The Mayor and City Council discuss the budget (photo: William Alatriste/City Council)
New York City’s next fiscal year begins Wednesday, July 1, and there is no clear picture of the city’s fiscal future. The fallout from the COVID-19 pandemic has been catastrophic for the city’s economy, gutting revenue streams and necessitating major cuts in planned city government spending, along with tapping into billions of dollars in reserves.
Mayor Bill de Blasio and the City Council are engaged in intense negotiations as they seek to fill a large budget gap and try to prevent significant cuts to services and avoid mass layoffs while coming to a budget agreement by Tuesday night.
In his Executive Budget plan released in April, de Blasio had cut proposed spending by $6 billion from his January, pre-pandemic Preliminary Budget, from $95.3 billion to $89.3 billion. This was done through $2.7 billion in savings, largely reductions in planned city agency spending, and drawing $4 billion from reserves to attempt to minimize the city’s budget gap. But as tax revenue has continued to plummet that gap has continued to grow and the administration still has to find another $1 billion to balance the budget.
Yet the City Council was not in agreement with de Blasio’s Executive Budget and the two sides have had different priorities heading into final budget negotiations, most notably the goal set by City Council Speaker Corey Johnson and dozens of the Council’s 51 members to slash the police department’s $5.9 billion operating budget by $1 billion.
Meanwhile, hanging over the city budget picture have been two possible ways to close the immense gap that are out of the control of the mayor and Council: a federal “bailout,” which looks virtually impossible before the June 30 city deadline (thanks to Republicans in Washington), and permission from the state for the city to borrow billions of dollars to cover operating expenses, which appears unlikely to be granted in the next few days (thanks to Democrats in Albany).
Here are four things to watch in the city budget:
How will the city balance the budget?
Mayor de Blasio said at a press briefing on Friday that the city could have to lay off as many as 22,000 employees by October 1 if it cannot fill the $1 billion gap that remains.
Along with persistently but unsuccessfully lobbying for federal funds, de Blasio has been pushing the state Legislature to allow the city to borrow funds to cover those operational costs, a move that was prohibited after the practice in part pushed the city to the brink when it faced insolvency in the 1970s and the state came to the rescue. The resulting legislation after that fiscal crisis created an oversight body, the state Financial Control Board (FCB), and required that the city only spend as much revenue as it has on hand.
The mayor said his borrowing plan has been amended and instead of seeking authorization to borrow $7 billion, the city will ask for $5 billion over two years. “We hope to borrow none, if we actually got the kind of federal stimulus support we deserve,” he said. “Maybe that will come, but we need the fallback of borrowing.” He said the process would be closely monitored by the FCB.
Governor Andrew Cuomo and the state Legislature have been reluctant to approve any operational borrowing by the city but have yet to give definitive answers on the mayor’s latest proposal.
“Borrowing for operating expenses is a risky proposition, and it has to be done with caution, if at all,” Cuomo said at a press briefing on Thursday. “Because now you’re really rolling the dice on future revenues. We went through this situation in the ′70s, where New York City was basically bankrupt and the state had to step in.”
“If there is a plan, we will review it,” said Caitlin Girouard, a Cuomo spokesperson, in an email on Friday. “That said, the existing financial control board is in the best position to review any plans for New York City to issue long-term debt to pay for current operating costs.”
On Saturday, State Senate Majority Leader Andrea Stewart-Cousins, a Westchester Democrat, issued a statement indicating the Senate Democratic Conference is not there yet on supporting borrowing by the city.
“New York City is the economic engine for our nation and our state, and so it is a priority for the Senate that it remains economically strong and viable,” Stewart-Cousins said. “Prudence requires the development of a plan not rushed through before action is actually necessary, especially when the possibility of additional federal aid remains unresolved. Mayor de Blasio has made it clear we have several months before drastic measures like layoffs would occur and other city leaders have sent mixed signals about the wisdom and efficacy of the current request. The Senate will work with our partners in Government including the Mayor, the City Comptroller, the City Council, the Assembly, and the Governor to help New York City. We are open to approving limited loan authorization but more work needs to be done to develop a consensus around a sound approach.”
In response, mayoral spokesperson Freddi Goldstein said in a statement to Gotham Gazette, “Waiting to see what will come from Washington has never been a viable option. It wasn't during the crisis, and it’s not in its aftermath. We need money to restart our city, keep New Yorkers working, and deliver the services they need most as they rebuild their lives. Now is the time to act. We’re disappointed the State Senate doesn’t see that.”
A spokesperson for Assembly Speaker Carl Heastie, a Bronx Democrat, said the Assembly will review any proposals.
City Council Speaker Corey Johnson came out against the proposal to borrow $7 billion in May, instead pushing the administration to cut between 5 and 7% of city agency budgets. At the time, he said borrowing should be a “last resort” for the city. But at the Thursday briefing, Johnson said he wasn’t outright against it and that it may be required if federal stimulus funds aren’t delivered. “I am open to a responsible borrowing plan if we are at the same time focusing on meaningful cuts to city agencies without jeopardizing our social safety net,” he said. “We can’t just borrow to avoid looking hard at our budget and net agency spending. There are long-term implications to borrowing and if we do it, it must be done carefully and we can’t do it to supplement the entire city budget.”
Public Advocate Jumaane Williams has supported a long-term borrowing plan, insisting that cuts to services and layoffs would affect the very communities that have already borne the disproportionate brunt of the pandemic.
Comptroller Scott Stringer has cautioned against the burden that borrowing could place on the city, estimating that a $7 billion debt would need $11 billion in repayments over 20 years or $12.5 billion over 30 years. “While it's too soon to rule out any specific budget action, New Yorkers should know that under the Mayor’s proposal our children could be paying over $500 million a year for the next 20 years. I urge extreme caution,” he said in at the start of the month.
The four Democratic candidates running for Comptroller in 2021 have taken somewhat divergent views. Council Member Helen Rosenthal has called for borrowing. Council Member Brad Lander, State Senator Brian Benjamin and Assemblymember David Weprin, however, have warned against it.
De Blasio is urging labor unions to help find enough savings in labor contracts to help the city avoid the layoffs. “The layoffs would not begin until October 1, so, there's time to find the resources,” he said Friday on WNYC's The Brian Lehrer Show. “But if I don't have borrowing and I don't have stimulus, I'm just out of options. We would still say to labor, help us find a different kind of savings, and we wouldn't do layoffs. But we need them to come to the table and work with us.”
Citizens Budget Commission, a fiscal watchdog group, has recommended several “hard choices with difficult consequences” that the city could undertake to find almost $1.7 billion for the next fiscal year and reduce gaps down the line without layoffs or borrowing. It recommends cutting spending by $1.6 billion through improved efficiencies, renegotiating labor contracts, and cutting 9,000 employees from the 340,000-strong full-time workforce through attrition. They also called for a two-year property tax increase of 2%, selling city assets and freeing up another $750 million from the $1 billion general reserve fund.
“If the City’s leaders are willing to make the right and reasonable hard choices, they can balance the budget without asking future generations to pay for today’s bills or resorting to layoffs,” said CBC President Andrew Rein, in a statement.
Cuts to the NYPD
One of the major sticking points between the Council and the mayor is the push to cut $1 billion from the NYPD’s nearly $6 billion budget (which doesn’t include billions in other annual NYPD-related expenses) and to fund youth and social services that otherwise face cuts under the mayor’s proposal. The Council has been pushing for that reallocation for weeks but pressure has only increased after the recent protests of police brutality and racism as activists have taken up a call to “Defund the NYPD” and have even camped out next to City Hall for days to press their demands.
The Council proposed cutting the $1 billion by taking certain responsibilities from the police department, including shifting school safety, which cost $327 million this year, to the Department of Education, cutting the department’s headcount through attrition and a hiring freeze, and limiting overtime costs.
Council Speaker Corey Johnson said in a news conference on Thursday that the mayor’s executive budget proposal “is not a budget that the Council accepts, not a budget that would get the votes to pass,” citing cuts to education and the city’s social safety net while the NYPD emerged relatively unscathed. “This moment in our country and in our city calls for appropriately cutting funding for police and making sure that we are making structural changes to policing, re-envisioning what public safety looks like, and investing that money into communities of color and vulnerable communities. What was outlined in the executive budget doesn't do that.”
Though de Blasio has agreed to shift some funding away from the police department and said he is finding some agreement with the Council, he had said the $1 billion demand is too large. “We don't have a final dollar figure, but we're going to do something very, very substantial,” he said Friday on WNYC’s The Brian Lehrer Show. “We'll know more in the next few days. Yes, money will come out of the NYPD. Yes, money will go to youth programs.”
The mayor has also pushed back and is reportedly considering cutting the Council’s discretionary funding, according to the New York Daily News.
But on Monday de Blasio announced that he had put forward a plan to shift $1 billion in NYPD operating budget funds away from the department and another $500 million in capital dollars. While a deal with the City Council has not been reached, the two sides appear closer to an agreement on "defunding" the NYPD by the $1 billion, though some advocates and elected officials say that too much of the cut is really just moving functions and employees from the police department to other city agencies, like school safety to the Department of Education. The details of the proposals put forth by the mayor and the Council show some overlap, but also some key distinctions, especially when it comes to NYPD headcount.
Comptroller Scott Stringer has pushed for a $1.1 billion reduction to the NYPD over four years, achieved through a reduced headcount by attrition, cutting overtime, and other miscellaneous costs.
Summer Youth Employment and Other Programs
The City Council took particular issue with the mayor’s executive budget proposal, noting that it only reduced the NYPD budget by less than 1% while slashing the budget of the Department of Youth and Community Development by 32%. That cut meant that the city was zeroing out the $124-million Summer Youth Employment Program, which provides summer jobs to young people between the ages of 14 and 24. The city allocated funds for 75,000 jobs last year, many of which went to youth from low-income communities of color.
Though after major blowback de Blasio promised an alternative plan, details have yet to be released. De Blasio recently said the program will take shape soon, albeit late this year, and include a mix of outdoor and virtual opportunities.
Summer youth employment is one of many relatively smaller budget items, whether full or partial, that have been on the chopping block as de Blasio has sought to close the budget gap. But those very programs are often ones that Council members don't want to see cut, so the end result of how agency spending is trimmed will be full of details of great interest to many stakeholders inside and especially outside of government, including, for example, the many nonprofits that the city contracts with to perform vital services as well as CUNY, the city's public university system, and more.
Also in this larger category are city funding for individual schools, which supports not only teachers' salaries but guidance counselors, nurses, and more.
The mayor’s executive budget also made major changes to the four-year, $67.2 billion capital plan, which funds long-term infrastructure investments around the city, from building and repairing schools to the city’s vehicle fleet and much more. Most capital projects were delayed to future years, when de Blasio will no longer be in office.
The capital budget is funded through long-term borrowing, but billions of dollars in debt service is paid each year through the city operating budget, so de Blasio’s plan is aimed at reducing some of those annual costs in the near-term.
Notably, the mayor cut significantly from planned upcoming investments in affordable housing, new schools, and the plan to build four new borough-based jail facilities to replace the Rikers Island jail complex which is slated for closure.
Budget watchdogs have emphasized that the city should continue funding routine maintenance and repair work, which are essential to the city’s quality of life and its eventual recovery. Others like City Council Member Brad Lander have urged the mayor to invest more funds in capital projects as a means to not only ensure the long term prosperity of the city but to also put New Yorkers back to work at a time of record unemployment.
Citizens Budget Commission, however, recommends reducing the five-year capital plan by a total of $6.7 billion – $2.4 billion in planned school construction and $4.3 billion in other expansion projects.
Note: this story has been updated with news of de Blasio's Monday announcement about NYPD funding.