newly arrived migrants in FY25, as well as $466 million more in Foundation Aid to the City, the primary source of state funding for public schools.

The forecast also assumes growing costs associated with providing shelter and services to asylum seekers currently in shelters and Humanitarian Emergency Response and Relief Centers (HERRCs), which is partially offset by higher NYS aid.

It is also projects that the City will spend about $1 billion more on pension costs in FY25 as reflected in the City’s April 2024 Financial Plan. This projection incorporates adjustments to reflect collective bargaining agreements and the financial impact of previous years’ investment gains and losses. In addition, the State Budget includes a change to how certain pension benefits are calculated. Under the new law, a Tier 6 employee’s pension will be based on their last top three years of earnings instead of five.

An influx of federal Covid funds lifted the City’s cash balances in the last two years but the flow of aid is going to dwindle going forward.

State legislation increased the City’s debt capacity, and the City is implementing an ambitious capital program, with the vast majority of additional planned commitments in the April Capital Commitment plan going to the School Construction Authority and toward the construction of borough-based jails.

The City recently closed a $1.9 billion sale of TFA FTS 2024 G bonds. Most of the proceeds from this bond sale will be transferred into the General Fund in early June. The City will resume its bond issuance program in early FY25, and we project that an additional $3.35 billion in bond proceeds will be moved into the General Fund in August and September.

The cash balances are expected to average $9.8 billion during the next four months, compared to $12.267 billion during the same time last year.