When Mayor Eric Adams submits his final budget proposal to the City Council by the end of the month, he will have to deal with consequences of one of his most significant achievements.
By signing a new contract with the police union earlier this month — ending a six-year standoff and establishing parameters for the city’s other uniformed services — he will be forced to deal with the fact that the cost of labor peace will mean $18 billion in more spending over the next four years, according to an analysis by the Independent Budget Office.
A separate analysis by the Citizens Budget Commission, a financial watchdog group, estimates that the police union contract alone would add $700 million to the city’s deficit.
The result has already intensified the debate between the City Council and its allies who say there is plenty of money to spend on the city’s needs and the fiscal experts who warn that such a strategy is too risky and threatens a fiscal disaster in the not-too-distant future.
“The Council has identified $5.2 billion in additional tax revenues and $2.7 billion in available resources,” Council Finance Committee Chair Justin Brannan told THE CITY Thursday. “We know resilience doesn’t happen on its own and it doesn’t happen through further cuts – rather, resilience requires meaningful investments in our city. The money is there.”
The Council proposed $1.3 billion in additional spending earlier this month.
Any such approach will boomerang, say fiscal experts.
“I would say people who think we don’t have to deal with the future are setting the city up for massive cuts of services to people who are in need,” said Andrew Rein, president of the Citizens Budget Commission, which wants the city to restrain spending and build up fund reserves.
The mayor’s plan is due April 26, and then goes before the City Council.
In February, the mayor issued a preliminary budget for the 2024 fiscal year that begins July 1 that called for spending $104.8 billion. And that was before the cost of accommodating asylum seekers soared to as much as $4 billion over the next few years, according to the mayor.
Albany could put the city on the hook for additional costs that could be as high as $1 billion, half of which would go to the MTA, according to an analysis City Comptroller Brad Lander used for his budget testimony before a legislative committee. Other new city outlays could be for covering some Medicaid costs the state is currently paying, forcing the city to pick up costs for student Metrocards, and added pay for contractors and others from indexing the minimum wage for inflation.
And a string of bank failures has raised the risk of a recession later this year, which could impact overall tax revenue.
But the biggest problem for City Hall is dealing with the cost of union contracts. Earlier this year, the city reached an agreement with DC37 for annual raises of about 3% that set the parameters for deals with other civilian unions, most notably teachers. The eight-year pact with the Police Benevolent Association includes raises that reach 4% next year that sets the standard for uniform services, including firefighters and corrections officers.
The bottom line is labor contracts will add $18 billion over the next four budgets, according to an estimate this week by the IBO.
Even before the police union agreement, the state comptroller had estimated the city faced red ink that could reach $14 billion in fiscal year 2027, a deficit that would require both large tax increases and spending cuts to get to its legally required balanced budget.
To deal with the risks, Mayor Adams has instituted a series of directives to agencies to cut spending, including one a few weeks ago calling for another 4% reduction. Speaker Adrianne Adams, meanwhile, denounced the move, saying it “risks taking the city down a harmful, destabilizing path.”
Some groups are mobilizing to stop the cuts. Immigrant advocates held a rally Thursday in front of the Department of Education’s Tweed Courthouse headquarters to denounce the 3% cut the mayor imposed on it, and demanding $5 million in new money for programs to help those immigrant students.
“We know our newly arrived asylum seekers and many of our immigrant youth have faced significant trauma over the last few years,” said Andrea Ortiz, senior manager of education policy for the New York Immigration Coalition.
But the Citizens Budget Commission notes that the savings the administration has achieved come primarily from financial sleights of hand, such as re-estimating other expenses, plus the thousands of vacant city positions, which at some point are likely to be filled. It said this week that the actual reduction on spending that affects services is only about $200 million, or 0.3% of the budget.
“People have to realize we are not talking austerity,” said the CBC’s Rein.
Since former Mayor Bill de Blasio’s first budget in 2014, the city’s spending has increased about 40% from $73 billion to $104 billion, according to an analysis by the CBC. If the budget had merely kept pace with inflation in the New York area, it would be $80 billion, or $25 billion less.
When negotiations begin between the mayor and Council, one key will be whether the state budget imposes new costs on the city, especially for the MTA. Even more important will be an agreement on how much the city will collect in taxes.
The Council has argued revenues will be $5 billion more than the mayor projected in February given continuing strong income tax collections. Privately, city officials say the Council has a history of overestimating revenues.
And while the administration says it wants to come to an amicable budget deal with the Council, it is sticking to its view that caution is required.
“The city faces significant fiscal and economic headwinds, which require prudent fiscal planning to ensure that we are spending within our means,” said mayoral spokesperson Jonah Allon in a statement.
“The City Council’s failure to account for $4.2 billion in related asylum-seeker costs or potential state cuts is unrealistic and does not properly recognize the city’s current and upcoming fiscal challenges.”