Gotham Gazette http://www.gothamgazette.com/component/tags/tag/108 Sat, 23 Feb 2019 13:22:23 +0000 Joomla! - Open Source Content Management en-gb webmaster@gothamgazette.com (Webmaster) What's The [Data] Point? $92.2 Billion, Mayor de Blasio's Preliminary Budget http://www.gothamgazette.com/city/8268-what-s-the-data-point-92-2-billion-mayor-de-blasio-s-preliminary-budget http://www.gothamgazette.com/city/8268-what-s-the-data-point-92-2-billion-mayor-de-blasio-s-preliminary-budget whats the data point


What's The [Data] Point? Episode 65 -- $92.2 billion, Mayor de Blasio's Preliminary Budget, with Sally Goldenberg [You can download What's The [Data] Point? wherever you get your podcasts, including on iTunes]

sally goldenberg wtdp

Mayor de Blasio released his $92.2 billion preliminary budget plan for fiscal year 2020, which begins July 1 of this year, and Sally Goldenberg of Politico New York joined the podcast to break it down and preview what's next in city and state budget deliberations.

Listen to the conversation and let us know what you think: Ben Max of GG (@TweetBenMax), Maria Doulis of CBC (@MariaDoulis). Listen below or download wherever you get your podcasts!

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by Ben Max, Gotham Gazette
     

Read more by this writer.

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What's The [Data] Point? $92.2 Billion, Mayor de Blasio's Preliminary Budget Fri, 08 Feb 2019 05:00:00 +0000
Citing Causes for Concern & Promising Cuts, De Blasio Presents Still-Growing Budget Plan of $92.2 Billion http://www.gothamgazette.com/city/8266-citing-several-causes-for-concern-de-blasio-presents-still-growing-budget-plan-of-92-2-billion http://www.gothamgazette.com/city/8266-citing-several-causes-for-concern-de-blasio-presents-still-growing-budget-plan-of-92-2-billion may bill de blasio fiscal 20

Mayor de Blasio presents his budget (photo: Ed Reed/Mayoral Photography Office)


When Mayor Bill de Blasio presented his preliminary budget proposal last year, he issued solemn warnings about the threats posed by cuts in the state budget and from federal maneuvers that could mean fewer resources for the city. On Thursday, de Blasio repeated that message, but in more dire terms, as he unveiled a $92.2 billion spending proposal for the 2020 fiscal year that starts July 1.

While the plan calls for another significant annual increase in spending -- about $3 billion, or 3.4 percent, from the budget adopted last June -- the mayor also said his administration would have to make difficult decisions in the coming months, instituting a new savings program to find efficiencies in city government while ensuring that front-facing services do not suffer.

“We have some tough choices up ahead under any scenario,” de Blasio said in City Hall’s Blue Room. “We will be guided by the need to make hard choices, to find savings and then when we have to choose, we will favor the priorities that we believe are most strategic and high impact. If a program is nobly intended but not as strategically central or not as valuable, that’s where you will find the cuts.”

The mayor’s proposal will soon become the subject of City Council hearings, and the mayor will be in Albany on Monday to testify at a state budget hearing, where he will tell legislators they must help him undo elements in Governor Andrew Cuomo’s executive budget plan, which the mayor said totaled about $600 million in proposed cuts and cost shifts to the city.

The $3 billion in increased city spending outlined in de Blasio’s preliminary budget includes about $1 billion additional spending stemming from recent contract agreements with labor unions, $632 million in added education spending, $358 million in debt service costs, $325 million in fringe benefits for city employees, $113 million in mandatory charter school spending, and $109 million to expand the city’s 3-K for all program.

Overall, the preliminary budget represents a nearly $20 billion increase since the last budget modification before de Blasio took office in 2014.  

But de Blasio cautioned of an economic recession on the horizon, the symptoms of which are already beginning to show and are forcing the city to tighten its belt. The city is projecting that personal income tax revenue would be $935 million less this fiscal year than last year, for instance, with most of the drop off in December and January revenue collections. (Similarly, Governor Andrew Cuomo announced earlier this week that the state is expecting a $2.3 billion shortfall because of lower income tax revenue. De Blasio noted that Cuomo had already looked to the city to make up state deficits before the recently-announced shortfalls.)

Along with those concerning tax receipts, de Blasio pointed to additional pressure from developments at the state and federal levels. He pointed to the proposed Cuomo cuts and cost shifts that the city may have to bear in spending on education, financial assistance and health services for needy families, and spending for at-risk youth. “These are permanent cuts...when these cuts occur in the state budget, it’s not just for one year. The money goes away, never comes back,” he said, promising to oppose them but conceding that some losses may happen despite the city’s best efforts. 

The governor's administration later sought to rebut the mayor's comments on decreased education funding. "We don't know how the City considers a $282 million school aid increase over last year a cut, and a cut from what you ‘expected’ to get is a bizarre concept," said Morris Peters, a Division of Budget spokesperson, in a statement. "The state has a formula that outlines what the funding increase will be year to year – so why the City would expect to get something higher than that is nonsensical and a pure fabrication."

The threat to the city emanating from Washington is far less certain. The federal government faces a February 15 deadline to reach a budget agreement and preempt another disruptive government shutdown. If that agreement fails, de Blasio said the state would lose about $500 million every month starting in May, with the city losing about $110 million monthly. There are the more nebulous effects of the fluctuations in the stock market, which have been partly to blame for lower city revenue, and federal trade policy.

Taking those factors into account, the mayor announced that for the first time since he took office in 2014, he would institute a PEG (Program to Eliminate the Gap), which former Mayor Michael Bloomberg employed to control agency costs. Unlike Bloomberg’s program, however, de Blasio does not plan to institute a citywide percentage-based cut in spending at all or most agencies. Instead, he said he will direct most if not all agencies to cut a collective $750 million in costs by April, including by expanding a partial hiring freeze that the city estimates has saved $448 million since it was announced in April 2017. Each agency will receive a target figure for spending cuts from the city’s Office of Management and Budget, de Blasio said.

The preliminary budget also includes $1 billion in savings across fiscal years 2019 and 2020, and $1.6 billion in savings on healthcare spending in fiscal year 2020, increasing to $1.9 billion in fiscal year 2021. Yet, notably the mayor did not dedicate additional resources to the city’s reserves, keeping them flat over last year -- they include $1 billion in the general reserve, $250 million in the capital stabilization reserve, and $4.5 billion in the Retiree Health Benefits Trust Fund. Budget watchdogs have repeatedly said that while the city has solid reserves, they are not enough, especially as de Blasio continues to increase spending, to truly weather a recession.

The mayor’s preliminary budget includes few major new investments in programs, and continues funding for those that are already underway or have been announced by the mayor in the last few months. Those include $25 million for NYC Care, which will give healthcare access to uninsured New Yorkers. The program is expected to launch in the Bronx this summer and will expand citywide by 2021 at a cost of $100 million annually, serving 600,000 people. The city also plans in next fiscal year to spend $106 million to continue funding Fair Fares (half-priced MetroCards for low-income New Yorkers); $5.3 million to speed up Crisis Intervention Training for NYPD officers; $25 million to expand 3-K for All in the Bronx and Brooklyn; and $2.7 million to increase bus speeds by 25 percent by the end of next year.

Also, for the first time ever, the city’s preliminary ten-year capital strategy reached triple digits, for a high of $104.1 billion, an increase of 8.7 percent. The city’s expense and capital budgets are calculating and presented separately. Every two years the capital strategy is re-established.  

“You’ve all heard the truism that budgets are a statement of values. That’s gonna play out in these coming months,” de Blasio said. “If we get continued good news from Washington, from Albany, from our broader economic context, we’ll have more freedom. If we get bad news, we’ll be ready to make some very tough decisions.”

In the next few weeks, the mayor’s budget proposal will be dissected in a series of City Council hearings, where officials from the administration will be called to testify. On Thursday, the Council acknowledged the city’s difficult fiscal position but indicated that it was ready for tough negotiations.

“We know there are challenges presented by the economy, as well as funding shortfalls from the state, particularly in education and social services. We will work with the Administration to get our fair share from Albany,” said Council Speaker Corey Johnson, finance committee chair Daniel Dromm, and capital budget chair Vanessa Gibson, in a joint statement. “But even while recognizing the challenges, we also know this City’s economy is strong and we will fight for a fiscally responsible plan that protects the social safety net.” They vowed to push for funding for Fair Fares, education, immigrant families, and permanent housing for those who need it. “These are our values and we will never walk away from them.”

Comptroller Scott Stringer also took note of the “warning signs” for the economy and commended the mayor for instituting a PEG, which he has called for repeatedly. “It’s past time for City agencies to seriously evaluate how effective their spending really is in achieving results for New Yorkers,” he said.

Year after year, fiscal watchdogs and rating agencies have praised the city’s responsible budgeting but have also raised alarms about spending trends that could backfire in an economic crunch. Andrew Rein, president of the nonprofit Citizens Budget Commission, reiterated some of those concerns on Thursday, noting that the budget showed “modest restraint” in increased spending.

“Much bolder action is needed to ensure the City is prepared for an economic downturn,” Rein said. “Spending growth should be limited to inflation and reserves should be increased. The PEG announced today should be developed with an eye to making operations more efficient and generating recurring savings.”

Last week, CBC recommended that the city pursue a four-part strategy of lower spending growth, greater reserves, improvements to the capital plan and strengthening the fiscal health of three major public authorities -- the New York City Housing Authority, NYC Health + Hospitals, and the Metropolitan Transportation Authority.

The mayor said his budget did not include any new funding for the MTA, funding for which is expected to be a major source of contention between de Blasio and Cuomo over the next several months.

A state budget is due by April 1, at which time the mayor and City Council will have significantly more information to work toward their next spending plan, which is due by July 1.

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by Samar Khurshid, senior reporter, Gotham Gazette
     

Read more by this writer.

Note - This article has been updated with a statement from a state Division of Budget spokesperson. 

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Citing Causes for Concern & Promising Cuts, De Blasio Presents Still-Growing Budget Plan of $92.2 Billion Thu, 07 Feb 2019 05:00:00 +0000
What's The [Data] Point? $175.2 Billion, Cuomo's Executive Budget http://www.gothamgazette.com/state/8211-what-s-the-data-point-175-2-billion-cuomo-s-executive-budget http://www.gothamgazette.com/state/8211-what-s-the-data-point-175-2-billion-cuomo-s-executive-budget whats the data point


What's The [Data] Point? Episode 62 -- $175.2 Billion, Cuomo's Executive Budget, with Andrew Rein of CBC [You can download What's The [Data] Point? wherever you get your podcasts, including on iTunes]

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$175.2 billion is the size of Governor Andrew Cuomo's Executive Budget plan for Fiscal Year 2020, unveiled earlier this week and now the basis for hearings and negotiations with the Legislature.

The New York budget is one of the largest government budgets in the world, and it’s poised to grow 4 percent over this year’s budget for fiscal year 2019. The Governor has included proposals for everything from congestion pricing to recreation marijuana and sports gambling legalization. Of particular note are significant spending increases on priorities such as education that are backed by a five-year extension of the income tax surcharge on millionaires. Andrew Rein, new president of Citizens Budget Commission, joined the hosts to give an initial assessment of the Governor's budget plan.

Listen to the conversation and let us know what you think: Ben Max of GG (@TweetBenMax), Maria Doulis of CBC (@MariaDoulis). Listen below or download wherever you get your podcasts!

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by Ben Max, Gotham Gazette
     

Read more by this writer.

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What's The [Data] Point? $175.2 Billion, Cuomo's Executive Budget Thu, 17 Jan 2019 05:00:00 +0000
Agenda 2019: City & State Budgets on Mostly Solid Ground, with Major Questions Looming http://www.gothamgazette.com/state/8147-agenda-2019-city-state-budgets-on-mostly-solid-ground-with-major-questions-looming http://www.gothamgazette.com/state/8147-agenda-2019-city-state-budgets-on-mostly-solid-ground-with-major-questions-looming Cuomo budget presentation

Gov. Cuomo (photo: The Governor's Office)


This is part of AGENDA 2019, a joint Gotham Gazette-City Limits project
Find the rest of the series here

New York’s economy has seen several rosy years in the decade since the Great Recession, with a run of steady growth, increasing job numbers, rising wages, and reliable tax revenue that has defied historical trends -- and led to growing city and state government budgets. But 2019 may be the peak of that economic swing as economic experts predict a long-expected slowdown to set in before 2020. New York City, the experts say, seems better equipped to weather any adverse effects of slowing growth and the state may struggle, presenting some hard choices for Democrats who will fully control state government come January and have a long list of priorities, some of which have financial costs attached.

Also complicating the fiscal pictures as the state and city levels are projected budget gaps that must be closed, looming negotiations over how to fund the next MTA capital budget plan and its tens of billions of dollars to fix the subways, and the still unclear effects of recent federal tax reforms, among other outstanding questions. The finances of New York City continue to show a rosier picture than those of the state, with the city economy essential to the state’s ability to spend more each year, though the state has grown its budget in much more limited fashion than the city under Mayor Bill de Blasio.

In January, Governor Andrew Cuomo will present his State of the State address and executive budget for the fiscal year that begins April 1. Afterward, de Blasio will respond to the governor’s budget plan -- which will set the stage for negotiations with the state Legislature, de Blasio, and others -- and release his own preliminary budget for the next city fiscal year, which will begin July 1. Once the state budget is finalized, the city will be able to take its details -- funding levels, new mandates, and more -- into account as it creates its own budget. The specifics of the annual struggle over what the state is asking or requiring of the city are to be seen, though Cuomo has already indicated he plans to seek more money for the MTA from de Blasio.

Budgets are statements of values as much as they are financial planning documents and Cuomo and de Blasio, both Democrats, face pressure each year to balance their policy priorities with fiscal restraint, as well as the demands of others, especially members of the respective legislative bodies each must negotiate with. The governor prides himself on having passed eight on-time or nearly on-time budgets with a 2 percent cap on increased spending, though he is known to manipulate the numbers to say he has stuck to that limit even though some years he has not. De Blasio boasts of record amounts of savings, though watchdogs regularly say that he is not socking away enough given the extended economic boom while he is spending too much, especially in recurring costs like through a significant expansion of the city workforce.

The agreed upon state budget was more than $168 billion for the current 2019 fiscal year, with savings that are far too minimal according to every expert. And the mayor’s administration, though praised by fiscal monitors for its responsible financial planning, has overseen ballooning expenditures, passing a nearly $90 billion budget for fiscal 2019 -- it was $72.7 in the final year of the Bloomberg administration.

But New York City revenue is largely based on property taxes, which would remain relatively stable even in the event of an economic slowdown. The state on the other hand is far more vulnerable since personal income tax and sales tax contribute a bulk to state revenue.

Barring any unforeseen circumstances, the current economic expansion, the second-longest in the country’s history, will continue through most of 2019, bolstered by the federal tax cuts passed in 2017 (even if many New Yorkers’ tax burdens increase due to the new cap on state and local deductibles). It should allow both the state and the city to keep spending, though experts warn that both should prepare for what will happen down the line. Both the Cuomo and de Blasio administrations, along with the state Legislature and City Council, respectively, should be putting more money towards rainy day funds, fiscal experts say; particularly the state, especially as necessary infrastructure investments loom large and add to already rising debt obligations.

New York State
The state budget remains far more precariously placed in the case of a downturn, even though one isn’t expected to hit soon. The governor has reiterated in recent months that he will continue to abide by a self-imposed 2 percent limit on increased annual expenditures, which presents little wiggle room to add major spending initiatives, though it remains to be seen if the governor will employ one of his many budget maneuvers to obscure actual spending increases. For instance, the State Fiscal Year 2019 budget, which began April 1, included a provision that funnels Payroll Mobility Tax revenue directly to the MTA instead of going through the state, effectively shifting $1.5 billion out of the budget.

“Part of the problem is they’ve technically abided by it but they’ve only done that by shifting things around and reclassifying things, not necessarily through stringent cost controls,” said David Friedfel, director of state studies at Citizens Budget Commission, a nonprofit watchdog. “The more they play those tricks, the harder they will be to find in the future if that’s how they choose to close the gap.”

The New York State Division of Budget’s mid-year financial update, released in November, predicted that the state will meet its revenue projections by the end of the fiscal year. Even at the state level, budget gaps remain manageable, at about $3.1 billion for fiscal year 2020, a number that is quickly cut if the 2 percent growth is factored in.

State Comptroller Tom DiNapoli released his own financial update in November, estimating that overall tax revenues would decrease by 1.8 percent by the end of the state’s 2019 fiscal year (end of March). Though personal income tax revenues are expected to fall by 2.5 percent, business and consumption taxes are set to increase by a total of 6.5 percent, the report estimated. Tax revenues are expected to increase by 5.9 in the 2020 fiscal year and then at a lower rate, 2.4 percent in the 2021 fiscal year.

Similar to city representatives, officials in DiNapoli’s office said in a background briefing that they expect a soft landing for the economy, despite the volatility in national and international markets. They have yet to determine the full impacts of the federal tax code overhaul, which capped State and Local Tax (SALT) deductions at $10,000 annually, raising concerns that high earners facing larger tax bills would in some cases fold to out-migration pressures, leaving the state and taking their tax dollars with them. Given New York’s position as a high-tax state, even many upper middle class homeowners in expensive New York City suburbs, and in the city itself, will be facing increased tax burdens, though it is not immediately clear that these factors will lead to a significant increase in the number of higher earners leaving the state. New York has consistently seen out-migration each year and has lost a net of 1 million residents since 2010, according to The Empire Center, a think tank. A report issued by the center in March suggested that the state should undertake several reforms to encourage the economic competitiveness which could help reverse that trend.

The state took measures to decouple state tax provisions from the federal tax code, including decoupling from the SALT limit to prevent higher state taxes, and changes to the child tax credit and the single filer deduction. The state also created two new programs -- the Employer Compensation Expense Program and the State Charitable Gifts Trust Fund -- in an effort to limit state taxpayers’ exposure to federal tax changes, but neither program appears to have caught on in any significant way. Officials in the state comptroller’s office said the impacts of the SALT deduction in particular wouldn’t be evident until during next fiscal year, particularly if it encourages people to move out of state.

Other risks in federal funding to the state seen in recent years -- Republican proposals to repeal the Affordable Care Act and make drastic cuts to Medicaid -- have also mitigated, the officials said, since those proposals have failed to come to fruition. But federal funding does remain uncertain as Congress is in the middle of negotiating the current federal budget with President Donald Trump, who has threatened a government shutdown if Congress does not approve funding for a wall along the southern border that he had promised Mexico would pay for. The ballooning federal deficit incurred from the Trump-led tax cuts have also increased pressure on federal spending, which could trickle down to the aid that New York receives for transportation, health care, and education, among other things.

“The state is in decent financial position but not when you consider the fact that we are nine years or so into an economic expansion,” CBC’s Friedfel said. “The state has been gifted with $12 billion in financial settlements and some additional revenues yet the state’s reserves are not where they should be or could be. They haven’t been added to in about four years. And liabilities are still out there.”

As Friedfel noted, the state’s rainy day funds stand at only about $2 billion, a pittance when looked at in the context of a downturn. In the case of a recession, Friedfel estimated, the state could face up to $50 billion in combined losses over a four-year period. “California is doing a very good job on their reserves. They’re gonna have close to 10 percent of state operating spending in their reserves, which is really what New York should be aiming for,” he said. “Instead of $2 billion, we should be closer to $10 billion.”

As with the city, the state’s debt also continues to rise, particularly with the governor having launched an ambitious infrastructure program that includes modernizing existing facilities and building new ones across the state, including bridges, airports and bus systems. The state’s debt service payments for fiscal year 2019 stood at $5.5 billion and are projected to rise to $6.6 billion in 2020. New York currently ranks second-highest in the country, behind California, in outstanding debt.

Year after year, DiNapoli has waved a red flag over the state’s debt obligations and officials in his office are keeping a close eye on whether those will increase in the upcoming year. There will be particularly pressing needs -- the MTA, NYCHA -- where the state will have to work with the city to fund large capital improvements. The current 2015-2019 MTA capital plan remains underfunded and the Fast Forward Plan, proposed by New York City Transit President Andy Byford to modernize the city’s subway and bus systems, may cost nearly $40 billion, with no plan proposed to pay for it in its entirety. A congestion pricing program for New York City has been embraced by the governor and many in the state Legislature as a funding stream, but even if implemented quickly and without carve-outs it would fall far short of meeting the goal.

“That’s one of the biggest questions,” said Gelinas from the Manhattan Institute, “especially if the economy continues to do well. How much does Governor Cuomo go after the city for MTA funding and in multiple billions of dollars...and does that cut into the city’s other priorities?”

IBO’s Lowenstein also echoed that concern. “The state has a great deal of leverage over the city and its own fiscal concerns and it would be unreasonable to expect these issues get resolved without city participation.”

Last time Cuomo and de Blasio negotiated the MTA capital plan, the governor successfully convinced the mayor to significantly increase city funds for the authority. Cuomo has repeatedly stated publicly in recent months that he will be pushing the city to pay “its fair share” for the MTA. De Blasio has called for an added tax on high-earners to provide dedicated funding for the MTA, a proposal that Cuomo has publicly mocked as fantasy on several occasions.

The state Legislature next year will also include several newly-elected Democrats who expressed support for increased education funding, per the Campaign for Fiscal Equity decision, which could add billions to the state budget. The state Board of Regents recently proposed a $2.1 billion increase in education funding for next year, which would be a significant jump from the current fiscal year’s increase.

New York already spends nearly twice the national average on per-pupil funding, said CBC’s Friedfel, but doesn’t necessarily allocate funding to the districts that need it most. CBC has argued for changing the key formula, known as Foundation Aid, noting that many wealthy districts receive it despite already spending more than the national average and more than the already-high state average by leveraging local tax dollars.

Another open question is what the state will do with about $900 million in unspent or unallocated one-time funds from Extraordinary Monetary Settlements, recovered from the financial industry in the wake of the 2008-09 market crash. Since state fiscal year 2015, the state has received nearly $11.2 billion in those settlements.

Though the governor has repeatedly said he will divert those funds to capital investments, and he mostly has, he has also used them for budget balancing purposes, DiNapoli’s office noted.

“The governor should be putting much more money of any one-time revenue sources aside for the MTA, things like court settlements or just better-than-expected revenues,” Gelinas said, noting the dire need to fund the transit agency. “We haven’t put enough of that money aside for the MTA.” Cuomo has, on the other hand, dedicated financial settlement money to his signature infrastructure projects, like the new Mario M. Cuomo Bridge.

Unlikely to impact the next state budget, but certainly on the negotiating table in the new legislative year, is the push to revolutionize how New York provides health insurance and health care. Several legislators, long-time and newly elected, are pushing for the New York Health Act, which would establish a single-payer health care system in the state and could cost nearly $140 billion in additional state expenditure by 2022, according to a RAND Corporation study. Though the act could reduce total health care spending by 3 percent by 2031, the study found. Cuomo has said he supports a single-payer system, but has insisted that it should be implemented by the federal government rather than the state, and said that he does not see it make fiscal sense for New York.

New York already has one of the largest Medicaid programs in the country, comprising a huge chunk of the state budget (education and Medicaid are the two biggest spending programs). But enrollment has been relatively flat over the last three years. If that trend continues, Friedfel said, the state could find more savings in the budget.

Friedfel also noted at least one development on the horizon that could have a significant impact on state tax revenue. “The million pound gorilla in the room is what’s gonna happen with the state’s millionaire’s tax,” Friedfel said. The tax is due to expire on December 31, 2019, and though prominent elected officials have called for extending, and even expanding, the program, CBC’s position is that it should be allowed to sunset to help with the state’s economic competitiveness and to keep high-earners from leaving because of the SALT deduction cap.

While Cuomo has overseen its repeated extension and he has dismissed calls to expand it, during the recent election cycle he was mum about what he wants to do with the current millionaire’s tax.

New York City
The city released its latest budget modification in November, revising spending up by $1.4 billion, for a total of $90.56 billion for the 2019 fiscal year, which ends June 30. That marks a high point for city spending, and an $18 billion increase from before de Blasio came to power in 2014. The city’s Office of Management and Budget projects a manageable $3.17 billion budget gap -- the difference between expected revenues and projected expenditures -- for the 2020 fiscal year starting July 1. OMB expects that gap to rise to $3.36 billion for fiscal year 2022, the end of the current four-year financial plan period, by when expenditures are projected to reach a whopping $99.6 billion.

As City Comptroller Scott Stringer noted in his latest financial report released on Friday, OMB tends to issue more conservative estimates of revenues in upcoming years, allowing the administration more leeway to adjust spending. Stringer’s report estimates the budget gap to be lower, about $2.6 billion in FY2019 and $2.8 billion in FY2022.  

“We’ve come out of a run of a number of years of good economic conditions and good fiscal conditions here in the city...but we’re not seeing anything in the numbers that suggests it’s going to end anytime soon,” said Ronnie Lowenstein, director of the Independent Budget Office, a nonpartisan city-funded agency.

In a background briefing, an official at Comptroller Stringer’s office acknowledged that there’s significant uncertainty, with even the Federal Reserve appearing divided about where the economy is heading. There are mixed signals in the market -- unemployment is markedly low which should lead to higher inflation, but hasn’t.

But the comptroller’s office is cautiously optimistic and no economist currently projects a recession -- though one is never out of the question -- but rather a return to a slower rate of growth by the time 2020 rolls around.

“[We’re] expecting a great deal more softness in economic growth,” said IBO’s Lowenstein. “Not a recession but a much softer U.S. economy. And as far as the local economy’s concerned, we’ve already begun to see the weakening.” She pointed to the drop in job growth over the last few months and also noted that though the job market has diversified with more jobs created outside the financial industry than before the last recession, most of the new jobs have been in lower-paying industries.

But she said that slower growth won’t create out-of-control deficits. “We’re looking at gaps that are readily manageable, of the size that we’ve managed in the past,” she said.

The official from the comptroller’s office agreed that the city has the capacity to manage outyear budget gaps, particularly with a strong budget surplus each year that has allowed the city to maintain a healthy, if not optimal, level of reserves. The de Blasio administration put away added rainy day funds in the current fiscal year, responding to demands from the City Council. The result included a total of $1.25 billion in the general reserve, $4.35 billion in the Retiree Health Benefits Trust Fund, and $250 million in the capital stabilization reserve.

The city’s budget cushion has been increasing over the years and stood at about 11.2 percent at the start of the current fiscal year, though the comptroller has urged the administration to maintain levels between 12 and 18 percent, the lower range of which would have required more than $6.3 billion to hit the upper end.

agenda19v2 aThere are of course various risks that the city must manage. One big vulnerability, according to the official from the comptroller’s office, is the size of the city’s workforce, which has added more than 30,000 workers under de Blasio.

“If you look at the November budget update...the biggest issue is the increased expected spending on labor,” said Nicole Gelinas, senior fellow at the Manhattan Institute, a think tank. She noted that the report increased the labor reserve for fiscal year 2020 by $704 million, for 2021 by nearly $1 billion and for 2022 by about $1.4 billion.

“It just shows that these labor agreements that the mayor is making with the unions are costing a little bit more money than expected,” she said. “So the basic story is if the economy keeps doing well, we can probably squeak by with balancing next year’s budget...but if the economy does fall into a recession, with the higher labor costs making these deficits a little bit bigger over the next few years, they would pose a bigger problem for the city.”

Gelinas said the city must take aggressive cost-cutting measures in labor agreements, particularly health care spending, to help avert layoffs and service cuts in the case of a recession. “Longterm, health care savings have to be much more aggressive,” she said. “The healthcare fringe benefit budget for the upcoming fiscal year will be almost $11.5 billion and it’s continuing to rise. It’s going to $12.5 billion by the end of the financial plan.”

“No mayor has ever gotten through two terms without a recession,” she added on the eve of de Blasio’s sixth year in office.

The city’s debt obligations have also been rising, owing to a massive capital program, which pays for building and maintaining the city’s infrastructure such as roads, parks, schools, and libraries.

“Debt service is one of the two big sources of growth in city spending,” said IBO’s Lowenstein, referring to the annual debt payments that are included in the city’s expense budget. “It’s debt service and healthcare, and they’re both big and they’re both growing very fast.” Debt service -- which is accounted for in the city’s annual operating budget -- is budgeted at a total of $6.8 billion for fiscal year 2019, according to the November update, and is expected to rise to $8.3 billion by fiscal year 2022.

Unlike most other municipalities, New York City’s capital program is funded entirely through borrowing, incurring massive debt that must necessarily be paid off every year, which could pose problems in the long run. “It’s less that we can’t continue to pay the debt service on the commitments that we’ve made but rather that they’re crowding out other things that the city might want to do,” Lowenstein said. “And our ability to expand those capital commitments is not unlimited. Especially in an era when interest rates are rising.”

Rising debt service also gives the mayor and City Council “less leeway to budget for other things ranging from teachers to cops to road repair,” she said.

Stringer has repeatedly raised the issue of rising debt, though it’s not yet out of control. The rule of thumb for his office is that debt service should not exceed 15 percent of tax revenues, a level it is well below currently. And the City Council has also attempted to make changes to the mismanaged capital funding process, creating a new subcommittee this year dedicated to examining the capital budget, finding ways to make it more efficient and reducing cost overruns. Upcoming City Council budget hearings may indicate whether that subcommittee and its focus are having any real impact.

But there are big items that may add significantly to the city’s capital investments and therefore create an additional debt burden. Those include funding for the beleaguered New York City Housing Authority (NYCHA) and the state-run Metropolitan Transportation Authority (MTA). In both cases, the city may have no choice but to commit billions more dollars, particularly pending the outcome of negotiations with federal officials over NYCHA and with state officials over the MTA, for which the city typically kicks in significant capital funds.

“The city may not have choices so the speed with which this occurs may be out of our hands,” Lowenstein said.

This is part of AGENDA 2019, a joint Gotham Gazette-City Limits project
Find the rest of the series here

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by Samar Khurshid, senior reporter, Gotham Gazette
     

Read more by this writer.

Note - This article has been updated to ntoe that the Capital Stabilization Reserve is $250 million, not $250 billion. 

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Agenda 2019: City & State Budgets on Mostly Solid Ground, with Major Questions Looming Sun, 16 Dec 2018 05:00:00 +0000
What's The [Data] Point? 2,268, 'Deinstitutionalization' in New York http://www.gothamgazette.com/city/8140-what-s-the-data-point-2-268-deinstitutionalization-in-new-york http://www.gothamgazette.com/city/8140-what-s-the-data-point-2-268-deinstitutionalization-in-new-york whats the data point


What's The [Data] Point? Episode 61 - 2,268, 'Deinstitutionalization' in New York, with Stephen Eide of the Manhattan Institute [You can download What's The [Data] Point? wherever you get your podcasts, including on iTunes]

wtdp stephen eide

Stephen Eide, a senior fellow at the Manhattan Institute for Policy Research, is the author of a new report about New York’s inpatient mental healthcare system, the state push toward deinstitutionalization, and what it has meant for people with serious mental illness and New York City. "Cuts to state psychiatric hospital beds has coincided, in recent years, with increasing mental illness-related pressures on the city’s homeless services and criminal justice systems," Eide argues.

Listen to the conversation and let us know what you think: Ben Max of GG (@TweetBenMax), Maria Doulis of CBC (@MariaDoulis). Listen below or download wherever you get your podcasts!

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by Ben Max, Gotham Gazette
     

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What's The [Data] Point? 2,268, 'Deinstitutionalization' in New York Thu, 13 Dec 2018 05:00:00 +0000
What's The [Data] Point? 18.6%, New York's Inequality & Social Safety Net http://www.gothamgazette.com/city/8113-what-s-the-data-point-18-6-new-york-s-inequality-social-safety-net http://www.gothamgazette.com/city/8113-what-s-the-data-point-18-6-new-york-s-inequality-social-safety-net whats the data point


What's The [Data] Point? Episode 60 -- 18.6%, Inequality and the Social Safety Net, with Greg David and Cara Eisenpress [You can download What's The [Data] Point? wherever you get your podcasts, including on iTunes]

gregdavid caraepress amazon18.6% is the poverty rate in New York City. Greg David and Cara Eisenpress, both from Crain's New York Business and the Craig Newmark Graduate School of Journalism at CUNY, discuss their recent reporting exploring New York City's safety net, how it's funded, and how it compares to other places, while showing that the city's robust safety net is made possible by the city's vast inequality and tax structure.

Listen to the conversation and let us know what you think: Ben Max of GG (@TweetBenMax), Maria Doulis of CBC (@MariaDoulis). Listen below or download wherever you get your podcasts!

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by Ben Max, Gotham Gazette
     

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What's The [Data] Point? 18.6%, New York's Inequality & Social Safety Net Fri, 30 Nov 2018 05:00:00 +0000
A Closer Look at the Tax Incentives in the Amazon Deal http://www.gothamgazette.com/state/8110-a-closer-look-at-the-tax-incentives-in-the-amazon-deal http://www.gothamgazette.com/state/8110-a-closer-look-at-the-tax-incentives-in-the-amazon-deal govcoumo realestate

Cuomo, de Blasio & an Amazon rep celebrate (photo: Kevin P. Coughlin/Governor's Office)


Amazon’s decision to put a corporate campus in Long Island City after a year-long, somewhat-public search for a host city and a series of incentives from New York City and State has drawn skepticism and outrage in Queens and beyond for a number of reasons.

Some activists and elected officials oppose the secretive process by which Amazon got its land, tax breaks and grant, others feel like the company isn’t a corporate entity the city and state should be welcoming because of labor, political and other practices. But all of the opponents to the Amazon deal seem to agree that that package of roughly $3 billion in incentives the trillion-dollar corporation is getting from New York is out of bounds, an inappropriate giveaway based on old economics, in the midst of both a strong overall city economy with low unemployment on one hand and affordable housing, public housing, and transportation crises on the other.

And while a look at the programs in question reveals that Amazon doesn’t appear to be getting tax incentives or breaks that wouldn’t be available to other large employers who set up shop in New York, economists and budget watchdogs suggest the outrage over the tax break package Amazon is getting presents an opportunity to reexamine New York’s use of subsidies to entice companies. (Note: there is one discretionary capital grant in the deal for roughly $500 million that is separate from the $2.5 billion in city and state tax incentives.)

Where does the money come from?
The three largest incentives Amazon is getting from New York come from three as-of-right (that is, incentives available to any company that meets the requirements) programs: the Excelsior Jobs Credit Tax Program, the Relocation and Expansion Assistance Program (REAP) and the Industrial and Commercial Abatement Program (ICAP). The latter two tax breaks are incentives established by the state government that affect the city tax rolls, while the former program affects state tax rolls.

“They’re state created, like 421-a,” John Kaehny, the Executive Director of Reinvent Albany, told Gotham Gazette about ICAP and REAP, with reference to the tax break known as 421-a that seeks to incent housing development with some affordability included. “So the New York City Department of Finance administers them, but they have to, they're made to by state law. Basically it's money that the state is directing be taken out of the city's tax revenue.”

Along with their as-of-right nature, all three programs require a company actually delivers jobs in order to take advantage of the breaks. In that sense, Amazon is no different from a hotel company or mobile phone infrastructure company or real estate company in applying for the programs. In the case of the Excelsior program, Amazon is taking advantage of a refundable tax credit equal to 6.85 percent of the total wages per new full-time job they create, and a capital investment credit equal to 2 percent of a company’s total qualified investments that result in new jobs.

For the city tax breaks, ICAP is a tax abatement program that may last up to 25 years, available to companies who undertake new commercial construction in areas outside of some exempted sections of Manhattan. It appears Amazon will be eligible for a 15-year ICAP that begins to decline in year 12. REAP is a per-job tax credit in which companies from either outside New York City or below 96th Street in Manhattan get a $3,000 per employee credit for 12 years for each employee that moves into the new office outside the REAP area.

In addition to the above programs, Amazon is also getting a cash grant from the state called an Empire State Development Capital Grant that’s potentially worth $505 million and is supposed to help defray some of the costs from building the new corporate campus. And because New York State is taking over the land where the office will be located and making it tax-exempt, Amazon will make payments in lieu of taxes (PILOTs) that the city has said will be equal to the property tax bill the company would pay on the land otherwise. Half of the money from the PILOT will go to the city’s general fund, and half of it will go towards infrastructure improvements around Long Island City.

All told, the tax breaks from the jobs credit, ICAP and REAP and the capital grant could wind up adding up to $3 billion in incentives to Amazon, if the company delivers the 25,000 jobs it’s promised over the course of 10 years.

What’s the problem exactly?
In his media appearances and statements to defend the incentive package, Governor Cuomo has suggested that these kinds of tax breaks are just the cost of doing business in America. But some economists, like James Parrott, the Director of Economic and Fiscal Policies at the Center for New York Affairs, say the programs are working off of a somewhat dated economic model, especially since he found that the city gave up almost $6 billion in tax revenue in Fiscal Year 2018 thanks to a stew of incentive programs like ICAP and REAP.

The predecessors to ICAP and REAP arrived in “a different historical economic context, coming on the heels of the 1970s when there was a lot of corporate headquarters movement out of New York City,” Parrott told Gotham Gazette. “With the loss of 600,000 jobs between 1973 and 1979, it was a really difficult economic period for the city. So in the 1980s the city put in place, and ramped up its commitment to subsidize corporations to stay in New York City, to relocate to New York City and to add employment.” But these days, Parrott says the city’s economy is healthy enough to function without massive incentives.

“We're now at a point where the total employment level in New York City is 4.3 million, almost 700,000 to 800,000 higher than it's ever been before,” he said. “Arguably New York City doesn't need to do anything to subsidize new economic development investments, given the very rapid employment growth we've had in recent years.”

Though he continues to stress that his administration refuses cash grants to companies, de Blasio also continues to defend the Amazon deal, including the use of the subsidies involved, again doing both during his weekly NY1 appearance on Monday. “[W[hat we need to move towards is a society where it’s not about cities competing” over companies, the mayor told host Errol Louis. “The specific incentives were automatic and part of state law,” was also part of his defense, and he suggested that if people want to see an end to the as-of-right programs, people should debate that in the future.

Parrott said he could understand the use of the Excelsior programs upstate, given the region’s struggling economy and what he said was a better oversight process than the program’s predecessor, the extremely troubled and criticized Empire Zone program. But the entire program also has an annual cap ($183 million in 2019 and steadily decreasing to $36 million in 2024 per the Citizens Budget Commission) that will have to be raised by the state Legislature if Amazon creates all of the jobs it’s promised, leaving Parrott to wonder, “why on Earth, if you have these limited tax credit resources, you spend those in New York City? The one place in the state that that least needs economic development subsidies?”

Kaehny sees some self-promotion as a motivating factor in giving state money to Amazon, specifically on the part of the governor. “Cuomo wants to create a narrative that shows that he had some agency, that he was the one that closed this deal with Amazon, that he did something that caused this deal to happen,” Kaehny said. “If Amazon says, ‘Well we don't care about the subsidies at all, we really just wanted New York City and this terrific dynamic place with a huge job market of talented people, the kind that we want working for Amazon and we don't really need subsidies,’ well then what's Cuomo’s role in landing the deal?”

It’s an especially pertinent question according to Kaehny and others who insist that Amazon was probably going to come to New York anyway. Both before and after identifying Long Island City as one of its landing spots, Amazon officials said that the ease of recruiting tech talent was the key ingredient in their search. A request for information that Amazon sent to Somerville, Massachusetts included one question about the incentive package the city could offer, but multiple questions about quality of life and the area’s working populations.

That in turn raises the issue of where New York should actually invest, in businesses or in infrastructure, according to Jonas Shaende, the chief economist at the Fiscal Policy Institute. “Should we just give [companies] tax subsidies outright or should we invest in what makes New York so attractive and so vibrant and so great? In the things that that are the real factors in in their decision making, things like the transportation system, the affordable housing the access to to labor, to education facilities those kinds of things.”

Shaende wasn’t alone in that line of thinking, as redirecting state subsidies from corporations towards local infrastructure was a centerpiece of the Marc Molinaro and Stephanie Miner campaigns for governor.

It’s real money
Another one of the governor’s defenses of the incentive package is that New York isn’t actually paying Amazon anything at all, but rather is letting the company pay slightly less in taxes than it would otherwise. In his “op-ed” published to the governor’s official website, Cuomo writes:

“Our proposal offered that, when and if those revenues are realized, the government would effectively reduce their $1 billion payment by about $100 million for a net to New York of approximately $900 million. New York doesn't give Amazon $100 million. Amazon gives New York $900 million.”

It’s a rhetorical sleight of hand that doesn’t pass muster with any expert Gotham Gazette spoke to. “I mean, that's just fundamentally wrong because essentially all economists left, right, wherever agree that a tax abatement or tax credit is a form of expenditure by government and is rightly called a subsidy,” Kaehny said, pointing out that the Governmental Accounting Standards Board (which sets the rules for financial reporting by government entities) now has a rule that counts subsidies as expenditures.

And in the case of the capital grant Amazon is getting, the cash is very much real. “It's clearly a case where it's a budget choice [Cuomo's] making, here's $500 million in taxpayer resources we're going to give to Amazon rather than use it for something else,” Parrott said.

“[Cuomo] happens to have a reserve of resources, out of which it’s very likely that this money is going to come,” Parrott said, talking about New York settlements reached with banks who are alleged to have committed mortgage securities and other financial fraud. “Although there wasn't anything said in the memorandum of understanding with [Empire State Development] and the state and the city that said where the capital monies are going to come from, my guess is it will come out of the reserve,” he said. Cuomo has indicated he does not need legislative approval for the capital grant, but legislators, especially those opposing the deal like Queens state Senator Michael Gianaris, are exploring all their options to block or change the deal.

The Citizens Budget Commission was measured in its critique of the grant, comparing the reimbursement-style payments as better than upfront costs the state has taken on with, for instance, the $750 million solar panel plant it built in Buffalo. But CBC still criticized the ongoing lack of oversight for where the money would come from. The grant has also been criticized in multiple corners as a sop to Cuomo-friendly construction unions, with critics charging the state is essentially paying Amazon to use union labor.

And the subsidies also open New York up to the double whammy of even more companies asking for the kinds of tax breaks Amazon is set to receive while at the same time trying to provide services and pay for them in a state budget operating under the governor’s self-imposed 2 percent cap on annual spending increases.

“It’s not a fiscally responsible way of running government,” Shaende said. “It could be potentially highly problematic for the state, because the state still relies on taxes. And we have the 2 percent spending growth cap, we have all sorts of measures that that the governor adopted to show that he's running a very fiscally responsible shop. He saves money, let's say, by cutting services, by finding efficiencies, in joint services between municipalities. So he saves, you know, a couple of nickels here a couple of dimes over there, and then he just splurges like this.”

Could this spur change?
As lawmakers scramble to find a way to stop or change Amazon’s incentive package, there’s at least some hope among reformers that the publicity surrounding the deal can lead to a change in how the state and city use tax incentives. The incentives all going towards one company has already brought more attention to the ways New York uses them than their use for the Hudson Yards development, Parrott said, despite the fact that “the total cost of the Hudson Yards tax breaks rival the amount of the city and state subsidy to Amazon.”

The surrounding outrage may also give new life to the proposed subsidy tracker known as the “Database of Deals,” an idea that Reinvent Albany’s Alex Camarda pointed out “is not rocket science” in Assembly testimony for more accountability in the state’s economic development funds last year. It is a transparency measure Comptroller Tom DiNapoli has called for but Cuomo has opposed; it passed the Republican-led state Senate earlier this year, but was not given a vote in the Democrat-led Assembly.

According to Shonede, the database not only could provide transparency to what’s going on in the state, but a better template for future spending.

“As a community of experts, we need to stress some basic accountability, how many jobs we get per dollar spent, and what kind of jobs they are,” Shoende told Gotham Gazette. “And if we do that, in a consistent and serious way, a basic accounting of these efforts, it’s going to be obvious that the best way to improve the situation with income inequality, and lack of good jobs in vulnerable communities and improving the business climate have to do with what the traditional role of the government is supposed to be. And that is making sure that people are safe, that they are well prepared for the market, and that the infrastructure is such that it minimizes the business costs for the businesses that you see operate in the neighborhoods,” he said.

And so in his own way, despite resisting intensive oversight of the state’s economic development initiatives, the governor may have inadvertently dragged the state’s subsidy programs further towards daylight. “This is kind of a like peeling the onion of Albany dysfunction and scurviness in a microcosm, this deal,” said Kaehny. “Because there's all this stuff baked in here that's been going on for a long time time. But it's like for the first time people in New York City were like ‘Oh s***,’ but reality is they've been doing this for many, many years.”

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by Dave Colon, Gotham Gazette
     

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Note: this article has been updated with more clear description of Amazon's eligibility for ICAP.

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A Closer Look at the Tax Incentives in the Amazon Deal Wed, 28 Nov 2018 05:00:00 +0000
What's the [DATA] Point? 1981, New York's Property Tax System http://www.gothamgazette.com/state/8081-what-s-the-data-point-1981 http://www.gothamgazette.com/state/8081-what-s-the-data-point-1981 whats the data point


What's The [Data] Point? Episode 59 - 1981 [You can download What's The [Data] Point? wherever you get your podcasts, including on iTunes]

tempsnip

The data point for today is 1981, the year in which the State Legislature enacted S7000A, the landmark bill that formalized the current property tax system for New York City. A response to the Hellerstein case, which found the system was in violation of State law, S7000A essentially codified the status quo.

In doing so, it established a system of property classification, fractional assessments, caps, phase-ins, and class shares that is still with us 37 years later. These structural features and statutory requirements are the root of the system’s inequities and complexities. A home worth $500,000 can face the same tax bill as a home worth $1.5 million, while the value of a condominium unit, according to the City, is a fraction of its sale price. In fact, some buildings have values that are below the sale price of individual units. And commercial and rental property faces a higher average property tax burden than 1-, 2- and 3-family homes.

These inequities and problems have led to repeated calls for reform, including pending litigation. This past May, Mayor de Blasio and Speaker Johnson formed the Advisory Commission on Property Tax Reform. In September, the Citizens Budget Commission, the Regional Plan Association, and NYC Robert Wagner School of Public Service held a panel to discuss the problem, inequities and potential reforms

Listen to the conversation and let us know what you think: Ben Max of GG (@TweetBenMax), Maria Doulis of CBC (@MariaDoulis). Listen below or download wherever you get your podcasts!

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by Ben Max, Gotham Gazette
     

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What's the [DATA] Point? 1981, New York's Property Tax System Sat, 17 Nov 2018 05:00:00 +0000
What's the [DATA] Point? 3, with Cesar Perales, Charter Commission Chair http://www.gothamgazette.com/city/8035-what-s-the-data-point-3-with-cesar-perales-charter-commission-chair http://www.gothamgazette.com/city/8035-what-s-the-data-point-3-with-cesar-perales-charter-commission-chair whats the data point


What's The [Data] Point? Episode 58 -- 3, Cesar Perales, chair of the mayor’s 2018 charter revision commission [You can download What's The [Data] Point? wherever you get your podcasts, including on iTunes]

cesarpicCesar Perales, chair of Mayor Bill de Blasio's 2018 Charter Revision Commission, joined the podcast to discuss the commission's work and the three ballot proposals it put forth that go before voters on Election Day: Tuesday, November 6, which deal with campaign finance reform, creating a civic engagement commission, and term limits for community board members, among other details.

Listen to the conversation and let us know what you think: Ben Max of GG (@TweetBenMax), Maria Doulis of CBC (@MariaDoulis). Listen below or download wherever you get your podcasts!

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by Ben Max, Gotham Gazette
     

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What's the [DATA] Point? 3, with Cesar Perales, Charter Commission Chair Thu, 01 Nov 2018 04:00:00 +0000
What's the [DATA] Point? 8, with David Friedfel and Patrick Orecki http://www.gothamgazette.com/state/8016-what-s-the-data-point-8-with-david-friedfel-and-patrick-orecki http://www.gothamgazette.com/state/8016-what-s-the-data-point-8-with-david-friedfel-and-patrick-orecki whats the data point


What's The [Data] Point? Episode 57 -- 8, David Friedfel and Patrick Orecki [You can download What's The [Data] Point? wherever you get your podcasts, including on iTunes]

andrew marcCitizens Budget Commission experts David Friedfel and Patrick Orecki joined the podcast to discuss their recent in-depth report on Governor Andrew Cuomo's two-term record and how the debate between Cuomo and Republican challenger Marc Molinaro touched (and didn't) on elements of that record.

Listen to the conversation and let us know what you think: Ben Max of GG (@TweetBenMax), Maria Doulis of CBC (@MariaDoulis). Listen below or download wherever you get your podcasts!

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by Ben Max, Gotham Gazette
     

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What's the [DATA] Point? 8, with David Friedfel and Patrick Orecki Wed, 24 Oct 2018 04:00:00 +0000