Last month, libraries across the city began closing their doors on Sundays. Composting programs started to shut down. And Mayor Adams announced that tens of thousands of pre-K seats would be slashed.
New Yorkers have been told these cuts are necessary because the city won’t have enough revenue next year to maintain these programs. While there are expected budget gaps, the mayor’s budget office routinely projects future revenue shortfalls, based on projections that turn out to be overly pessimistic. In fact, revenue has already exceeded those pessimistic projections — allowing the mayor to selectively reverse some cuts to NYPD, FDNY and sanitation.
There’s no question that our city faces fiscal challenges with the expiration of federal COVID funds and slowing economic growth — but overstating their severity, and making unnecessary broad budget cuts, inflicts real economic harm on working New Yorkers.
The mayor’s administration should be honest about the size of expected shortfalls so that we don’t undermine critical public services.
Inflated projections of coming revenue shortfalls, known as budget gaps, are hardly new. Over the last nine years, the Mayor’s Office of Management and Budget (OMB) has, on average, underestimated future revenue by around 4% in its November financial plans. The reason is simple: OMB intentionally underestimates revenue in the coming years.
Conservative budget forecasting can be sound fiscal management to help the city avoid overspending. But when these conservative forecasts lead to excessive, unnecessary, and preemptive cuts, this doom and gloom approach becomes fiscally reckless — and could damage the city’s economy, leading to bigger budget gaps.
OMB is predicting a budget gap for 2025 of $7.1 billion. Yet, when we account for their history of conservative revenue estimates, and reallocate the $2.4 billion of the $2.9 billion in budgeted reserves (which by law must be spent within the fiscal year this and next year) FY25’s actual shortfall is likely closer to $3 billion.
Additionally, while OMB recently updated its November budget to show larger budget gaps next year, it did not update its economic forecasts to account for recent stronger-than-expected economic performance — further calling into question the reliability of their projections.
Fortunately, the mayor’s budget office is not the sole authority when it comes to forecasting the city’s finances. The City Council, the city comptroller, and the Independent Budget Office all provide their own fiscal projections.
The Council expects $1.5 billion more in revenue over the next year and a half than OMB projections. Other forecasters also see significantly larger revenue projections as well: the comptroller’s recent forecast projects $2.5 billion more revenue, while the Independent Budget Office forecasts $3.4 billion over the next year and half.
Smaller revenue shortfalls, such as those projected by IBO, can be addressed through short-term fiscal management techniques like using reserves required to be used within a fiscal year, increased state aid, generating new revenues, and carefully pruning non-essential spending programs.
By contrast, large, persistent budget gaps such as the $7.1 billion shortfall projected by Mayor Adams’ administration can lead to calls for more drastic, across-the-board budget cuts that would devastate city services. Phrases like “inflated outyear budget gaps” may make one’s eyes glaze over, but their impact is quickly waking New Yorkers up.
When budget cuts are necessary, it is important that they be made in a targeted fashion in order to minimize their impact. City Hall’s proposal for across-the-board cuts may sound like mercifully prescribing the same amount of pain to every agency — but in reality, cuts that are not specifically tailored inevitably cause disproportionate suffering. Equal cuts to every agency are not equitable cuts.
In the coming fiscal year, the city plans to cut $120 million from Pre-K and 3-K — two programs that save working families more than $10,000 a year. The city is cutting nearly $20 million from free summer school programs that serve more than 100,000 kids, and $18 million from health, dental and nutritional services at the city’s community schools in low-income neighborhoods.
New York is already leading the nation in population loss, and working and middle-class families are leaving the state at four times the rate of the wealthiest New Yorkers. Cuts to the services and programs will only hasten their departure.
As COVID federal aid dries up and our city’s economic growth slows, and we continue to welcome more asylum seekers, New York faces tough fiscal decisions. To tackle these challenges without causing long-term economic damage, we need to start grounded in a sensible reality — not with an exaggerated sense of an unmanageable crisis.
Brannan is the City Council finance chair. Gusdorf is executive director of the Fiscal Policy Institute.
Bring some sense to budget making
5
13
13.01.2024
Last month, libraries across the city began closing their doors on Sundays. Composting programs started to shut down. And Mayor Adams announced that tens of thousands of pre-K seats would be slashed.
New Yorkers have been told these cuts are necessary because the city won’t have enough revenue next year to maintain these programs. While there are expected budget gaps, the mayor’s budget office routinely projects future revenue shortfalls, based on projections that turn out to be overly pessimistic. In fact, revenue has already exceeded those pessimistic projections — allowing the mayor to selectively reverse some cuts to NYPD, FDNY and sanitation.
There’s no question that our city faces fiscal challenges with the expiration of federal COVID funds and slowing economic growth — but overstating their severity, and making unnecessary broad budget cuts, inflicts real economic harm on working New Yorkers.
The mayor’s administration should be honest about the size of expected shortfalls so that we don’t undermine critical public services.
Inflated projections of coming revenue shortfalls, known as budget gaps, are hardly new. Over the last nine years, the Mayor’s Office of Management and Budget (OMB) has, on average, underestimated........
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