The Citizens Budget Commission (CBC) is pleased to provide the Charter Revision Commission (CRC) these Recommended Areas and Preliminary Approaches and Options for Changes to the NYC Charter to Improve Finances, Management, and Public Feedback. Given the CRC’s timeframe, please understand these are preliminary recommendations, and CBC is in the process of refining and specifying proposals, which we will share shortly. We look forward to being a resource to your Commission by providing a) our recommendations, b) feedback on issues others and the CRC may raise, and c) feedback on your preliminary and final proposed changes to the Charter.

CBC’s Preliminary Recommended Areas for Charter Revisions include changes that:

• Improve Fiscal Integrity and Stability;
• Improve Management Quality and Efficiency; and
• Improve Resident Feedback.

Before presenting our recommendations, we want to share a note of caution. The Charter is the City’s framing document, and it should define the core powers, structures, and processes of City government. However, one need look no further than the current Charter itself to witness the temptation to pack the Charter with administrative provisions, minutiae, and management dictums that are not appropriate for the document. CBC believes the CRC should focus on recommending changes that are appropriate to the Charter and not local law—changes the Commission is best situated to affect, rather than those that can be implemented through the legislative process.¹ Furthermore, the Commission should consider removing vestigial and inappropriately administrative provisions that no longer comport with City operations.

The following CBC preliminary recommendations will be refined in sufficient time to assist the CRC in completing its work successfully in a timely manner.

Improve Fiscal Integrity and Stability

We recommend the Commission include Charter revisions in five areas to improve fiscal integrity and stability.

1. Create Rainy Day Fund (RDF) Deposit, Withdrawal, and Balance Rules

The 2019 Charter Revision Commission paved the way for the City’s first true RDF, officially called the Revenue Stabilization Fund (RSF). Following the Charter revision, the State enacted the necessary implementing legislation.²

However, the State rules governing the fund’s use are inadequate.³ There is no target size, and deposits are completely discretionary, radically reducing the likelihood that sufficient deposits will be made during economic expansions to substantially help the City through a rainy day. Furthermore, withdrawals are not tightly constrained to recessions or a defined severe emergency. They are limited to 50 percent of the balance in one year, or more if the Mayor certifies a “compelling fiscal need” without further specificity, allowing the fund to be tapped when there is no recession or severe emergency.

CBC’s To Weather a Storm report about how to structure the RDF recommended:

• A target size equal to 17.2 percent of pre-recession tax revenue;
• Mandatory deposits of 75 percent of tax revenue growth that exceeds 3 percent annually, measured on a common rate and base, until the target is reached; and
• Withdrawals limited to only during a recession or emergency with significant revenue loss or expenditure increase, with no more than two-thirds to be withdrawn in the first year.

After CBC’s report, the City and State Comptrollers presented similar positions.  While there are differences between CBC and the City Comptroller, the frameworks are very similar and strongly aligned. The City Comptroller recommends a target size of 16 percent of City tax revenues, formula-driven mandatory deposits, and strict withdrawal rules.⁴ The State Comptroller recommends the adoption of mandatory deposit rules and stricter withdrawal rules but does not make specific recommendations.⁵

Preliminary Recommendation. The Charter should include clearly defined rules governing the RDF. It is important to consider how much detail should be specified in the Charter versus established in local law. Given the importance of building reserves and using them only as appropriate, the Charter should contain some specificity, since legislation can and is often reversed or temporarily preempted.

At minimum, the Charter should require mandatory deposits, withdrawals be limited to a recession or severe emergency, and a target size. CBC currently is developing proposals to provide an appropriately specific framework or thresholds for these measures. These likely will include a) the economic conditions under which mandatory deposits should be required, b) guidance on the size of mandatory deposits, c) whether or how specifically a recession and severe emergency should be defined in the Charter, and d) a target size or process for setting one.

2. Create the Retiree Health Benefits Trust (RHBT) in the Charter and Establish Rules for Deposits and Use

In 2006, the City created the RHBT in local law to pay the current year cost of retiree benefits (the PAYGO cost) and accumulate resources for future payments.⁶ Unlike pensions, the City does not annually make a deposit to the RHBT equal to the future liability associated with retiree health and other postemployment benefits (OPEB) earned by employees in that year. Instead, it generally deposits the PAYGO cost for retiree benefits (and the fund serves as a pass-thru, making the annual benefit payments); occasionally the City deposits more, which increases the fund’s balance.7

Being established in law, the RHBT could be terminated. This would be detrimental to the City’s long-term fiscal health, since the City would have no fund in which to deposit resources to ultimately offset its OPEB liability, currently totaling $100.3 billion. The current RHBT balance of $4.8 billion covers just 4.8 percent.⁸

Furthermore, inadequate deposit and withdrawal rules have allowed the City to use it as a de-facto RDF, drawing down accumulated funds for fiscal relief. 

Ideally, the RHBT’s balance would be: equal to the City’s OPEB liability; sufficiently resourced to fund the cost of each year’s benefits; and annually the City would deposit the normal cost (the actuarially estimated incremental cost of future benefits for current employees being accrued that year) in order to maintain sufficient levels going forward. Currently, the normal cost is higher than the annual benefit cost and requiring the City to fund the normal cost would be fiscally challenging, requiring an annual additional $3.7 billion deposit.⁹

Preliminary Recommendation. The Charter should be revised to establish the RHBT, ensuring there is a fund to accumulate resources to pay for the City’s long-term OPEB liability. The Charter should require annual deposits into the fund of at least the PAYGO amount, so that it no longer serves as a de-facto rainy day fund, plus some additional deposit (a percentage of the annual cost or liability), or the normal cost, whichever is less. The Charter also should limit withdrawals from the RHBT to the amount needed to pay for the current-year cost of the retiree health benefits.

3. Strengthen Legislative Fiscal Impact Statement (FIS) Requirements

The City’s Charter requires a FIS for each bill that will be voted on by any City Council Committee or the full Council.¹⁰ However, the statements rarely are available until just before the vote of Committees that commonly occur within hours of votes by the whole Council. Committee hearings to review legislation and take testimony occur earlier, well before the Committee votes. There is no time for substantive debate about costs and potential funding offsets, and by that time, the vote outcome is often already determined. Even an available FIS rarely sparks debate about the inconvenient truth of affordability.

A glaring example is the City Council’s passage and mayoral veto override of four bills to expand eligibility for the City’s Family Homelessness and Eviction Prevention Supplement (FHEPS) program. The four bills were considered in January 2023, but the amended versions were introduced on May 23, 2023. The FIS was released on May 24, 2023, and the introductions were passed on May 25, 2023. While the Council’s own FIS showed the expansion would cost $10 billion over five years, it ignored the FIS, issuing one press release about other estimates showing lower costs or savings, and another press release about its veto only highlighted the savings, writing: “...Fiscal cost analyses…projected that the bills would save the City over $730 million in costs from homelessness and its various impacts on New Yorkers.”¹¹

The FIS should be required earlier in the process to give Council members and the public a reasonable estimate of the cost of a proposed policy. At a minimum, the FIS should be part of the Council Committee Report released during the first Committee meeting. A FIS should also be included with all proposed legislation that has fiscal implications.

An earlier FIS would be an improvement but may not be sufficient to foster thoughtful budget decisions, especially if a program cannot be accommodated within the current budget.

Preliminary Recommendation. The Charter should require fiscal impact statements be published earlier in the legislative process; CBC is currently refining its proposed timing.

To increase the likelihood that long-run affordability is better considered and promoted in the legislative process, CBC is conducting additional research to develop two possible approaches. One would be to require the FIS to identify the preferred “pay-for”—offsetting savings or locally controlled revenues equal to the cost of the proposal annually over the multiyear financial plan. To be clear, CBC will not recommend this preferred pay-for have the power of budget modification, but rather that its identification provide the benefit of sunshine—acknowledgement that the funds to support the program are not in the budget, and to foster the debate on priorities.

The second approach is whether, and if so how, to limit the City’s obligation to implement a newly enacted policy that has major budget implications, if it has not been incorporated into the budget. The risks of self-imposed unfunded mandates are real and can be substantial. However, such a requirement should only be designed in such a way that does not remove appropriate authority from the legislative branch.

4. Improve Accuracy of Financial Plan Estimates with Oversight/Review

Currently, the NYS Financial Emergency Act and City Charter require that revenue and expenditure estimates be based on “reasonable and appropriate assumptions and methods of estimation.”¹² However, CBC’s research has demonstrated that the City’s financial plans are routinely and increasingly understating expenditures needed to provide planned services.¹³ For example, CBC estimates that by the end of fiscal year 2024, overtime spending at uniformed agencies will be $2.0 billion, while the budget at adoption was  $1.1 billion, and the prior year expenditure was $1.7 billion.¹⁴

Significant inaccuracies in the City’s financial plan estimates distort the City’s fiscal picture, potentially masking fiscal problems, or even greater than acknowledged available resources. This can encourage programs to be started and expanded without sufficient resources to fund them over time, potentially leading to massive cuts and crises. Only real, reasonable estimates will drive smart choices on spending and service priorities.

It is important to acknowledge the difference between, for example, reasonably conservative revenue estimates, and unacceptable distortions in the financial plan. Reasonably conservative revenue estimates, as long as they are not flagrantly understating likely revenues, protect the City’s finances and the City’s ability to help New Yorkers during challenging times.

Preliminary Recommendation. The Charter’s requirement that revenue and expenditure estimates be reasonable and appropriate should be bolstered. CBC is conducting additional research on three possible approaches.

One approach would be to require the City to provide details of the basis and specific calculations of its estimates in cases where the City or State Comptroller’s analyses of the budget identify estimates that vary significantly from the Executive.¹⁵ Forecasting revenues and expenses is not a precise science, and different, reasonable assumptions can lead to different, reasonable estimates.  CBC also is examining whether this requirement, if ultimately recommended, should be based on a threshold difference, such as 15 percent, and whether any threshold should be different for expenses and revenues.  

Another approach would be to have the City Comptroller certify whether the estimates are reasonable. The intent would not be to give the City Comptroller power to substitute its own estimates for the Executive’s, since that would radically and improperly reduce the fiscal authority of the Executive.

A final approach being considered is whether an explanation should be required if an ongoing program’s budget increases or decreases more than a specified percentage from one year to the next in the four-year financial plan. This would highlight potential areas where the City’s multi-year financial plan does not represent ongoing costs accurately.

5. Cap Debt Service at 15 Percent of Tax Revenues

The State has set limits for how much long-term debt municipalities may have outstanding.¹⁶ However, outstanding debt levels are just one part of assessing whether indebtedness is affordable. The other critical metric is debt service relative to the underlying revenue used to service the bonds.¹⁷ The City has an informal requirement to keep debt service below 15 percent of tax revenues, but it is only articulated in debt management policy and could be amended.¹⁸

Recommendation. To help ensure that long-term debt is affordable, the Charter should limit debt service to 15 percent of tax revenues. The City Comptroller has made a similar recommendation.¹⁹

Improve Management Quality and Efficiency

Require a Comprehensive Performance Management System

Performance management systems are most effective when they include both robust data on performance (inputs, process, output, outcome, efficiency, and quality measures) and a management review and accountability process where leaders and managers review the data, identify successes and problems, identify and track improvement plans, and foster accountability.²⁰

The Charter requires a Mayor’s Management Report (MMR) to provide data across functions on agency performance. While often lacking in quality and efficiency measures by and large, the MMR has been a helpful mainstay of City government transparency. The Charter also outlines some components of a performance management process when it defines the role of the Mayor’s Office of Operations (MOO). The MMR and MOO both emerged from the 1975 fiscal crisis as Executive Orders prior to being incorporated into the Charter during the 1989 overhaul.²¹

However, the management process outlined is not sufficient and has failed to drive administrations to implement a comprehensive system that spans all agencies and initiatives and is vertically integrated from the Mayor’s and Deputy Mayors’ offices through the agencies to front-line operations.

Recommendation. The Charter should establish a basic performance management framework—its management, planning, and reporting—while each administration should specify how it will implement the performance management system within that framework. The requirements should parallel those for the MMR and be influenced by Executive Order 13 (on efficiency).

Specifically, the Charter should:

• Require the Mayor to designate a Deputy Mayor or other senior official to be the chief performance officer overseeing the system, and specify a schedule for reviews, with a minimum number required in the Charter;
• Identify the agencies, functions, and initiatives covered by the system;
• Create a review structure that cascades from the Mayor’s office to agencies and within agencies from the Commissioner to programs; and
• Require public reporting on the system’s activities and impacts, at least annually.

CBC is further refining specific language and will propose that to the CRC. This may include some modifications to the current sections on MOO, as well as improvements to the definitions in the MMR section.

Improve Resident Feedback

Require a Statistically Valid Resident Feedback Survey at Least Every Five Years

The City MMR includes hundreds of metrics about City services; however, it does not include direct feedback from residents. Statistically valid, resident feedback can provide critical information about the quality of City services directly from those services’ “customers,” as well as insight into how residents feel about the quality of life in the city and their neighborhood.

The City conducted its Resident Feedback Survey first in 2008 in order to collect this information, with the intent that it be conducted periodically to track residents’ assessments of the City’s services and quality of life, and to track how they changed. Following the Great Recession, the City shelved plans for additional surveys. To update New Yorkers’ assessment and demonstrate the survey’s value as a statistically valid, comparable assessment, CBC conducted the survey again in 2017 and 2023, with minor modifications. The 2023 survey found that the current Administration had by and large the right priorities, but that residents’ ratings of services and the quality of life declined significantly since 2017. This feedback, which is statistically valid by neighborhood, income level, and race/ethnicity, provides valuable feedback to the City on where efforts are succeeding or failing and where to focus additional effort to improve the lives of New Yorkers.²²

Recommendation. The City Charter should require the City to conduct and publish a statistically valid resident feedback survey at least every five years, with results at the Community Board level and by key demographics.