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'This is Going to Change Everything': How the American Rescue Plan Will Impact New York City

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Mayor de Blasio & Senator Schumer (photo: Michael Appleton/Mayor's Office)

With the passage of the American Rescue Plan -- a $1.9 trillion federal relief package in response to the fallout from COVID-19 -- Washington lawmakers are infusing state and local economies with billions of dollars intended to support everything from emergency pandemic responses to poverty reduction. New York is slated to receive an estimated $100 billion for government budgets, vaccination efforts and other services, schools, businesses, individuals and families, and more — an influx of funds that experts in a number of sectors say will be transformative, especially if used strategically.

"Help is on the way," said Senate Majority Leader Chuck Schumer, New York's senior senator and a Brooklynite, in a speech from the U.S. Capitol on March 10 after Congress passed the legislation and sent it to President Joe Biden for his signature. "This is one of the most consequential pieces of legislation we have passed in decades."

Two days later, Mayor Bill de Blasio called it "the single biggest shot in the arm for the American people since the New Deal." "This is going to change everything. This is going to make recovery possible. This is the bottom line," de Blasio said in a press briefing the morning after Biden signed the American Rescue Plan into law.

Among other sectors, the massive aid program is a needed boon for the New York City and State governments, which face billions in revenue shortfalls, due in part to contractions in signature industries like real estate, dining, tourism, and the arts. Unemployment skyrocketed last year amid widespread shutdowns, and while it has come down some, it is still exceptionally high, at about 8.8% statewide in January, though that likely does not account for the full shrinking of the workforce. Along with job losses, many thousands of New Yorkers face the threat of eviction, a hanging blade held up by temporary state and federal moratoriums.

Experts say the federal aid, large as it is, will need to be used flexibly and smartly to provide immediate aid to individuals, spur economic growth, and shore up New York's fiscal future. But the sheer size and scale of the American Rescue Plan is undoubtedly set to give a significant boost to New Yorkers and New York City.

 The question is exactly how massive of an impact the package will have and whether its potential can be maximized to induce a strong, sustained, and equitable recovery — including in conjunction with upcoming New York State and City budgets, due April 1 and July 1, respectively, and policy-making. The federal stimulus is forecasted to drastically reduce unemployment and poverty; prevent evictions, foreclosures, small business closures, private and public sector layoffs; shore up colleges and universities; keep the subways running; and more.

"It basically fills any gap for the next two years that the city or state were concerned about in terms of both covid-related expenses and gaps in revenues and extra supplies for everything from education, broadband, small business, Broadway," said Kathryn Wylde, who heads the Partnership for New York City, a group representing big businesses. "So it's a very rich plan."

At Stake for New York City and State
The American Rescue Plan, the sixth stimulus package enacted since the coronavirus seized the nation in March 2020, sends $23.8 billion directly to state and local governments in New York, with roughly $12.6 billion going to the state (below the $15 billion Governor Andrew Cuomo has sought) and $6.1 billion to New York City, which de Blasio has celebrated.

There is also over $7 billion for transit in New York, including $6.5 billion to the MTA, and $2.7 billion in Medicaid increases. Grants for restaurant relief total $28.6 billion on top of $15 billion to other ailing small businesses, and $1.25 billion for independent performing arts venues. Schools K-12 will receive $9 billion statewide, with another $2.6 to higher education.

"It is the investment our economy needs right now. It also puts us on stable ground to avoid harmful cuts," said State Comptroller Thomas DiNapoli in a statement after the package had passed the House of Representatives on March 10. "The state and city must now use this aid as a bridge to put their finances on sustainable fiscal paths, to be prepared once this emergency federal relief ends."

The package also includes poverty reduction mechanisms that advocates lauded as the most robust in generations for individuals and families. The centerpieces are enhanced unemployment benefits, direct checks to individuals and families, child tax credits, rental and mortgage relief, and nutrition assistance -- totalling over $50 billion for New Yorkers.

“The American Rescue Plan will bring critical relief for millions of New Yorkers who have struggled throughout the pandemic," said Emily Miles, chief program and policy officer at FPWA, an anti-poverty group. "The tax credit expansions alone will bring thousands of New Yorkers above the federal poverty threshold by allowing them to hold on to their hard-earned dollars, and should be made permanent."

A recent Urban Institute report found the annual U.S. poverty rate in 2021 would be lowered by more than a third by the provisions, from 13.7% projected in December to 8.7%. The analysis found the package would reduce racial disparities in the poverty rate by cutting poverty among Black people by 42% and among Hispanic people by 39%, along with a 34% reduction for white people. In New York City, where the poverty rate was roughly 20% before the pandemic hit, the American Rescue Plan is expected to alter the picture significantly, at least temporarily.

"It is a decisive and transformative intervention on behalf of all Americans that will address the particular challenges confronting Black America, which the data has revealed have been disproportionately and adversely impacted by both the public health aspect of the crisis and the economic aspect of the crisis," said U.S. Rep. Hakeem Jeffries, who represents New York's 8th Congressional District of Brooklyn and Queens and Chairs the House Democratic Caucus, in a Tuesday press call.

"Keeping families out of poverty means keeping them out of stress and it improves their social determinants for health and the other things that mean a lot for the wellbeing of families and children," said Mary Jane Dessables, director of information at the Council of Family and Child Caring Agencies.

Alleviating financial stress for hundreds of thousands of New Yorkers will translate to local spending and will have "a synergistic effect," on the economy, Dessables said. "If you can have your basics paid for you can go on to do the other higher order things of life. You can focus more on education, you can focus more on playing with your kids when you're not having to manage three part-time jobs to make ends meet. It's really a domino effect in many different ways."

The aid will help tens of thousands of tenants pay back rent and rescue the budgets of many small businesses -- including their payrolls. The help for the Metropolitan Transportation Authority (MTA), a massive employer and artery for the regional economy, will avoid services cuts and layoffs, creating additional knock-on effects for the larger economy, especially as more people return to commuting into Manhattan and around the five boroughs. For millions more statewide, the stimulus checks will provide disposable income for people earning up to $75,000 annually at the same time many businesses will be reopening.

Doug Turetsky, chief of staff at the city's Independent Budget Office (IBO), believes the American Rescue Plan, with its direct aid to New York City government, will help the city's overall budget outlook, "as well as shoring up sagging [sales] tax revenues by get ting more money into the hands of low- and middle-income residents."

"The bill also provides substantial help to the MTA, a critical part of ensuring the city’s rebound," he wrote in an email to Gotham Gazette, when asked what was at stake for New York.

Wylde said public spending "will significantly accelerate the economic activity and support small businesses, performing arts -- those areas."

"It definitely fills a gap," she said. But there are questions of whether the huge surge of cash will spur an economic boom, or even trigger inflation, "and that's just hard to know."

"It certainly should substantially reduce the threat of eviction protections disappearing and of back rent, and it should affect the food crisis in a substantial way," Wylde added. "So a lot of the covid-related crises for small business and low-wage workers will be mitigated by the plan."

In terms of inflation, "there might be very short-term price blips here and there," said New School economist James Parrott, in an interview, "but nobody that I respect as an economist thinks that this is going to lead to sustained inflation." The Federal Reserve released projections Wednesday that the national economy would grow at a rate of 6.5% this year, up more than two points from forecasts in December. The Fed predicts the inflation rate will hit 2.4% by the end of the year, up from an 1.8% projection in December, and will drop back down to 2% by the end of 2022.

Democrats in Congress are now pushing to make permanent some of the temporary poverty-reduction measures, like the child tax credit, nutrition and work benefits. New York's short-term position, even before the latest federal stimulus, has been better than forecasted and experts have been more concerned with how the stimulus will be used to protect against budget shortfalls two years out and beyond.

The IBO previously estimated the city will be going into next fiscal year with a $3.6 billion surplus and $500 million the following year, based on economic and revenue forecasts and the mayor's preliminary budget. The projections did not account for new stimulus money, including the $6.1 billion the city government is receiving directly, or a recent increase in FEMA reimbursements totalling roughly $1 billion that the mayor announced was quickly allowing him to reinstate planned budget cuts.

"Whether crunch turns to crisis really depends on the degree to which the pandemic fosters structural changes in the local economy," wrote Turetsky.

The pandemic has altered the trajectory of the city's economy with some industries suffering while others thrive, though the long-term trends are not yet clear. With the expansion of telework and the shuttering of so much of the hospitality industry, U.S. Bureau of Labor Statistics modelling shows nationwide demand for hotels and restaurants could decrease between 7 and 12% from 2019 to 2029, with an up to 10% decrease for construction, retail, and transportation. Conversely, the crisis will likely continue to spur growth in health care and information technology sectors.

"We need to recognize which jobs have been permanently lost, identify those workers, start retraining those workers for jobs that will exist when the economy reopens," said Parrott. "This is a scale of emergency labor market repair that New York City hasn't faced since 1945."

In New York City, there were 635,000 fewer salaried positions in January 2021 compared to January 2020, with an additional 80,000 to 100,000 independent contractor jobs lost, according to Parrott.

He argued the city should be using a portion of federal funds to provide wage subsidies to get New Yorkers back to work while also supporting business. Officials should also be looking at job creation programs, especially in growing industries like public health. "That should be obligatory for the city, I don't think that's on the table right now -- needs to be," Parrott said.

De Blasio has centered job creation in the public health sector as part of his "Recovery for All" agenda announced in his State of the City address in January, though it is unclear how new stimulus funds will be leveraged for the effort. The agenda includes hiring for the mass vaccination rollout to help restore 400,000 jobs by the end of the year; creating a Pandemic Response Lab and Institute along with 25,000 new lab and office jobs; 4,000 jobs for a Public Health Corp, modeled on the community outreach of the city's test and trace program; and creating a health-care career hub at Medgar Evers College, a historically Black college, in Brooklyn.

The new federal package broadens eligibility for the Payroll Protection Program, which provides loans that can turn into grants to businesses to maintain their labor force.

Wylde, of the Partnership for New York City, said the city should use federal funds to leverage private investment in order to spread relief out over the next four or more years.

"For example, if you take the proposals for hotel conversion to supportive housing, that would be a combination of public and private money, not just 100% federal dollars," she said in an interview.

Wylde is concerned about tax increases included in current state budget proposals because the federal package contains a "maintenance of effort" provision where states and localities must keep taxes steady -- an instrument aimed at Republican-led states to keep them from using federal money to fund tax reductions. "They are increasing the taxes without knowing the [economic] impact," she said of New York state legislators pushing for those revenues. The state's next fiscal year begins April 1 and tax increases on the wealthy and corporations are among the proposals being negotiated between Cuomo and his fellow Democrats who control both houses of the Legislature.

While much remains uncertain about how federal money will be distributed now and in the so-called out-years, the bill will help plug the state's projected four-year $39 billion budget gap, which appears to be far larger than reality at this point, and stave off cuts at the city and state levels.

"The stimulus bill will also help alleviate one immediate threat to the city’s finances—with the state getting more than $12 billion it is less likely Albany will push its own fiscal problems down to City Hall, something it has done repeatedly," said Turetsky of the IBO. The final word on that issue will come once a new state budget is adopted.

Anti-Poverty Measures
The billions in anti-poverty measures have been lauded as historic, but community advocates say it still leaves holes in the social safety net.

The American Rescue Plan extends unemployment insurance enhancements under the March 2020 CARES Act through September of this year and provides tax relief for workers making less than $150,000 a year. Individuals making up to $75,000 a year will receive stimulus checks of the full $1,400 -- an amount designed to add to the $600 approved in December in the last covid relief deal under President Donald Trump to make a total of $2,000. Over $1 billion has been allocated to emergency rental assistance and about half that for mortgage relief. More than $1 billion will go to enhanced nutrition assistance and food stamps statewide.

Schumer, estimates the added unemployment benefits will total $21.7 billion in New York. Stimulus checks will reach a total of 9 million households statewide, totalling over $22 billion, according to Schumer. Homeless New Yorkers, who number close to 80,000 across the five boroughs, are also eligible to receive checks, though getting them can be difficult without a tax filing and permanent address.

In New York City, the IBO estimates 3.1 million taxpayers will receive a full check and another 78,000 will get partial payments, based on its analysis of 2019 tax filings, which does not account for income lost during the height of the pandemic.

Low-income families can receive up to $300 per month in additional Child Tax Credit, amounting to over $7 billion statewide, according to Schumer's office.

New York City Comptroller Scott Stringer estimates 76% of children under 18 live in households that would benefit from the expanded Child Tax Credit citywide, based on Census Bureau data from 2019. The neighborhoods with the most children in eligible households are in Brooklyn (Borough Park and East New York), The Bronx (Belmont, Fordham, and Highbridge), and Queens (Jamaica).

"These bold tax policy initiatives will have a transformative impact on the country’s ability to eradicate poverty, as they dramatically lift household incomes and reduce child poverty, and they must be made permanent," said Jennifer March, executive director of Citizens’ Committee for Children of New York, in a statement Thursday.

But most of the benefits leave out undocumented immigrants and do not go far enough to protect renters from eviction, advocates say.

"Undocumented immigrants and workers were still excluded from receiving payments even though we know that these are the folks in dire need and also who have put their bodies on the line for the last year working in essential jobs," said Anu Joshi, vice president of policy at the New York Immigration Coalition.

A major victory for immigration advocates was the inclusion of children in mixed-status families -- those with Social Security numbers but with undocumented parents -- to be eligible for direct stimulus payments. The extension of unemployment and gig economy benefits will also have an impact on New York's immigrant communities but the package did not include people who filed taxes with what is known as an Individual Tax ID Number, used in lieu of a Social Security number, which leaves out undocumented immigrants.

The New York Immigration Coalition and others are pushing the State Legislature and Governor Cuomo to include a fund for excluded workers, like undocumented immigrants and the recently incarcerated, in the state budget due April 1. The Legislature's one-house budget bills include $2.1 billion for the fund, which was not part of Cuomo's executive budget plan, but a new report from the Fiscal Policy Institute estimates the state would need $3.5 billion to equal the minimum benefits other workers have gotten.

And even for those who will be receiving aid, advocates want this effort at relief and poverty-reduction to be an initial move followed by others. ”Inching families above the federal poverty threshold--$26,500 annually for a family of four—is an important first step, but still leaves too many unable to afford their basic needs,” said Miles of FPWA. “FPWA encourages members of Congress to build upon the stimulus bill’s provisions, and bring their boldest anti-poverty ideas to the table as they begin to draft the next budget.”

There is also the connected matter of growing "rent debt," which groups like the Association for Neighborhood Housing Development (ANHD) say foreshadows an impending eviction crisis even with direct federal aid to struggling households. ANHD says relief provided so far has been "insufficient" to address the debt accumulating under the yearlong eviction moratorium.

"The expectation that the covid crisis will end, people will get jobs again and now be able to pay that rent back is ludicrous," said Lucy Block, a policy analyst at ANHD and author of a recent report on pandemic rent debt, in an interview. "If you don't get that relief, they are out on the street. What else can you do if you owe your landlord $14,000?"

ANHD released an analysis Wednesday showing that 222,135 tenants across the state have active court cases -- cases that were paused at the beginning of the outbreak and ones filed since. Since March 2020, landlords have been pursuing eviction proceedings 3.6 times faster in the zip codes with the highest covid death rates, predominantly communities color, compared with neighborhoods with the lowest covid death rates. The state eviction moratorium is due to end May 1; the federal one ends at the end of March.

Based on a November survey, the consulting firm STOUT estimated New York State's rent shortfall would be between $1.3 and 2.2 billion by January 2021. New York City renters are likely facing more than $2 billion in rent debt, according to the Community Housing Improvement Program, an association of rent stabilized property owners. Nationwide, the burden has been disproportionately felt by Black communities, with 38% of Black households struggling to pay their rent or mortgage between November and February, compared with 19% of white households.

The federal stimulus package passed last December included $1.3 billion for rental assistance for New Yorkers, which has yet to be distributed, and the new package includes roughly $1 billion more. Tens of thousands of tenants have been filing for hardship protections.

"ANHD believes it is really important that state legislators get the details right,” said ANHD spokesperson Melanie Breault, in an email to Gotham Gazette, “and make sure the households that are most economically impacted, most impacted from COVID, and are having evictions filed against them most often are prioritized.”

by Ethan Geringer-Sameth, reporter, Gotham Gazette

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