Mayor Eric Adams released a preliminary budget on Tuesday less gloomy than his prior spending plan — scaling back planned service cuts thanks to better-than-expected revenue projections and an anticipated increase in state aid for asylum seekers.
The new proposed $109.4 billion proposed city budget for the next fiscal year, which begins July 1, includes an estimated $2.9 billion more in tax revenues than the mayor’s budget office had previously projected.
Last week the mayor started to reveal promised reversals of some of budget cutbacks he had rolled out in November, including restoration of a job-training program in the Parks Department, some Police Academy classes, and service hours for the Department of Education’s Summer Rising program.
Adams released a video Saturday announcing that the city’s three library systems would not be required to make further spending cuts, after already eliminating Sunday service last month in response to shrinking city spending. Adams had previously announced police, fire and other uniformed agencies will face no further reductions.
Meanwhile, other agencies, including the Department of Education, Department of Social Services and the Department of Youth and Community Development, had earlier cost-savings targets adjusted to preserve city services. Adams also said he will cancel an anticipated April budget cut if they receive additional money from the state — saying the city’s own cost-saving measures and higher-than-expected revenue prevented him from having to make further cuts.
“We balanced the budget without unduly burdening New Yorkers with tax hikes or massive service reductions — and without laying off a single city worker,” he said Tuesday, later adding that the November cuts were “smart fiscal management and not being reckless at this particular time.”
City Council finance chair Justin Brannan, a Democrat from Brooklyn, said the new figures are even better than the Council had projected last year, when the city’s Office of Management and Budget said the Council’s numbers were too optimistic.
“Just as the Council predicted, once OMB acknowledged the additional revenue that we knew was there, they rolled back a bunch of these cuts,” he told THE CITY Tuesday.
“The sooner we can all agree on how much money is there, the sooner we can start getting back to work with priorities.”
Andrew Rein, president of the nonpartisan Citizens Budget Commission, said the Adams administration would still need to tighten spending “to stave off a fiscal reckoning,” pointing to projected budget gaps in future fiscal years.
Also on Tuesday, Adams announced a six-person independent panel to advise the city on fiscal matters, convened by City Hall’s request by the nonprofit business group Partnership for New York City. The panel is led by Antonio Weiss, a former official from the U.S. Department of Treasury under the Obama administration, and includes members of former Mayor Michael Bloomberg’s fiscal team.
Adams unveiled the city’s preliminary budget on the same day as Gov. Kathy Hochul unveiled her plans for the state’s spending, in which she added $2 billion to help cover the costs of caring for thousands of asylum-seekers.
Most of the migrants in New York have landed in New York City, and Adams has blamed the cost of caring for them as the reason for his sweeping fall spending cuts.
While the city budget restores some funding, the mayor warned the city is “not out of the woods” yet — and proposed further cuts and savings initiatives, including a hiring freeze at most city agencies.
City-funded migrant shelters recently began setting time limits on stays, a measure projected to save $1.78 billion over two fiscal years, the mayor said.
Health Tensions
Adams is counting on Hochul and the state legislature to step up with funding for migrant care. The governor obliged with a $2.4 billion proposed allocation for the state fiscal year that begins April 1, up from the $1.9 billion provided in the current year.
But overall in her $223 billion budget proposal, Hochul is trying to slow the growth in state spending and convince New Yorkers the state can’t afford major increases.
Hochul’s budget plan would increase spending by about $4 billion, or only 2%, in part because federal COVID aid has been exhausted.
But a separate budget accounting, including only state funds, is increasing by 4.5%, largely because of the asylum assistance to New York City and a $3 billion jump in Medicaid spending because people are staying on Medicaid for longer periods of time and are older and sicker. Hochul is meanwhile limiting the increase in school aid to a little over 2% while suggesting the money go to poorer districts — a move likely to be very unpopular in the New York City suburbs.
Medicaid, other health care spending and K-12 school aid account for about 55% of the state budget. Hochuls’ budget assumes she will be able to find $1 billion in savings — even as a coalition of unions and hospitals have launched a statewide television ad campaign calling for a major boost in Medicaid reimbursement rates, suggesting tough negotiations with the legislature lie ahead.
Both the governor and the mayor doubled down on some of their key fiscal policies — anticipating smaller than previous gains in revenues, keeping reserves intact and opposing tax increases.
The country as a whole, the state and the city avoided an expected recession in 2023, which meant more tax revenue for the current fiscal year, which both will use to help close the budget gaps in the upcoming year. But tax increases will be modest, with the state projecting a revenue gain of only 2.5% in the upcoming year.
Both the state and the city have record reserves — the state some $20 billion and the city a little more than $8 billion — but both Hochul and Adams drew a firm line against using the money. Both said that reserves should only be used during dire economic times, like a recession.
Despite calls from progressives in Albany to raise taxes on the rich, both the governor and the mayor said they opposed any increase for fears it would encourage wealthier New Yorkers to move.
“The governor and I believe we should be living within our means to remain competitive,” said Blake Washington, Hochul’s budget director. “If you live in the city you pay the top personal income tax rate in the country and we are committed to balancing the budget without raising taxes.”
The city and the state are required to project spending for three additional years and both the governor and mayor forecast significant deficits: $20 billion over three years for the state and about $16 billion for the city.
Additional reporting by Gabriel Poblete