The City Council will wrap up its Fiscal Year 2025 Executive Budget hearings this week, kicking Administration and Council budget negotiations into high gear. The choices Mayor Eric Adams, Speaker Adrienne Adams, and their teams make in these next five weeks will either help stabilize the fiscal path—strengthening the City’s ability to drive prosperity and protect New Yorkers—or make it shakier, increasing the chance of massive cuts to services in the future.

To strengthen the City’s long-term health and competitiveness, City leaders should:

 

Adopt a Transparent, Accurate Budget—that Fully Funds Planned Services and Identifies those that Will Shrink

To foster a fact-based debate and prioritization of programs, the budget should be transparent and accurately reflect the costs of planned programs—for services such as public assistance—and for underbudgeted costs such as overtime. The budget will then more accurately reflect the size of future gaps, rather than artificially reducing gaps by underbudgeting. If the City chooses not to fully fund a program, it should be clear that it will be trimmed or cut.

Despite the Administration’s welcome steps to increase accuracy by adding funds to support current programs in the Executive Budget, such as housing vouchers and homeless shelter for non-asylum seekers, the City’s budget remains inaccurate.¹ For example, costs for Early Intervention services are $65 million short in fiscal year 2025, while the Department of Sanitation is $22 million short for litter basket service.²

In total, the budget is approximately $2.2 billion short in fiscal year 2025 to continue current programs; the outyears are between $2.6 billion and $2.8 billion short. This omission distorts the City’s fiscal condition and obfuscates budget gaps.³ The New York State Financial Emergency Act requires that “(a)ll projections of revenues and expenditures contained in a financial plan shall be based on reasonable and appropriate assumptions and methods of estimation."⁴

 

Ensure that Spending Added During Budget Adoption Is Offset by Savings Elsewhere

To ensure new spending is sustainable, it should be budgeted on a recurring basis and offset with recurring spending reductions from efficiencies or the reduction or elimination of lower impact or underutilized programs.

Budget negotiations are likely to add spending for City Council and Administration priorities. The adopted budgets for fiscal years 2022 to 2024 increased spending by $2.3 billion, $1.9 billion, and $1.6 billion, respectively.⁵ Furthermore, these additions are often done one year at a time, by agreement between both the Administration and the Council, creating new fiscal cliffs.

 

Deposit at Least $1 Billion into the Rainy Day Fund over This and Next Year

To protect New Yorkers during a recession or a severe one-time emergency, the City should deposit at least $500 million in the Rainy Day Fund (RDF) in fiscal year 2024 and budget to deposit at least $553 million in fiscal year 2025, and more if revenues are higher than projected in the Executive Budget.⁶

Since the RDF was authorized in 2020, the City has made only one discretionary deposit, bringing the RDF balance to just $2.0 billion.⁷ That is not enough. The City should ultimately build its reserves to $12.7 billion, which would cover two years of recessionary tax revenue losses and permit spending to grow 2 percent a year.

CBC recommends enacting mandatory deposit rules to ensure the RDF is built up over time.⁸ CBC’s deposit formula would require a $553 million deposit in fiscal year 2025, based on current revenue estimates. This deposit should be included in the adopted budget and increased by 75 percent of any additional tax revenues recognized in the adopted budget or subsequent modifications.

Furthermore, since budget adoption the City has identified nearly $4 billion in additional fiscal year 2024 resources to roll in fiscal year 2025. Given that the City did not make a discretionary RDF deposit in fiscal year 2023 when CBC’s recommendation would have yielded a $1.3 billion deposit, a $500 million catch-up deposit this year is reasonable.