New York City Mayor Bill de Blasio’s five years in office have been marked by a thriving economy locally and nationally. New York City is expected to bring in $92.2 billion in revenue next year – up about $14 billion from de Blasio’s first budget, enacted in 2014. But the mayor once again played the role of cautious fiscal steward in his preliminary budget presentation Thursday afternoon, saying that the city’s finances face an “unusual level of uncertainty” due to a number of outside threats. Here are five things to know about the budget.

His budget partners seem content

This preliminary budget is just the starting point for negotiations with the New York City Council. The mayor and the Council have nearly five months to negotiate before the budget is due on June 30. Council Speaker Corey Johnson, along with finance committee chairs Danny Dromm and Vanessa Gibson, released a joint statement that was generally supportive, agreeing the economy presents some challenges. But the Council vowed to save its own priorities from budget cuts, including the Fair Fares program for half-price Metrocards for low-income New Yorkers, and funding permanent housing for low-income New Yorkers.

The Citizens Budget Commission, an independent fiscal watchdog which advocates for limited government spending, wasn’t as happy with de Blasio’s plan. Though the city is sitting on more than $5.5 million in various reserve funds, CBC President Andrew Rein called for more aggressive saving and limiting spending growth to inflation.

Washington is in chaos, the market is volatile, income-tax revenues are down and Albany is getting stingier, but Mayor Bill de Blasio's budget continues to grow.

The mayor rolled out his preliminary spending plan Thursday while warning that the city faces an "unusual level of uncertainty." He noted that a dispute between President Donald Trump and Democrats in Washington could lead to another costly shutdown, that Wall Street remains jittery, that many experts see an economic crisis coming, that the city expects $935 million less in income taxes than previously forecast and that Gov. Andrew Cuomo has proposed $600 million in "cuts and cost shifts" to the Big Apple.

Still, he proposed to spend $92.2 billion in the fiscal year starting July 1, roughly $3 billion more than this year's budget—yet laced his presentation at City Hall with references to containing expenses and identifying savings and efficiencies.
The mayor also pledged to add $1.25 billion to the city's reserves and $4.5 billion to a fund for health benefits of retired city workers.

Fiscal hawks, however, warned that de Blasio was not being aggressive enough. The Citizens Budget Commission encouraged the mayor to peg the budget growth to inflation and pour more money into the rainy-day funds.

"Greater recurring savings from making government more efficient are needed to bolster reserves and make certain that the city can provide critical services to New Yorkers in both good times and bad," said Andrew Rein, president of the fiscally conservative watchdog group. "Much bolder action is needed to ensure the city is prepared for an economic downturn."

Rein also lamented that the city's 10-year capital plan, released simultaneously with the budget, is a record-high $104.1 billion.

Mayor Bill de Blasio voiced credible fears of an economic downturn and cuts in aid from DC and Albany on Thursday as he rolled out his preliminary spending plan for the coming year. So why on Earth does he want to raise spending, yet again?

Even as the city is seeing a surprise drop of more than 20 percent in its income tax take, Hizzoner’s plan comes in at a hefty $92 billion — or $94.1 billion, after accounting for prepayments, according to the city’s Independent Budget Office — for fiscal year 2020, which begins on July 1.
That counts $69.8 billion from city revenues, a 3.4 percent jump over last year and a stupefying 33.5 percent over Mayor Michael Bloomberg’s final budget, or more than four times inflation. (Total spending would grow a “mere” 28 percent since Blas took office.)

True, de Blasio’s prior budgets goosed spending even faster. And this year, for the first time, he’s eyeing some agency cuts.

Also true, pay hikes for city employees account for a good chunk of the new costs. But then, he was the one who OK’d those hikes in the first place — and also the guy who has let the number of city employees soar to record highs.

On Thursday, de Blasio defended the headcount growth, claiming the extra employees are essential to running the city. That’s debatable, especially when it comes to the boatloads of “special assistants” he has hired. In any event, if the money runs out, their heads may be the first on the chopping block.

“In this uncertain economic environment,” notes Citizens Budget Commission President Andrew Rein, “greater recurring savings” are needed to “make certain that the city can provide critical services to New Yorkers in both good times and bad.”

He called for “much bolder action” and limiting spending growth to inflation.
De Blasio has been lucky to benefit from a strong economy his entire time in office, but he’s used the good fortune of booming tax revenues to bloat spending. That leaves the city on shaky financial ground when a (historically overdue) slowdown hits.

If de Blasio’s luck holds, disaster won’t strike till after he steps down in 2021. But New Yorkers will still be stuck with the
mess he’s made.

New York City will see a sharp drop in personal income tax collections this year, surprising city officials who now warn of a possible end to the nearly decade-long boom that accompanied Wall Street’s gains.

Mayor Bill de Blasio said on Thursday that the city projects that it will receive $935 million less in income tax revenue than the previous year — echoing an even larger shortfall in New York State’s budget.

State and city officials suggest several reasons for the decline, but most seem linked to Wall Street, with the stock market’s volatility at the end of 2018 having a ripple effect on municipal budgets, as well as to changes related to the 2017 Republican federal tax overhaul. That includes a short-term boom in tax revenue at the end of 2017 as some residents rushed to pay state, local and property taxes ahead of the new federal law.

The gaps also have prompted a deeper, and perhaps more troubling, question: Is this the new normal?

“If this is actually a change in taxpayer behavior, long-term, and not a blip or an overcorrection,” said David J. Friedfel, the director of state studies for the Citizens Budget Commission, “then this is the new base.”
The recent market drop, by coming late in the year, was particularly well-timed for investors looking to take advantage of investment losses to offset gains elsewhere in their portfolios. By taking those losses, investors would trim their overall tax burden, reducing tax revenue sent to the state and city.

“New York has a lot of high earners and high net worth individuals who may have, at the end of the year, chosen to take capital losses,” said Jared Walczak, a senior policy analyst at the Tax Foundation, a right-leaning think tank. “That’s going to be a much bigger hit to New York than to a typical state.”

Other states that depend heavily on high-income taxpayers for their revenues, such as California and Connecticut, also saw big drops in revenue late in 2018, according to Lucy Dadayan of the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution.

The tax reform package passed on the federal level that included the changes to the state and local tax deduction are having a big impact on the state’s finances. We broke down the impacts with Dave Friedfel, Director of State Studies at the Citizens Budget Commission.

After Gov. Andrew Cuomo announced the state was facing the loss of $2.3 billion in planned tax revenue, state lawmakers largely said they would take a wait-and-see approach.

That approach has turned largely to a shrug.

Take for instance the joint legislative hearing on Wednesday for the education portion of the state budget. Nary a question was asked about the revenue issue, which Cuomo has blamed on the $10,000 cap on state and local tax deductions.

If the belt has to tighten this year, budget hawks say lawmakers and Cuomo should be focusing on targeted increases.

“You can probably fund a sound, basic education for all students with a much smaller increase in education aid, but it would be targeted for much smaller districts that aren’t spending enough currently,” said David Friedfel of the Citizens Budget Commission.

A sharp drop in New York State income tax collections will force revisions to Gov. Andrew Cuomo’s $175.2 billion budget proposal.

Cuomo said Monday that New York’s personal income tax receipts in December and January were $2.3 billion below forecasts, a shortfall driven largely by federal tax changes capping deductions for state and local taxes at $10,000.

The Democratic governor and State Comptroller Tom DiNapoli said during a joint press conference that the large revenue shortfall is creating severe fiscal challenges for the state less than two months before the 2020 fiscal year commences on April 1.
Andrew Rein, president of the independent Citizens Budget Commission, cautioned in a Jan. 17 report that Cuomo’s plan to extend the millionaire’s tax is “overly reliant” on a small number of high-income earners.

“High earners, which tend to recognize a larger share of earnings from capital gains, have more volatile incomes and have been most negatively affected by the federal cap on state and local tax (SALT) deductions,” Rein wrote. “Extending the higher rates would make New York less competitive and make its personal income tax revenues more susceptible to economic downturns.”

Rein also noted that while Cuomo’s budget would increase rainy day funds by nearly $500 million over the next two years to $2.3 billion, more is needed to prepare for possible economic headwinds. The state last raised its rainy day fund in 2015.

“The $2.3 billion balance is 3 percent of general revenues and falls far short of reserves needed to withstand an economic recession,” said Rein. “The past three recessions have multiyear revenue losses totaling more than $20 billion each time.”

Three weeks after proposing his $175 billion dollar budget, Governor Andrew Cuomo announced the state is now $2.3 billion in the hole.

Cuomo is pointing to the federal tax laws as the main culprit. Now, the Governor says the budget he put forward is no longer supported by the revenue. He now has until mid-February to make some major adjustments.
David Freidfel, Director of State Studies, with the Citizens Budget Commission said the state has closed deficits like this before by implementing strong spending controls.

"If state spending were to stay flat going into next year, the gap would shrink immediately to about $400 million," said Friedfel.

He went on to that say that cutting the property tax relief credit which is over a billion dollars wouldn't be a bad idea either.

Aside from two contentious but toothless City Council hearings, Amazon has not had to clear many hurdles in its quest to build a new campus in Long Island City with $3 billion in state and city tax subsidies. That may change once the plan hits the Public Authorities Control Board, a group of five appointees who must unanimously approve projects that derive from an array of state authorities, including the one that is allowing Amazon to bypass local oversight. On Monday, Queens State Senator Michael Gianaris, Amazon's primary antagonist, was nominated by Senate Majority Leader Andrea Stewart-Cousins to sit on the PACB, which would give him the veto power necessary to scuttle the deal.
David Friedfel, the director of state studies at the Citizens Budget Commission, said that even if Cuomo and Amazon can avoid the PACB, portions of the plan will have to pass through the state legislature.

"If the governor decides to approve the capital grant in some way through the budget process, there’s a chance that it wouldn’t have to go through PACB, but definitely overall, it’s going to need some time of legislative approval," he said.

Friedfel also pointed out that the state legislature is going to have to vote on whether to raise the monetary cap and the duration of the Excelsior Jobs Program to meet Amazon's targets. And the PACB also approves many grants that legislators rely on for their districts. Add to all this, Governor Cuomo's announcement on Monday that the state is seeing declining tax revenue, "it may make it so those allocations are a little bit harder to come by."

"I think it makes the political calculation a little different and it also makes the horsetrading a little more challenging, if that was going to be how to get the agreement passed."

Gov. Andrew M. Cuomo on Monday announced a dramatic drop in state income tax revenue of $2.8 billion, which he says will prompt him to revise his 2019-20 budget and reconsider spending on schools, health care and repairs to roads and bridges.

Cuomo, a Democrat, blamed the shortfall on a federal tax plan backed by Republican President Donald Trump. Cuomo said the law's cap on deductions for state and local taxes at $10,000 was to blame and suggested it is, anecdotally, triggering high-earners to leave New York.
While Culomo said he has met his self-imposed cap of 2 percent spending growth, not everyone agrees.

State operating funds spending will grow by 3.4 percent — the third year in a row that Cuomo exceeded his 2 percent cap, said David Friedfel, director of state studies at the independent Citizens Budget Commission.

“The state's rainy-day funds grew slightly to $2.3 billion, but fall far short of what would be necessary to contend with an economic slowdown or recession,” said CBC president Andrew Rein. He said Cuomo uses “gimmicks” in accounting such as reclassifying some spending to be exempt from the spending total used for the cap and shifting costs to other fiscal years.

Cuomo’s budget spokesman maintains that spending is within the 2 percent cap.

“At this point there is no doubt that the budget we put forward is not supported by the revenues,” Cuomo said at a State Capitol news conference. “It’s as serious as a heart attack.”

New York state is facing an unexpected $2.3 billion shortfall — the most significant in eight years — due to a sharp drop in income tax collections for December and January, state Comptroller Tom DiNapoli and Gov. Andrew M. Cuomo revealed on Monday.

The governor, who had announced his $175 billion spending proposal for 2020 last month, cast blame on the federal government, attributing the drop largely to the 2017 federal rollback of the state and local tax deduction, known as SALT, which he said was designed to penalize Democratic "high-tax" states.

Dave Friedfel, director of state studies at the Citizens Budget Commission, said the state could do more to increase its reserve funds and account for the possibility of an economic recession.

"While true that the governor has increased reserves since taking office, the projected balance of $2.3 billion is not enough to weather the extreme volatility caused by our dependence on high-income New Yorkers with extremely volatile incomes," he said. "Even a mild recession would be expected to create a $20 billion deficit over four years – and that's if spending remains flat."

New York’s budget picture is darkening, officials and analysts warn.

Lawmakers this week are turning more attention to Gov. Andrew Cuomo’s $175 billion spending plan after three weeks of focus on social-policy measures. Legislators will hold hearings on health care and education, the two biggest spending areas, on Tuesday and Wednesday.

Their deliberations are unfolding amid a dip in state revenues. The governor’s budget team last month lowered the amount of money it expected from income taxes in the coming fiscal year after December collections were $500 million short.

A Jan. 24 report from Moody’s Investor Service saw similar trends in other states and said “the crosscurrents of poor performance in the equity markets and changes stemming from a new federal tax environment have created considerable uncertainty for revenue forecasters.”

Compensation in the financial-services industry correlates to profits and market performance, so New York is particularly sensitive to downturns, according to David Friedfel, director of state studies for the Citizens Budget Commission, a fiscal watchdog. He said there could be a further shortfall in January’s tax collections.