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NYC Jobs Won’t Bounce Back Until at Least 2024, IBO Says. But State and City Budget Holes Not as Big as Feared

SHARE NYC Jobs Won’t Bounce Back Until at Least 2024, IBO Says. But State and City Budget Holes Not as Big as Feared

Signs us struggling retail in Downtown Brooklyn

Hiram Alejandro Durán/THE CITY

While Democratic control of the U.S. Senate raises the prospect of more federal aid for New York, city and state budgets apparently are in far better shape than Mayor Bill de Blasio or Gov. Andrew Cuomo will admit.

That’s the conclusion of new analyses that show the city will end the current fiscal year with a $1.5 billion surplus and a manageable deficit for the next one. Meanwhile, Cuomo has more than enough money to close his much-ballyhooed $8 billion hole this fiscal year and whittle the gap for 2021-2022.

Gov. Andrew Cuomo and Mayor Bill de Blasio hold a joint news conference, March 2, 2020.

Ben Fractenberg/THE CITY

Nevertheless, both the city and state face long-term problems because New York City is  not expected to regain all 600,000 or so jobs lost in the pandemic recession until at least the end of 2024, according to a forecast released Wednesday by the city Independent Budget Office.

And neither the IBO nor any other expert is willing to predict the future given the damage done to the economy in the downturn, which has left hundreds of thousands of New Yorkers jobless, behind in rent and food-insecure.

“The key is what we have here is a multi-year problem and if the only solution is to raise taxes that is not a long-term solution,” said Andrew Rein, president of the Citizens Budget Commission.

The IBO analysis chalks up the estimated $1.5 billion city surplus for the fiscal year ending June 30 to a mix of factors: Revenues have exceeded estimates by a little more than $1 billion; the mayor has booked almost $600 million in labor savings by pushing payments into next year; and the city reduced spending by another $1 billion — primarily due to expenses that weren’t incurred because of the economic shutdown.

Several of the mayor’s moves were questionable, the IBO said, especially the labor deals. The budget watchdog projects the budget gap for next year will be $2.6 billion. The city has routinely dealt with deficits of that scale in the past.

Anger at Cuomo

Fiscal experts are furious with Cuomo and his aides for their lack of transparency on the state budget, which continues to show an $8 billion deficit for the year ending March 31. 

The governor also has withheld 20% of money due local governments and nonprofits, although he recently said he would release a little over $1 billion for those with cash flow problems.

“The state is currently in the third quarter of fiscal year 2021 and has not released a plan to implement any spending reductions,” a group that included the Citizens Budget Commission complained in a letter to the governor released in late December. “The lack of details makes it difficult to assess how state actions are impacting agencies, local entities, and nonprofits.”

But publicly available data indicates the governor has more than enough money to close the $8 billion hole. Comptroller Thomas DiNapoli projects the state will end the fiscal year with almost $4 billion more in tax revenue than expected.

State Comptroller Thomas DiNapoli

NYS Comptroller’s Office/Flickr

The Empire Center’s E.J. McMahon notes that the administration has also not detailed how the $5 billion in federal coronavirus relief fund money was spent, but believes that at least $1 billion is available to close the gap. 

The state has saved at least $1 billion — and possibly more — by deferring raises for state employees and leaving positions unfilled.

The CBC’s Rein notes the state has saved another $1 billion in capital projects to be financed by the operating budget rather than through borrowing.

The state’s hole for the next fiscal year is also much smaller than previous predictions of $16 billion. To begin with, DiNapoli’s revenue forecast for 2022 is a little more than $4 billion higher than the one the governor adopted in April and has not been updated.

The federal aid bill passed last month will send New York State $4 billion for K-12 education. 

“The money could be used in this year’s budget or next year’s or split between the two,” Rein noted.

Uncertain Over New Shutdowns

New York officials are not alone in finding their budgets in better shape than feared. 

In November, the legislature’s office of analysis said that revenue in California was likely to be $26 billion higher than expected. Both New York and California have benefitted from strong income tax collections, since most higher-income workers have kept their jobs while tech and Wall Street have prospered.

In addition, New York City homeowners and landlords, for the most part, have continued to pay their property taxes, with no signs of an anticipated surge in tax delinquencies.

“If there is a significant amount of rent not being paid at some point, landlords will have increasing difficulty paying property taxes,” said George Sweeting, the IBO’s deputy director. “For now the evidence is they are finding a way to pay the bills like they did before the pandemic.”

A shuttered storefront in Manhattan’s Flatiron District, Oct. 2, 2020.

Hiram Alejandro Durán/THE CITY

The IBO cautions that the risks to the city budget are more threatening than in years, citing uncertainty over whether the current surge in coronavirus cases will spur a more severe shutdown.

The IBO also notes that the city is less well positioned to cope with any unexpected setbacks because the mayor has already depleted about half of the reserves he had socked away.

The state and city’s long-term outlook is more problematic because New York has been hit harder than almost any other major city by the pandemic recession. The five boroughs have the highest unemployment rates in the state and no one knows what structural changes are in store for an economy built in major parts on tourism and work traditionally done in offices.

“The really big issue is what are the long-term changes for the city in terms of population, demand for residential and commercial real estate and whether the MTA will be rebuilt so it can function as the circulation system for the city and the region,” Sweeting said.

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