NYC Comptroller Lander Releases Annual Report, Warning of Fiscal Challenges Amid Federal Cuts and Adams Administration’s Shortsighted Planning

 

Incoming administration facing increasing fiscal pressures as Adams Administration leaves behind a $2.18 billion budget gap for the current fiscal year, and projected gaps and risks exceeding $10 billion in FY 2027

In the Annual Report on the State of the City’s Economy and Finances, New York City Comptroller Brad Lander outlines the fiscal challenges confronting the City at a moment when the Trump Administration is pursuing sweeping federal funding cuts that pose significant risks ahead. The report details how years of chronic underbudgeting have contributed to a $2.18 billion budget gap in Fiscal Year (FY) 2026, even before accounting for these looming federal threats.

The Comptroller’s Office estimates that underbudgeting and fiscal risks could widen the budget gap to more than $10 billion in FY 2027, a budget that the incoming administration will be required to balance in February, shortly after taking office.

“After years of budget gimmicks, the Adams Administration is walking out the door leaving the next administration holding the bag as they stare down a more than $10 billion budget gap. Closing a gap of this magnitude is a tall order and undermines the ability to make the investments New Yorkers require. Even amid the Trump Administration’s reckless punishment of cities and states like New York, transparent and responsible financial planning can steady the course and ensure that we meet our City’s long-term needs,” said New York City Comptroller Brad Lander.

New York City’s Economy and Finances

Sudden policy shifts on trade (raising the average tariff rate imposed on imported goods to an estimated 16.8%, up from 2.4% at the beginning of the year), along with restrictive immigration enforcement, deep cuts to health and social assistance programs, and repeated attempts to withdraw Federal aid have chilled the economic outlook, posing a challenging climate for cities like New York.

Despite the City’s overall financial stability, economic growth has been modest. Payrolls in several major industries have remained flat in 2025, yet unemployment claims have not spiked as sluggish job openings were matched by low job separations. Going forward, New York City’s economic trajectory will depend heavily on federal policy choices.

Challenges Ahead

If federal cuts widen, New York City is woefully unprepared to weather them. Poor fiscal planning by the Adams Administration, illustrated by three consecutive years of expenses outpacing revenues, has left the City vulnerable just as these serious risks could materialize.

Despite strong tax revenue growth of 8.3% in FY 2025, the Administration once again made only a $5 million deposit into the Revenue Stabilization Fund—the third year in a row at that minimal level. Under the Comptroller’s recommended formula, FY 2025 revenue growth would have yielded a $1.34 billion deposit.

One-time cost adjustments, understated recurring expenses, and the absence of a long-term savings or efficiency strategy have further weakened the City’s fiscal footing. Most immediately, the City is facing a $2.18 billion gap in FY 2026, a departure from what is typical at this point in the fiscal year when the Office of the Comptroller usually projects a modest surplus that can be used to prepay the following year’s expenses.

Looking ahead, budget gaps in future years could reach $10.41 billion in FY 2027 (8.8% of total revenues), $13.24 billion in FY 2028 (10.9% of total revenues) and $12.36 billion (9.9% of total revenues) in FY 2029.

As the incoming mayoral administration works to advance essential initiatives for New Yorkers, it will have to contend with several serious fiscal challenges, including:

• Near-term costs from federal cuts, including reductions to SNAP administrative funding and Emergency Housing Vouchers. Larger cuts, to benefits like Medicaid and food assistance, will initially hit the State, but may later affect the City.
• Chronically underbudgeted expenses, including overtime, public assistance, and rental assistance. These are projected to total $3.76 billion in FY 2026, growing to more than $5.63 billion in the outyears.
• Implementing the State class-size mandate, requiring hiring a significant number of new teachers beginning in FY 2027.
• Rising health insurance costs for City employees, only partially addressed in the November plan.

Transparent, thoughtful, and efficient budgeting is more important than ever to make sure the City has the resources it needs to meet the challenges that lie ahead.

For the Comptroller’s full analysis and outlook for the City’s economy now and in the years ahead read the full Annual Report on the State of the City’s Economy and Finances at https://comptroller.nyc.gov/reports/annual-state-of-the-citys-economy-and-finances-2025.