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At First Hearing on Mayor's Preliminary Budget, City Council Takes Aim at Agency Staffing Crisis

Budget Director Jacques Jiha (photo: John McCarten, NYC Council Media Unit)

City Council members repeatedly clashed with budget officials from Mayor Eric Adams’ administration at a hearing on Monday, pressing for answers about an ongoing staffing crisis at city agencies that has affected the delivery of municipal services. The hearing kicked off the weeks-long process of the Council’s public examination of Mayor Adams’ $102.7 billion preliminary budget proposal for the 2024 fiscal year, which starts July 1.

The first part of the hearing featured testimony from Mayor Adams' budget director, Jacques Jiha, who repeatedly stressed the fiscal challenges facing the city and touted the administration's careful budgeting. He and a series of City Council members engaged in rounds of back-and-forth where the members questioned the city's approach to its tens of thousands of vacant positions and rigid personnel policies. While Jiha offered a few notes of progress, he largely side-stepped what appear to be the most pressing challenges: a lack of hybrid work models and low pay scales that often can't compete with the private sector.

[READ: Is Mayor Adams' Spending Plan an 'Austerity' Budget?]

The mayor’s budget proposal is about $1.7 billion higher than the budget adopted by the Council last June, and slightly lower than the $102.9 billion that the city projected in its November budget modification that it would spend by the end of the current fiscal year. 

When Adams, a first-term Democrat, released his budget proposal in January, it included few new avenues of major spending, and made significant cuts across several city agencies to account for pandemic-era federal aid that is running out.

The administration also faces a slew of budget risks – unresolved costs of renegotiating expired labor contracts, funding services for tens of thousands of migrant asylum-seekers, lower stock market returns that will increase pension costs, cuts and cost shifts imposed by Governor Kathy Hochul’s state budget proposal, a possible recession, and tax revenues that are expected to slow after coming in higher than expected. 

As part of the preliminary budget, the mayor ordered city agencies to find 3% in savings under a Program to Eliminate the Gap (PEG), which saved $3 billion across the current and next fiscal years – including a reduction in almost 4,300 budgeted vacancies across city government in the current fiscal year.

City Council members, among others, have been particularly critical of the vacancy cuts and larger picture of tens of thousands of budgeted vacancies, arguing against what they see as an overall approach that has hampered the ability of city agencies to provide basic services and core functions. At the Council’s urging, the administration restored almost 400 vacant positions, including 340 for the Department of Social Services, but the central issue — discussed repeatedly at Monday’s hearing — remains the city’s ability to recruit, hire, and retain personnel.

“These reductions call into question the city's ability to provide essential services that support New Yorkers to say nothing of the goals laid out by the administration on housing, economic opportunity, and public safety,” said Council Speaker Adrienne Adams, a Queens Democrat, in her opening remarks. “The fact that these cuts are not distributed evenly, only magnifies this concern.” 

Adams and others have pointed to specific areas of concern including funding cuts to libraries, mental health services, CUNY, and prekindergarten for three-year-olds (3-K). 

The mayor’s Office of Management and Budget has predicted that the city will end the current fiscal year with a $2.2 billion surplus, which will be used to pre-pay costs for the next fiscal year. But the City Council has questioned those predictions, releasing its own forecast on Friday that projects a surplus that is $5.2 billion more than OMB’s projections for the current and next fiscal years. Council Member Justin Brannan, a Brooklyn Democrat and chair of the Council’s finance committee, said there is an “abundance of pessimism” in OMB’s tax and revenue projections, unlike the Council’s own numbers. “[A]fter reviewing the administration's preliminary budget, concerns that the Council raised last year about veering into unnecessary austerity have returned,” he said. 

Jiha said the Adams administration followed a “cautious path” as it prepared for the many risks it faced in creating next year’s budget. And he repeatedly deflected when questioned about the staffing crisis, which he attributed more to a tight overall labor market than city policies. Even with some reductions, there are more than 23,000 budgeted vacancies citywide – including, for instance, over 2,100 at the Department of Social Services, more than 670 at the Department of Health and Mental Hygiene, and more than 400 at the Department of Housing Preservation and Development. 

“Their challenge is that hiring has not caught up with attrition,” he said, noting that agencies hired 22,400 employees in the 2022 fiscal year and lost 24,500 to attrition. He did say that the city is “turning the corner” and that the municipal headcount increased by a net of 1,000 in the first seven months of the current fiscal year.

Jiha said the administration has taken several steps to address staffing issues including scrapping previous restrictions on hiring, shortening his Office of Management and Budget’s timeline for reviewing personnel actions, and new initiatives for recruiting and retaining workers. While he repeatedly pointed to job fairs the city has begun holding, he mostly tried to avoid discussing pay scales and hybrid work models for union and non-union employees. He did, however, acknowledge at one point under questioning that the lack of a remote work option is one of the reasons that the city has lost workers to the private sector.

Most recently, the administration reached a tentative contract deal with DC 37, the city’s largest municipal workers union, that included a $70 million equity fund for salaries for hard-to-recruit titles, and a plan to explore flexible work schedules that will allow for remote work for some employees. “The city has always been a passive employer…We don't aggressively go out there, try to recruit people,” Jiha noted. “We're changing that pattern.”

When asked by Council Member Gale Brewer, a Manhattan Democrat, if the Adams administration was offering non-union employees or recruits hybrid work schedules whereby they can work some days from home, Jiha acknowledged that the administration has made no such strides, only pointing to the exploratory effort in the tentative DC37 contract. “That's going to be part of the pilot,” he said. 

“People won’t work for the city if it is not hybrid,” Brewer responded. “You're not going to be able to hire good people.”

The DC37 deal and other likely labor agreements to follow, along with the growing costs of the migrant crisis, state cuts and cost shifts, and more have all yet to be fully accounted for, and will be included in the mayor’s executive budget proposal which is due in April. With the state budget due by April 1, the mayor will be able to take into account final decisions by Governor Hochul and legislators on a number of fiscal issues where the city is trying to push back on Hochul’s plans.

Jiha noted that the $4.4 billion DC37 agreement for 2021 through 2026 is mostly offset by the city’s labor reserves, and would lead to a net $2.9 billion increase in city spending through the 2027 fiscal year. But the pattern set by the contract will cost the city about $16 billion in total for all labor contracts to be settled through 2027. The state cost shifts, he estimated, would equal more than $1 billion annually – that includes about $530 million each year in additional contributions to the MTA, and $125 million in the current fiscal year in lost Medicaid funding, which will grow to more than $340 million annually.

Jiha also painted a dire portrait of the migrant situation, which has swelled the city’s shelter population and strained the budget. Last January, Jiha said, the city’s shelter population stood at 45,213, and it has grown to almost 80,000 between DSS shelters and humanitarian relief centers specifically for asylum-seekers. In total, shelter and services are estimated to cost the city about $4.2 billion between the current and next fiscal years. The governor has proposed $1 billion in state aid for that purpose while the amount of funding from the federal government remains uncertain – $800 million for migrant assistance nationally was appropriated in December, with the city expected to see much of it, but it has yet to be disbursed. 

“We are in a very difficult situation,” Jiha stressed. “In an era of limited and diminishing resources, we will have to make difficult decisions to balance the budget as required by law and simultaneously  prevent fiscal strain that will jeopardize our ability to deliver quality services to  New Yorkers.”

Throughout the hearing, Council members were largely focused on the personnel vacancies. They pointed to the Preliminary Mayor’s Management Report, which shows city agencies failing to perform their duties. For instance, the Human Resources Administration has shown significant delays in processing food stamp applications. After a marked slowdown last fiscal year, the housing department is predicting that far fewer new affordable housing projects will launch compared to before the pandemic. There has also been a drop in the number of new housing units to begin construction in the first four months of the current fiscal year compared with the same period in the previous fiscal year.

Jiha sought to reassure the Council that vacancies generally were not to blame, and that the administration is prioritizing resources where required. “We are more than happy to work with agencies,” Jiha said. “Agencies have enough heads but if there are certain areas of the operation that need resources, and if the resources are available, we will work with them and work with you.”

The hearing touched on several other issues in some depth as Council members asked questions, including the migrant crisis, cuts to a planned expansion of 3-K, nonprofit contracting, and more. 

One of the criticisms the mayor has faced is for his decision to pare back an expansion of 3-K for All, which was planned under former Mayor Bill de Blasio. Adams’ preliminary budget includes a $283 million reduction for the 3-K program, scrapping 6,000 new slots that would have grown the program from 55,000 to 61,000 seats. The administration has said the expansion was unnecessary since roughly 33% of 3-K seats are currently empty and the prior model was not right-sized for enrollment trends.

Asked by Speaker Adams about 3-K waitlists, Jiha said the administration has hired the consulting firm Accenture to study the distribution and need for 3-K seats. “It doesn't make any sense for the city to be spending money for 19,000 seats that are empty,” he insisted. 

Pressed by Brannan about the vacancies at the Department of Homeless Services, Jiha said the administration has prioritized hiring at the agency. “We're working with them, and they're making progress but…it's a very challenging environment and we’re trying to be as aggressive as we can be,” he said. 

Council Member Charles Barron, a Brooklyn Democrat, had some of the harshest criticism for the administration, in particular for the mayor’s budget PEG. “These are not PEGs. These are cuts to services and when you cut vacancies, you cut services no matter how you try to fix it up in your report,” he said. 

Barron insisted that the budget fails to invest sufficiently in Black and brown neighborhoods where poverty and unemployment is higher than other parts of the city. “You don't have a money problem. You have a prioritization of spending problem,” he said, as he encouraged his fellow Council members to reject the budget. “This time around let's use our power so no matter what they present, let's use the power of the City Council to be for the people and say this budget is not a priority of the moral position or the values of this Council when it comes to human beings living in the richest city in the world with abject poverty that is disgusting and shameful,” he said. 

Council Members Diana Ayala, Farah Louis, and Althea Stevens questioned the administration about delayed payments to nonprofit service providers. Jiha said the administration is working to improve its procurement process, and collaborating with the comptroller’s office to streamline contract registrations and payments. “This is the first time we're tackling this issue where we’re putting resources behind it to make sure we change our entire process,” he said.  

Council Member Pierina Sanchez highlighted staffing challenges at the housing department (HPD) and the decreased rate of new affordable housing being financed and built. “The housing crisis. It is number one on New Yorkers’ minds and I wager that it should be and it should remain number one in the administration's mind,” she said. 

Jiha said the slowdown of affordable housing creation is a much more complicated problem because of the global supply chain problems and a nationwide labor shortage. And he noted that HPD currently has 427 vacant positions. “Giving you a hundred more vacant positions is not going to solve your hiring problem,” he said, again not discussing some of the ways in which critics and supporters of the administration have suggested changing city policy to enhance hiring and retention.

Ahead of his own testimony to the City Council on Monday, Comptroller Brad Lander, a Democrat, released a detailed analysis of the mayor’s preliminary budget, along with a brief report on how vacancies have affected agency performance.

He highlighted the changing fiscal forecast for the city, predicting a “soft landing” but not a recession for the city’s economy. But he did note the various added costs and risks including the costs of the labor union deals, the effect of the governor’s proposal, and additional costs of migrant shelter and services. He also pointed out other areas that are under-budgeted including uniformed agency overtime costs, spending on charter schools and Carter special education cases, pupil transportation, and growing city contributions to the MTA. 

Lander had several recommendations for the administration including shifting more migrants out of shelter (by supporting work authorizations or transitions to permanent housing), reversing cuts to CUNY and public libraries, adopting a formula for Rainy Day Fund deposits, new hiring and retention policies, and support for higher taxes on the wealthy at the state level in order to increase revenue for the city to invest into services.

“Let’s be clear. While savings and efficiencies are necessary, they won’t be near enough to allow us to invest in the  ambitious programs we need to secure New York City’s economic success, while also closing the budget gaps we face,” Lander said in his testimony. “New funding will be necessary. This budget cycle is the time to ask Albany for the resources and authority to raise revenues necessary to invest in the City’s future.”

Like the City Council, the Independent Budget Office also predicted in testimony on Monday that the city will have higher revenues at its disposal. But IBO also pointed to additional costs such as spending at the Department of Education (which will be affected by diminishing federal aid) and overtime costs, largely at the NYPD, that have regularly been higher than budgeted. The settlement of labor contracts will also push spending up, IBO’s testimony stated. “While this does not come as a surprise, it does mean policymakers may be faced with tough choices, particularly in the outyears,” the testimony reads.

The City Council’s preliminary budget hearings will now shift to committee and agency specifics, and will last through March. Tuesday’s hearings include those on small business; environmental protection, resiliency and waterfronts; immigration; and oversight and investigations.

[READ: Is Mayor Adams' Spending Plan an 'Austerity' Budget?]

by Samar Khurshid, senior reporter, Gotham Gazette

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