Urges depositing $800 million of additional FY22 tax revenues into long-term reserves to help prepare for a potential economic downturn, while using a modest portion of remaining Federal stimulus to reverse school budget cuts.
New York City Comptroller Brad Lander today released an analysis of the City’s fiscal year (FY) 2023 Adopted Budget. The analysis comes at a time of ongoing economic uncertainty and mixed signals. While New York City is facing record inflation, stock market volatility and rising interest rates, the City has also benefited from stronger-than-expected tax revenue, strong job growth, rebounds in tourism levels and record numbers of new business applications.
“The pandemic’s economic impacts have exacerbated long-standing inequities in New York City. While the Fiscal Year 2023 Adopted Budget addressed several of the concerns I raised earlier in the spring, including a large deposit to our Rainy Day Fund, it still falls short in key areas that threaten the City’s long-term stability and economic growth. Our analysis shows that we can do better to secure a more resilient city, by depositing $800 million of excess FY22 tax revenue into long-term reserves, while using 11% of remaining federal stimulus dollars for education to cover $469 million in school budget cuts. That would help us prepare better, both for a future economic downturn, and for the future of our kids,” said Comptroller Brad Lander.
The FY 2023 Adopted Budget of $101 billion is $10.44 billion less than in FY 2022 budget, predominantly driven by a reduction in COVID assistance from federal relief measures. The Adopted Budget included several changes to the Executive Budget supported by the Comptroller’s Office, including:
- A $371 million increase in the labor reserve to support annual wage increases of 1.25% as the City moves toward negotiations with all its workforce amidst high vacancies.
- An added $118 million into the rental assistance program.
- $10 million to ensure that undocumented children have access to publicly funded childcare.
- An additional $1.5 billion in long-term reserves, split equally between the Revenue Stabilization Fund (RSF) and the Retiree Health Benefit Fund (RHBF), bringing the total to $6.55 billion, or 9.4% of the City’s tax revenues.
As the City faces economic uncertainty, increasing reserves will be key to ensuring New York City is prepared to weather a fiscal storm. In addition to commending the increase to long-term reserves this year, the Comptroller’s Office reiterated the recommendation issued in a May 2022 report titled Preparing for the Next Fiscal Storm, to increase deposits to cover 16% of tax revenues and to establish a policy for regular deposits and limited withdrawals. Comptroller Lander also called for depositing $800 million in additional FY 2022 revenues identified in the Adopted Budget into long-term reserves.
Although the total budget for the Department of Education increased by $292 million from the Preliminary Budget, individual school budgets were cut by $469 million for FY 2023, a net reduction of $372 million. Comptroller Lander has repeatedly called for using federal recovery dollars for education to cover the gaps facing principals this year. The DOE continues to have over $4 billion in unused federal stimulus dollars that was allocated by Congress to provide relief and support schools through the pandemic, including over $600 million that was budgeted to be spent in FY 2022 but has not yet been spent. That one-time funding was intended to help support students during a time of loss and anxiety, and it should be used to stabilize school funding this year. The City also must have a thoughtful, transparent conversation to address long-term enrollment trends and ensure sustainable funding to support the needs of students and families.
Uncertain economic conditions, a declining stock market, under-budgeting in key areas, and recurring programs that remain unfunded in the outyears will need to be addressed in future financial plans. The Comptroller’s office projects slightly higher revenues than OMB’s forecast, but they are not sufficient to address risks and known funding shortfalls. Several programs (including rental assistance, shelter security guards, and 3K expansion) are fully funded in FY 2023 with non-recurring stimulus funding which risks the programs being under funded in future years when stimulus funding expires. The report identifies overtime, Carter Cases, homeless shelters, foster care reimbursement, paratransit, court appointed counsel, and public assistance and areas of concern for underbudgeting. The impact of historic stock market declines on NYC’s pension investment returns in FY 2022 will impose additional costs on the City’s budget beginning in FY 2024. The Comptroller’s Office projects that the City will face net risks of $869 million in FY 2023, $6.43 billion in FY 2024, $7.07 billion in FY 2025, and $9.55 billion in FY 2026.
Comptroller Lander urges the City to address these significant risks proactively through long-term planning for the City’s budget and its economic development programs, further contributions to reserves, and a thoughtful PEG program.
To read the full analysis on New York City’s FY 2023 Adopted Budget, click here.
No comments:
Post a Comment