Good morning. I’m New York City Council Speaker Adrienne Adams. Thank you for joining us today, and thank you to Finance Committee Chair Justin Brannan for chairing today’s oversight hearing on the Mayor’s Fiscal Year 2024 November Financial Plan.
On November 16th, Mayor Adams released his November Financial Plan that includes broad, 5 percent cuts to city agency budgets and a citywide hiring freeze, as part of a Program to Eliminate the Gap (PEG). Two additional rounds of similar reductions are expected, for a total of 15 percent in ordered budget cuts by the Spring of 2024.
The Mayor’s Office of Management and Budget (OMB) has proposed the PEGs in response to budget gaps for the current fiscal year, which are closed in the November Plan, as well as in out-year budgets that remain. OMB has estimated that the budget gaps for fiscal years 2025, 2026 and 2027 remain at $6 to $7 billion for each year.
For months, the Mayor’s administration has solely attributed these budget challenges facing our city squarely on the arrival of tens of thousands of asylum seekers in our city. OMB has projected that the cost of care and shelter for migrants will be $12 billion over three years, while other financial oversight bodies have estimated lower costs. The Council has urged that the Administration pursue different ways to provide asylum seeker-related services that are more effective and cost-efficient than the City over-relying on contracts with expensive, for-profit companies.
Nonetheless, the reality is that many factors are contributing to the gaps in our city’s out-year budgets, and asylum seekers are not to blame. The expiration of billions in federal COVID-19 stimulus dollars, slowing economic growth, real estate challenges – such as commercial office vacancies and weakening residential home sales – and under-budgeted costs are the underlying drivers of our budget gaps.
Despite the resilience of our national and local economies, the Council’s economic and tax revenue forecast released yesterday is projecting that the City is expected to enter a period of slower tax revenue growth. The forecast anticipates tax revenue to decline in FY24, which has only happened three times over the past 40 years.
Still, the Council forecast estimates the City will receive $1.2 billion more in tax revenue for this fiscal year than recognized by OMB, which has not updated its revenue projections since April.
All of this makes clear that the City is facing tough economic headwinds in the coming years that we must confront. But our approach must be surgical and strategic, prioritizing the investments that we need to safeguard for New Yorkers.
Cutting every agency’s budget indiscriminately will disproportionately impact everyday New Yorkers. The essential services that New Yorkers rely on, like educational programs that provide stability for young people, our libraries, and sanitation services that keep our streets clean, must be protected.
As a city, we have already witnessed what happens when city agencies are under-staffed and lack the resources needed to serve New Yorkers. The delivery of life-saving food benefits and housing assistance to help residents find and stay in their homes have already been delayed, putting too many families at risk.
Working and middle-class families have been leaving New York, often because of the combined lack of affordability and breakdown in city services. This exodus of New Yorkers is not one we can continue to afford.
Our city must take a different approach to its budget. For the current fiscal year, in addition to the $1.2 billion more revenue expected, there is also $1.45 billion of in-year reserves that must be used within the fiscal year. We must protect vital services as a priority for our city and New Yorkers.
As we approach closure of the out-year budget gaps, it will require additional support from Albany and Washington that city stakeholders must be united in demanding. Nowhere is this more important than for our schools and students that are still trying to recover from pandemic learning loss.
Closing our significant budget gaps will also require other solutions, including the identification of additional revenues – we cannot close our budget gaps by simply cutting services. There are voluminous tax breaks that the City and State continue to provide without an analysis of whether they provide public benefit to our economy. When we face budgetary challenges, all considerations must be on the table, and that must include revenue and tax breaks. Let’s think creatively about finding additional revenues in a thoughtful way that spares working and middle-class New Yorkers from harm.
At a time of serious budget challenges, we must be responsible.
Today, we seek to examine the Mayor’s financial plan to clarify a path forward to support the health of our city and all who call it home.
This will require the Administration to work collaboratively with the Council, service providers, and all New Yorkers, who all have a stake in the success and future of our city. As a city, we can and must shift our approach to meet the challenges ahead.
I look forward to hearing from OMB Director Jiha and administration officials about the Mayor’s November Financial Plan and ways to protect our budget and city.
Thank you to our Council Finance staff for your hard work on this critical oversight hearing.
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