Comptroller Stringer Releases FY 2021 First Quarter Revenue Update and Budget Outlook

 

Additional revenues—including $834 million in tax revenues above projection for the first quarter of FY 2021—reduce risks to balance in FY 2021

 New York City Comptroller Scott M. Stringer released a first quarter revenue update for fiscal year (FY) 2021 showing that tax revenues are running $834 million ahead of the City’s projections.  While potential State budget cuts continue to present a sizable risk to the City’s budget condition and a robust Federal stimulus package is essential to the City’s recovery, Comptroller Stringer said that the higher-than-expected tax revenues provide a path to closing the City’s budget gap next year. Existing resources include debt service savings from refinancing of outstanding City bonds, a Revenue Stabilization Fund that would allow access to nearly $500 million in General Fund balances, surplus revenues from fiscal year 2020, and tapping into reserves. Comptroller Stringer said that New York City Mayor Bill de Blasio is now in a position to present an updated Financial Plan in November that provides a clear path to a balanced budget for FY 2022 without cuts to essential services, layoffs of city workers, or borrowing to support operating expenses.

“While we should not underestimate the scale of the challenge before us, with thoughtful leadership, there is a clear path to financial stability,” said Comptroller Stringer. “If we get the support we need from Washington, the resources we have available give us a strong start on a balanced budget for FY 2022 and beyond without impacting critical city services, laying off City employees, or borrowing against decades of future investments in education, housing and other vital city services.”

Since FY 2021 budget was adopted in July 2020, a number of factors have changed that merit an update in advance of the November Plan. As adopted, the FY2021 budget was balanced, and projected a $4.2 billion gap for next year (FY 2022). Since then, additional resources have become available to help address the gap:

• The Comptroller’s Office and OMB together have refinanced outstanding bonds, resulting in $610 million in debt service savings ($469 million this year and $141 million next year).  Additional refinancings are expected during the course of the year that will add to this total.
• FY 2020 tax revenues were $1.019 billion more than projected;
• State legislation authorized the City to access $493 million in fund balances for gap-closing purposes through creation of a Revenue Stabilization Fund (a rainy day fund);
• Through September, this year’s tax revenues are running $834 million ahead of projections:

State and Federal Risks 

This is not to say that the budget picture is without further risks.  The most significant risk is the State’s budgetary situation, which as of the Division of the Budget’s Mid-Year Update, continues to rely on $8 billion in cuts in local aid for balance.  A 20% reduction in local aid to New York City is approximately $3 billion, two-thirds of which would fall on the Department of Education.

For this reason it is imperative that another federal stimulus package be enacted that includes relief for families, workers, and businesses – but also for state and local governments that, by taking the appropriate measures to protect public health, have lost billions in tax revenues.

The risks from insufficient federal aid and state budget cuts makes it all the more urgent to begin work now to bring the City’s budget into balance and better position the City to face future uncertainties.