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The Mayor's Budget, Federal Funding Cliff, and Impact on Low-Income Communities of Color


Mayor Adams at a food pantry (photo: Michael Appleton/Mayoral Photography Office)


New York City and local governments across the state are drifting toward a fiscal cliff, one that will affect everyone from Staten Island to Champlain. The unprecedented flow of federal funding that culminated in the March 2021 American Rescue Plan will run dry over the next few years. This jeopardizes our nascent recovery and will be most disastrous for communities that were already the most economically insecure. It doesn’t have to be this way.

To understand the risks that federal pullback poses to hard-hit communities, which are disproportionately those where incomes are lowest and people of color and immigrants live, one needs to look no further than the last recession. In February 2009, President Obama signed the American Recovery and Reinvestment Act, a broad stimulus package that provided relief to households, hard-hit sectors and communities, and local governments. While the law was effective in kickstarting recovery, it provided a short runway. Federal relief spending peaked in early 2010 and began a steady retreat by mid-2011. The ensuing recovery was halting and uneven.

Nationally, unemployment reached a peak of 10% in October 2009, then began a steady decline. While Manhattan mirrored this trajectory, the same was not true of the Bronx. The borough’s unemployment rate first peaked at 13.3% in December 2009. More than two years later, as the economic recovery was well underway in much of the country, the effects of the federal pullback reversed the Bronx’s recovery, along with communities across the country that had been economically insecure prior to the recession. After modest improvement, unemployment in the Bronx returned to 13.3% in February 2012. It didn’t fall below 10% until April 2014.

At the national level, the unemployment rate for Black workers followed the same path, remaining near all-time highs throughout 2011 even as unemployment for white workers was well on its way to recovery. These communities’ lost years of economic recovery did immense long-term damage, widening the racial wealth gap and crippling economic mobility.

Unlike the last recession, the federal response to COVID-19 provided emergency relief on an unprecedented scale. It averted a deeper, prolonged recession because basic human services expanded for those hit hardest by the pandemic.

Fiscal support for New York City spared it from having to make recession-exacerbating public sector layoffs as revenues contracted, while also supplementing essential human services programs. Federal funding for New York City’s human services programs rose 22.7% between fiscal years 2020 and 2021, reaching $5.3 billion, according to recent analysis conducted by FPWA using its proprietary Federal Funds Tracker tool. This analysis, however, gives cause for grave concern.

Taking a closer look, it becomes clear that without temporary emergency relief to just six programs that received the most federal aid, human services funding would have fallen by 5.7% last year. As federal relief funding begins to expire in the coming years, this declining baseline funding will place growing strain on the city’s human services. Fiscal pullback will come amid persistently high need for services because COVID-19’s toll on hardest-hit communities will extend for years to come.

Let’s take one of New York City’s largest human services programs as an example, Temporary Assistance for Needy Families (TANF). TANF funding, already on a downward trend prior to the pandemic, continued to lose federal financial support last year despite caseloads that remain 18.7% above pre-pandemic levels and with no apparent decline ahead.

And while Medicaid received emergency federal relief funding, a recent report from the New York State Comptroller highlights the likelihood that elevated post-pandemic caseloads will persist past the expiration of enhanced federal funding.

These services were critical to communities most affected by the pandemic and averted a deeper, more damaging recession.

It is a policy choice, not an inevitable outcome, that the hardest-hit communities suffer eroding human services funding and economic insecurity for years to come. Under-resourcing these communities, predominantly home to people of color and immigrants with low incomes, has been a persistent and deliberate policy choice at all levels of government for generations. It’s led to the status quo where New Yorkers with low incomes, especially people of color, are consigned to an economic underclass.

Officials at all levels of government must make sure that the city’s and state’s economic comeback is truly inclusive by fully funding vital human services in New York City and throughout New York State. It’s just, it’s overdue, and it’s essential if our city and state are to come back stronger.

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Andrew Perry is Senior Fiscal Policy Analyst at FPWA. On Twitter
@FPWA.

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New York History Lessons on Spending, Borrowing & Saving for a Rainy Day


ny power autho

The Erie Canal (photo: New York Power Authority)


Governor Kathy Hochul’s $216 billion budget proposal for Fiscal Year 2022-2023 includes a little-publicized provision to increase the state’s reserve funds, also called “rainy day” funds. Those are funds that the state reserves for downturns, hard times, and fiscal emergencies. 

A 2019 report by State Comptroller Thomas DiNapoli, “The Case for Building New York State’s Rainy Day Reserves,” explained that the state actually has two statutory rainy day funds – the Tax Stabilization Reserve and the Rainy Day Reserve. At the time of the report, the two funds together held just over $2 billion, about 2.8% of General Fund spending. In other states as diverse as California, Texas, and Michigan, the percentage is far higher, the comptroller reported.

“Rainy day reserve funds are needed to mitigate economic or other circumstances that could force cuts to essential services and harmful tax increases,” Comptroller DiNapoli explained. Rainy day reserves date from 1938, when the state was still feeling the impact of the Great Depression. Since then, the amount set aside for rainy day events has varied, and sometimes governors or legislatures have dipped into them for non-emergency purposes.

The “Director’s Presentation” by Division of the Budget Director Robert Mujica that accompanied Hochul’s budget proposal pointed out that the state’s finances have been badly damaged three times by sudden events in recent years: 9/11, the recession that began in 2007, and COVID-19. Such shocks can lead to pulling back on funding for important initiatives. He cites the state’s 2008 commitment to provide more school aid, which had to be curtailed when budget resources diminished. “Reserves are the best defense against a ‘repeat performance’ in the next crisis.” 

The state has a budget surplus now, in part due to federal covid aid. Hochul’s budget includes a commitment to bring the state’s reserves up to 15% of the state’s operating fund spending by 2025.

Will the Legislature go along with the proposal? Mujica cites “short memories and optimism” as potential deterrents to this fiscal prudence.

New York’s history suggests that Mujica is right.  

Sometimes New Yorkers have shown fiscal caution and an inclination to hold back for rainy days. More often, they have not  done so due to faith that the state’s good fortune would continue, or, if it was in abeyance, would return soon. Some examples:

State government, established in 1777, resorted to taxes, loans, and sale of loyalist property to support its Revolutionary War efforts. When that proved not to be enough, the state issued paper money backed only by the vague pledge that the bills would be redeemed in the future. New York emerged from the war awash in red ink. But the first federal bailout, Secretary of the Treasury Alexander Hamilton’s “Assumption Plan,” in 1790, assumed responsibility for all state debts, including New York’s. That was a lucky break for the new state. It wiped the deficit off the books. As the state’s economy grew after the war, taxes flowed into the state treasury, keeping New York solvent.

In the early 19th century, after the federal government had declined New York’s request for support to build a canal across the state from Troy to Buffalo, the Legislature, at the urging of Governor DeWitt Clinton, voted to build it with New York’s resources. The Legislature established a Canal Fund that would be derived from special taxes and, when the canal opened, from canal tolls. Canal Fund commissioners began issuing bonds as construction began in 1817. The bonds were a risky bet but investors, mostly New Yorkers, confident in the young state’s prospects, snapped them up. The canal opened in 1825. New York’s first experiment with deficit funding paid off. The canal led to the development and prosperity of New York City and the rest of the state. The bonds were soon paid off, and the tolls eventually abolished.  

Along the way, though, the overly-optimistic state overspent on Erie Canal enlargements, constructing other canals, and aiding early railroads. By 1842, the state debt was nearly $26 million (exact comparisons are difficult, but that would be about $984 million today). The State Comptroller warned the state was on the slippery slope to bankruptcy. The Legislature enacted an emergency “Stop and Tax” law that levied a special property tax to bring down the debt. An 1846 state constitutional amendment mandated voter approval for future debt. In 1854, with economic prospects brighter, confidence returned and New York voters approved resumption of bond-supported canal expansion. 

By the end of the 19th century, the canal was too small for large ships and was being rendered obsolete by railroads. The Legislature voted $9 million in 1895 for enlargement and repair. A scandal erupted when it came out that most of the money had been squandered on overcharging and shoddy work by contractors. Some leaders said that massive spending was enough, it was time to abandon the canal or build a railroad on its right of way.

But a commission appointed by Governor Theodore Roosevelt (1899-1901) recommended a new, larger canal to replace the Erie and capable of carrying huge barges in 1900. The price tag was high, $101 million, the equivalent of more than $3 billion today. Railroads objected and people in upstate areas far from the canal were not supportive. But the majority of voters, hoping the new Barge Canal would replicate the Erie Canal’s impact on the state, approved the $101 million Barge Canal bond issue in 1903.

That was the largest bond issue by any state to that time. The canal was completed in 1918 but the investment did not pay off. The canal quickly slid toward obsolescence from rail and highway competition. It is still in operation today, mainly for tourism and recreation. The state has renamed the Barge Canal the Erie Canal but it did not mimic the success of its namesake. 

Governor Thomas Dewey (1943-1955) began construction of the New York State Thruway in 1946. It was supposed to be built with appropriations from the regular state budget but when escalating costs made that impossible, Dewey proposed a new Thruway Authority with authority to issue up to $400 million in bonds to be paid off mainly by tolls on the new road. The Thruway would be the “new Erie Canal” that would ensure New York’s prosperous future, he promised.

Voters approved a constitutional amendment in 1951 to allow the state to guarantee the Thruway Authority’s bonds. The superhighway was completed in 1957. It was mostly a good investment for New York, speeding travel, stimulating new industries and communities along the route. But it helped speed the demise of the railroads and the Barge Canal and the tolls remain today.

Governor Nelson Rockefeller (1959-1973) was a strong executive who was eager to resolve problems and build things. He was impatient with restraints. In a 1962 speech, he decried “the timidity of leadership that rarely glimpses the dawn of any new concept but passively awaits the high noon of crisis.” Rockefeller vastly expanded the State University, built the Empire State Plaza government complex in Albany, and increased state government in other ways through legislative appropriations and, notably, substantial bond issues. Some of these bond issues were authorized by the voters; others were in the form of bonds issued through public authorities and other routes that did not require voter approval. State Comptroller Arthur Levitt was a critic of this “back door” borrowing technique, which he called a “subterfuge” to avoid going before the voters. Rockefeller’s initiatives and investments reflected New Yorkers’ confidence in their future and paid off and helped the state. 

But his liberal use of deficit financing set a trend for future governors, and for reports of criticism and caution by future state comptrollers. The comptroller’s 2021 “Financial Condition Report” identified $70.7 billion in “State-funded debt,” the second highest in outstanding state debt nationwide, about $3,500 per capita.

Which path should New York State take in 2022?

Governor Hochul has mostly chosen the path of confidence and optimism, investing in expanding New York’s future prospects rather than paying down the debt or, as some Republican leaders have advocated, cutting taxes. In her January State of the State address, she explained that much of her confidence stems from her reading of New York’s robust, successful history. That puts her in line with many of New York’s most successful, progressive governors in the past. 

On the other hand, beefing up the rainy-day fund (if she can get the Legislature to go along and include that in the budget it passes) sounds a notable theme of prudence and caution.  

That sort of expansive view of the future balanced with a measure of fiscal prudence may be just what New York needs now. It may also be just what Hochul needs to get elected in her own right in the fall.

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Bruce W. Dearstyne is a historian in Albany, NY. He is the author of The Spirit of New York: Defining Events in the Empire State’s History and The Crucible of Public Policy: New York Courts in the Progressive Era, both published in 2022 by SUNY Press.

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The Climate Investment New York Needs to Make Now


(photo: office of Cuomo)

Construction jobs on the line (photo: Governor's Office)


In 2019, New York passed one of the strongest climate bills in the country, the Climate Leadership and Community Protection Act.

The CLCPA requires nothing less than a total transformation of our economy. Our state must reach net-zero emissions by 2050, and between now and then we must rapidly increase renewable energy production and decrease fossil fuel pollution. Critically, the law also requires that 35-40% of state climate and energy spending be directed to communities on the frontlines of the climate crisis — a nation-leading environmental justice requirement that has been copied by other lawmakers and even the Biden administration.

All of this is great news for New York. But fully transforming our economy, investing in frontline communities, and meeting the mandates of the CLCPA aren’t free, and three years later, we’re still waiting for the money to show up in our communities. That’s why my organization, the New York City Environmental Justice Alliance, is part of a coalition supporting a $15 billion climate, jobs, and justice fund in the next New York State budget, due by April 1.

$15 billion is the bare minimum of what we need to meet our climate goals and invest in frontline communities. It’s just 7% of Governor Hochul’s proposed $216 billion budget — a small price to pay to address one of the biggest crises of our time while taking advantage of it to create jobs, particularly in vulnerable and disadvantaged communities. NYSERDA, a state authority under Governor Hochul’s administration, said meeting the mandates of the CLCPA will take $10 billion per year to start, with the amount increasing over time. The same report also found that reducing greenhouse gas emissions in line with the CLCPA avoids $260 billion in economic impacts of damages caused by climate change.

Making these investments is fundamentally an issue of racial and economic justice. Climate catastrophe and fossil fuel pollution are coming for us all, but for Black, brown, immigrant, and low-income communities, disaster has already arrived. The communities represented by NYC-EJA’s member organizations, from Sunset Park to the South Bronx, are breathing in toxic levels of pollution from peaker power plants, trucking facilities, waste transfer stations, and highways. They are flooded during increasingly severe superstorms and hurricanes, which leave behind disease-causing mold and mildew even after the streets dry out and the skies clear up. As summers get hotter and hotter, people in environmental justice communities suffer disproportionately from heat stroke and related illnesses, because our neighborhoods lack the infrastructure to keep cool.

It’s not random that communities of color suffer the worst impacts of pollution and climate change; it’s by design. Burning fossil fuels, and allowing the seas to rise, temperatures to increase, and storms to worsen requires that some people will suffer the consequences. In a country built on the marginalization and subjugation of people of color, it is unfortunately no surprise that our communities continue to be offered up as sacrifice zones by people in power.

This $15 billion climate, job, and justice fund can begin to remedy these injustices and build a just, thriving future for all New Yorkers. The money would put our state on a path to replace pollution-causing fossil fuels with renewable energy, solarize and retrofit public schools and housing, and make mass transit greener and more reliable, especially for communities on the margins. It would create hundreds of thousands of good-paying jobs for our communities. In fact, if we keep the investments up, we could see 150,000 good, green jobs created over the next ten years.

The fund would also provide a “climate stimulus” to low-income and working New Yorkers. These climate stimulus payments would include transit vouchers to encourage riding the bus and train, grants for homeowners to make their houses more energy-efficient, and credits to reduce the cost of heating homes and small businesses in the winter. We don’t have to choose between prosperity for all and a renewable future: we can have both. 

One of the most exciting components of the $15 billion climate, jobs, and justice fund is that it will provide grants to local organizations in frontline communities for programs that improve resiliency, increase energy efficiency, and decrease fossil fuel pollution. Frontline communities are already leading the way in creating climate solutions, but we need the Governor and Legislature to make sure we get the funding we need.

Some amazing projects already exist: in Sunset Park, UPROSE started Sunset Park Solar, a cooperatively-owned solar installation that will make cheap, green electricity available for low-income tenants in the neighborhood. They’ve also developed a community-wide plan to create green jobs and improve resiliency along the industrial waterfront — a plan that helped attract North America’s largest off-shore wind assembly hub to the Sunset Park waterfront.

Or look to the South Bronx. The POINT CDC has created a “Be a Buddy” program, which connects volunteers with seniors and other vulnerable people in the community to check in during heat waves, storms, or other climate events. With money from the $15 billion climate, jobs, and justice fund, we could see programs like this expand and bloom across the state.

What we can’t afford to do is wait. The climate crisis is happening now, and people on the frontlines deserve real funding behind our climate solutions. It’s time for the Governor and Legislature to put their money where their mouth is, and follow through on making New York a real climate justice leader. Let’s invest $15 billion in climate, jobs, and justice this year. 

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Eddie Bautista is Executive Director of the NYC Environmental Justice Alliance and a member of the Steering Committee at NY Renews. On Twitter @eddiebautista08 & @NYCEJAlliance & @NYRenews.

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