Lander points to lack of transparency in City finances, cuts to critical services, inadequate affordable housing policies; offers better management recommendations instead
New York City Comptroller Brad Lander testified to the City Council about the short- and long-term outlooks for the City’s economy and finances and released a report on the Adams administration’s preliminary budget for Fiscal Year 2025. The report includes the Comptroller’s Office’s economic forecast and analysis of budgetary risks facing the City of New York and can be found here.
“Our short-term decisions must not short-change the city’s future,” said Comptroller Brad Lander. “Rather than the Mayor obfuscating with quite a few twists, turns, and two-steps of the budget dance all by himself, the City’s fiscal health would be better served by fewer wildly swinging cost estimates for asylum seekers services while implementing clear efficiencies with incentives for agencies to achieve structural and long-term savings. The City must have sound management and make strategic investments in order to face the outyear fiscal gaps, confront the affordability crisis, and ensure strong economic growth in the years ahead.”
Last week, Lander’s office released The Bottom Lines, an analysis on the Adams administration’s preliminary budget for Fiscal Year 2025, which identifies areas where short-sighted programmatic cuts and longer-term agency budget and staffing reductions have resulted in measurable declines in critical service to New Yorkers. The report also highlights areas where the City can better manage budgeting and spending, including uniformed overtime, crash claims and Carter cases. More information on the report is available here.
Comptroller Lander’s testimony to the City Council is available online here and the hearing can be viewed online here. Remarks as prepared for delivery:
Good afternoon, Speaker Adams, Chair Brannan, and members of the Council. Thank you for having me here to talk about the City’s Preliminary Budget, current economic conditions, transparency in the City budget process (or, more precisely, the lack of it), and an appropriate management response to our City’s most pressing needs. I’m joined today by Executive Deputy Comptroller Francesco Brindisi and Deputy Comptroller for Budget Krista Olson.
We released our report on the Preliminary Budget and Financial Plan earlier today. Despite the whiplash we’ve experienced since the last budget was adopted in June, largely as a result of the Mayor doing quite a few twists, turns, and two-steps of the budget dance all by himself, and the associated lack of transparency around the City’s finances, our report provides clarity about where we are and how financial conditions have evolved. We also look at how critical services have been impacted by the Adams Administration’s budget cuts, and at how the City could do better at managing spending on overtime, claims, Carter cases, and emergency procurement.
NYC’s Economy and Affordable Housing Crisis
The city continues a gradual economic recovery. Jobs have rebounded and are now slightly above pre-pandemic levels, but growth has been largely concentrated in the lower-wage Health & Social Services sector. We project that growth will continue at a modest pace.
Crucially, rent remains high, burdening too many families and risking the city’s longer-term jobs outlook. The City’s 2023 Housing & Vacancy Survey reported an alarming, decades-low 1.4 percent rental availability rate – sharply down from (a still very low) 4.5 percent in 2021. Even more concerning: the availability of apartments that rent for less than $1,650 fell to under 1 percent.
We urgently need a deal in Albany this year that increases housing supply across income levels, with a focus on affordability; better protects tenants from eviction with good cause protections; and funds housing vouchers to help people escape homelessness into permanent housing. We also need more City investment in affordable housing; I’ll return to this at the end.
The City’s Fiscal Status
Turning to the Mayor’s FY 2025 Preliminary Budget, I first want to identify two ways in which the Adams Administration’s approach has unhelpfully muddled the process.
Last June, at the time of FY 2024 budget adoption, the Administration presented the FY 2025 budget gap at $5.1 billion. In November, they increased the projection to $7.1 billion, even after one round of Program to Eliminate the Gap (PEG) savings. Then just a few weeks later, in January, the FY 2025 budget was presented as balanced. Some of those changes are due to increases in revenues, which have come in above projections, though it is worth noting here that both our office and the Council’s projections were closer to reality. And some are due to savings, though these are in large part simply re-estimates of personnel as a result of vacancies.
But a large part of that dramatic shift is due to the Administration’s wild swings in the estimate of costs for services to asylum seekers. At budget adoption last June, they projected the cost at $3.91 billion over the two fiscal years FY 2024 and FY 2025. Just two months later, in August, outside of the normal budget schedule and without any particular new information about border policy or migration shifts, they increased that projection by $6.91 billion, a whopping 177%, to a total of $10.82 billion. More recently, they lowered it to $9.09 billion, and they have indicated they plan to lower it further still in the Executive Budget. And even the level of spending that has already occurred cannot be reconciled in the City’s own Financial Management System. These dramatic variations make it difficult to accept these projections with confidence.
Given the timing of those announcements, it is quite reasonable for the Council to believe that they were made for the purpose of establishing a rationale to order large PEGs from City agencies, and then reverse the worst of them in a show of magnanimity. And indeed, just after adjusting the forecasted gap up by $6.9 billion in August, the Administration announced in September that PEG savings were to be included in all three upcoming financial plans, with each round set at 5 percent – combined with a hiring freeze and other spending freezes. Since then, the Administration has restored a small number of initiatives cut in the November Plan and announced that it is cancelling the planned third round of PEGs in the Executive Budget, as well as pulling back from the hiring and spending freezes. These needlessly swift and sudden changes in expectations muddle the budgeting process.
Further clouding that picture is the significant underbudgeting of many predictable expenditures in the Adopted Budget, including rental assistance, special education Carter Cases, and overtime. This pattern of underbudgeting expenses, despite knowing that these costs will be incurred, has become a habitual part of the City’s budgeting; but it is not a good practice. A more accurate reflection of those items would have added $3.97 billion in expenditures over FY 2024 and FY 2025 to the adopted budget last year. That pattern of underbudgeting is continued in the current Preliminary Budget proposal. In addition, the Mayor has not been clear on which Federal Stimulus funded programs will continue at current levels or face reductions.
Where does all this leave us? The Comptroller’s Office projects that the City will end the current fiscal year in June with a small surplus of $214 million. However, where OMB projects a balanced FY 2025 budget, the Comptroller’s Office projects a gap of $3.30 billion in FY 2025 that will need to be closed.
In the longer term, fiscal projections are challenging because structural underbudgeting is compounded by two significant areas of uncertainty: spending for asylum seekers, where long-term projections are in many ways just guesses; and the cost of reducing class sizes per State legislation, which is fully unbudgeted in the Preliminary Budget.
Excluding these expenses, my office projects outyear gaps of about $8.5 billion (or about 7.5 percent of total revenues) for Fiscal Years 2026 through 2028. Including estimates of asylum seeker costs and class size mandate increases, the restated gaps grow to $10.5 billion in FY 2026 and could reach $13.5 billion in FY 2028 (nearly 12% of total revenues).
Better fiscal management can reduce the need for harmful cuts
How should the City approach these gaps? Our Bottom Lines report released last week outlines a better approach. Rather than cuts to essential services that New Yorkers rely on, we should work harder to cover growing future year gaps through stronger fiscal management.
As I have advocated before: the City’s fiscal health would be better served by implementing efficiencies and cost savings in each budget modification, with incentives for agencies to achieve structural and long-term savings without cutting core services; rather than erratic, surprise announcements of PEG exercises that emphasize short term cuts.
It continues to be imperative that we reserve our rainy-day fund for true recessionary times. Despite current fiscal challenges, the NYC economy is projected to grow, even if at a moderate pace. I continue to urge you to adopt a target for the rainy-day fund and rules for deposits and withdrawals that remove the fund from the budget negotiation process.
Long term savings opportunities include reining in the ballooning costs of uniformed overtime, many of which continue to be for planned events. We have offered a plan to reduce Carter Case settlements, by providing better special education services in our public schools. We urge making agencies responsible for claim and settlement payouts, as recommended in our analysis of collisions.
We have repeatedly identified significant opportunities for savings through better management of emergency procurement. Last week, our analysis found that four separate City agencies had entered into four separate emergency contracts for asylum seeker services, three of them without competitive bidding, for many of the same staffing services. The result is wide cost variation. In one particularly egregious instance, SLSCO, an emergency contractor procured by NYCEM, charged hourly rates that were 237% more than a similar contract secured by DHS for similar employees. An analysis of just one vendor at one site found that hiring new City employees instead of certain staffers supplied by the vendor could deliver as much as $50 million in savings in a single year.
Those reductions would be far better than many of the shortsighted cuts that are included in the preliminary budget.
CUNY, the gateway for so many first-generation college students, now faces a cumulative $95 million in annual cuts when all the various rounds of Adams Administration’s PEGs are taken into account. This intensifies funding challenges from reduced enrollment and the loss of Federal Stimulus funds. Similarly, libraries still face the impact of earlier cuts and cannot afford to stay open seven days a week.
The Administration’s cut to Alternatives to Incarceration (ATIs) and its slow walking of the construction of outposted therapeutic beds is similarly short-sighted, undermining the City’s efforts to decrease its jail population and close Rikers Island. ATI programs don’t just increase community safety and reduce the jail population, they save taxpayer dollars – typically, ATI programs cost City taxpayers about $20,000 per person, compared to the cost of incarceration at more than a half a million dollars per person, per year. Investing now in ATIs, outposted therapeutic beds, and justice involved supportive housing will reduce the money the City is spending on incarceration in the long-term and put the City back on track to fulfil its commitment to close Rikers this decade.
I hope the Council will continue its strong advocacy to maintain adequate funding for 3K and ensure the number of seats meets demand in neighborhoods across the city. This program helps kids learn and thrive, enables parents to work, and helps address crushing affordability issues facing families. Similarly, Promise NYC has become a critical program for young, undocumented children and their families—its funding should be baselined. And for early childhood professionals, let’s mend the previous Administration’s broken promise and ensure true pay parity.
We also urge the Council to maintain funding for community schools. These 155 critical programs educate 40,000 high-need students across the city. In addition, I urge the Council to support funding for shelter-based education coordinators so that the growing numbers of students in temporary housing won’t lose this critical program when stimulus funds run out. We must also increase accessibility in public schools, too many of which exclude children and parents with disabilities.
Finally, rather than evicting individuals and families from shelter just 30 or 60 days after they’ve arrived, we should invest in the legal services, case management, assistance to obtain work authorizations, and workforce development that enable these new New Yorkers to get on their feet and move out of shelter to meaningful self-sufficiency. The City must scale up, improve coordination toward actual job placement, and better measure the impact of programs like the Temporary Protected Status clinic and the Asylum Seeker Application Help Center. Of course, when City Hall evicts individuals and families after just 30 or 60 days, with no plan to follow up or stay in contact with them, it dramatically decreases the likelihood that these programs will succeed.
Capital budget
The Preliminary Budget also reduces the City’s Capital Commitment Plan by $5.9 billion for FY 2024 through FY 2028, and by $11.6 billion over the 10-year planning horizon. The Plan currently does not fully reflect needs for the School Construction Authority, borough-based jails, and the portion of the Brooklyn-Queens Expressway owned by the City. The Governor’s proposal in the State FY 2025 Executive Budget to increase the City’s debt-incurring capacity by $12 billion over two years is reasonable; it should be accompanied by a City policy that ensures debt service remains below the long-standing threshold of 15 percent of tax revenues. We will be releasing a detailed analysis of these issues soon.
Affordable housing should be the number one priority
Finally, as I said at the start, affordable housing should be our number one priority. Unfortunately, this budget does not do nearly enough to finance the production and preservation of truly affordable housing, one of the most powerful tools the City has to stabilize neighborhoods and protect low-income and working families from displacement.
I urge the Council to fight for much larger investments in permanently affordable, community-controlled rental, and limited-equity cooperative homeownership housing. We’ll have more to say about this in the coming days.
To convert those investments into real projects, the City must also ensure that HPD has additional resources to clear its backlog of affordable housing projects, develop and train new staff, and expand the City’s social housing footprint as we stated in our recent report, Building Blocks of Change.
To conclude: Our short-term decisions must not short-change the city’s future. Sound management and strategic investments are required to face the City’s fiscal challenges, confront the affordability crisis, and ensure strong economic growth in the years ahead.
Thank you for your time.
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