An expansion of the city’s borrowing capacity for operating expenses would have to be approved by the state.

“Borrowing should be the last consideration after all the other options are exhausted,” said Andrew Rein, president of the fiscal watchdog Citizens Budget Commission. “This is not the time. It’s too early.”

Last summer when this year’s budget was passed, the Citizens Budget Commission, a nonprofit fiscal monitor, pushed City Hall to prepare for a downturn by provisioning funds for a fiscal storm. They estimated a recession would reduce revenues by $20 billion over three years, much more than the city’s reserves.

Now, a recession is here and both corporations and the government will have to pare back costs and budgets. New York City finds itself in a precarious position where a budget that has doubled in under 15 years now has little cushion for a fall, with a more than a $9.7 billion shortfall expected over the next 18 months.

The Empire State has one of the most aggressive income taxing regimes in the country. With one of the highest income tax rates, approximately 14% of all income tax is derived from nonresidents. In 2017, the most recent year for which data is available, nonresident personal tax liabilities totaled $7.1 billion of the state’s $49.5 billion in total personal income tax liability.

“More than half of it comes from New Jersey,” David J. Friedfel, director of state studies for the non-partisan Citizens Budget Commission, told Yahoo Finance.

One fiscal watchdog group, the Citizens Budget Commission, released a report Friday suggesting the state could close this year's gap and reduce future deficits by temporarily suspending the exemption of sales taxes on clothing items costing less than $110 and freezing scheduled phased-in taxed cuts for middle-income earners.

Such actions would not harm the state's long-term competitiveness, said David Friedfel, director of state studies for the commission.

Richard Ravitch, who helped guide the city through the 1970s crisis, called the pandemic “so fundamentally more serious than what we went through in the 70s.”

“The problem today is we have no way of knowing what the revenue loss — sales tax, income tax and even the property tax revenues — are going to be for New York City and New York State,” Ravitch said during a Citizens Budget Commission online forum. “It’s very, very hard to measure.”

Dave Friedfel, director of state studies for the Citizens Budget Commission, says it’s a cause for concern.

“My understanding of the school budget vote process is that to a large extent, it’s already set because it’s been publicly sent out to voters what the tax levy is going to be and what the school budget is going to be,” Friedfel said. “So making cuts at this point is very hard for school districts absent some kind of statutory change at the state level.”

To be sure, other lawmakers and watchdogs think the capital plan as well as the rest of the budget should be on the table for cuts during the city's fiscal crunch.

“It’s a mistake to make cuts to core infrastructure and maintenance in response to a recession. That being said, a large portion of the city’s enormous capital budget does not go toward essential infrastructure," said Maria Doulis, vice president of strategy, operations and communications at the Citizens Budget Commission.

New York relies heavily on high-income taxpayers with volatile investment gains, according to the Citizens Budget Commission, a private fiscal watchdog. The state typically collects about one-fifth of its operating revenue from the top 1% of personal income tax filers, with tax on capital gains ranging widely from 12% to 29% of the total, the CBC said. In recent years, income from capital gains swung from a 32% increase in 2014 to a 22% decrease in 2016, the group said.

Richard Ravitch, who helped guide the city through the 1970s crisis, called the pandemic “so fundamentally more serious than what we went through in the 70s.”

“The problem today is we have no way of knowing what the revenue loss — sales tax, income tax and even the property tax revenues — are going to be for New York City and New York State,” Ravitch said during a Citizens Budget Commission online forum. “It’s very, very hard to measure.”

Ana Champeny, director of city studies for the non-partisan Citizens Budget Commission, however told Waste Dive the city's decision reflects budget realities, as well as the shortcomings of the program.

"The city's organics program is faced with high per ton collection costs due to low participation rates and a small share of organic waste being separated by households," she said. "The city has decided to suspend an inefficient, though environmentally beneficial program."

“It’s a mistake to make cuts to core infrastructure and maintenance in response to a recession. That being said, a large portion of the city’s enormous capital budget does not go toward essential infrastructure,” said Maria Doulis, vice president of strategy, operations and communications at the Citizens Budget Commission.

Not all capital spending spurs economic growth, she added.

It has laid bare the vulnerability of both low-income and middle-income workers, many of whom faced job instability and struggled to make rent payments long before coronavirus. Many of them have hourly jobs that can’t be performed remotely, and they may not have access to benefits like paid sick leave or a path to increasing their earnings. These workers are often the first to be let go in a crisis, as we’ve seen in the restaurant and hospitality industries, and they have less of a safety net in the event of unemployment. Many of them were already rent burdened: In 2018, nearly half of tenants in New York City were spending more than 30% of their income on rent, according to a report by the Citizens Budget Commission.