NYC Comptroller Lander’s Annual Report Finds Continued Use of Budget Gimmicks by City Hall

NYC Comptroller Lander's Annual Report Finds Continued Use of Budget Gimmicks by City Hall

New York, NY - In his office's Annual State of the City's Economy and Finances, New York City Comptroller Brad Lander laid out the city's economic and fiscal outlook, reflecting stronger economic growth than projected last year as well as looming economic and budget risks because of the incoming Trump Administration.

The Comptroller's analysis projects that the Mayor's Office of Management and Budget (OMB) has underbudgeted likely expenses including uniformed overtime, special education Carter Cases, and rental subsidies by an average of $3 billion each fiscal year. At the same time, the report projects that the Adams Administration inflated projected costs for spending on asylum seekers by nearly $6 billion in total over the same period.

"Enough with the budget gimmicks," said Comptroller Brad Lander. "For the past two years, the Adams Administration has consistently cried wolf that the City would go broke because of asylum seeker costs, when in reality, they inflated projections for asylum seeker services by billions of dollars, as part of a narrative that has scapegoated migrants and distracted New Yorkers with unnecessary fights about cuts to libraries and parks. Meanwhile, they continue to underbudget $3 billion every year in areas they know we will spend more on, like uniformed overtime and rental subsidies. And they have failed to contribute to the Rainy Day Fund, despite increased tax revenues which we have long called to be designated to strengthen our reserves. New Yorkers deserve more honest and fiscally responsible budgeting."

The Comptroller's Office projects that total spending on asylum seekers will be lower than OMB assumed by $1.35 billion in FY 2025, $2.30 billion in FY 2026, and $1.90 billion in FY 2027. Furthermore, the ongoing reconciliation of FY 2023 spending in asylum seeker services budget codes may result in up to $462 million in accrual adjustments. Under the accrual method of budgeting, when the City readjusts and lowers prior-year expenses, the difference is recognized as savings in the current year.

Overall, the Comptroller's Office estimates that OMB underbudgeted expenditures by $2.63 billion in FY 2025 and by $3.08 billion on average in each fiscal year, from FY 2026 through FY 2028. The Comptroller's Office also projects lower spending on asylum seekers and higher tax revenues to offset underbudgeting and other risks in FY 2025 but not in FY 2026, when the budget gap is estimated to be $2.95 billion after prepayments.

This report also indicates that New York City has climbed out from the economic downturn and disruption of the pandemic, but faces new economic and budget challenges from an incoming Trump administration. Cuts to Federal aid, tariff, and immigration policies threaten to reverse recent growth and imperil the very fabric of New York City.

Comptroller Lander continued, "Four years later, the City has finally recovered from and surpassed the economic downturn of the pandemic. Despite the rosy economic indicators, New Yorkers are still facing the high cost of rent and daily living, and we now face an incoming Federal administration bent on inflationary tariffs and reducing aid to municipalities. By spotting the risks on our horizon, the City can better plan and use its resources to build, create, and manage a more livable and better run city."

Four years after the pandemic, the city's employment is now above its pre-pandemic level, the commercial real estate sector shows signs of recovery and tourism has returned. However, the city's population has declined over the past three years and the housing market remains exceedingly tight, with housing affordability a top issue for New Yorkers.

Based on the current strength of the national and local economies, the Comptroller's Office forecasts that New York City tax revenues will grow this fiscal year by a strong 6.1 percent, followed by more moderate growth, averaging 2.9 percent per year through FY 2028. The Mayor's Office of Management and Budget (OMB) presented less tax growth in its November Financial Plan. This updated tax forecast is also significantly higher than the one the Comptroller's Office published last summer, primarily due to continued growth in business income tax collections and an improved outlook for the U.S. economy, local industries, financial markets, and financial sector profits. The Comptroller's Office projects surplus resources of $1.39 billion in FY 2025 compared to the Mayor's November Financial Plan.

Unlike recent plans, the City's November budget update did not include a Program to Eliminate the Gap (PEG). Some savings were recognized over the financial plan period-including reduced costs for pensions, largely due to higher than anticipated returns on the City's pension investments, lower debt service costs, and savings on asylum seeker services in FY 2025.

As this Office highlighted in its recent spotlight, NYC's Federal Funding: Outlook Under Trump, the Federal government provides over $100 billion collectively to New York City government, related entities, directly to New Yorkers, and other organizations each year. This includes $9.55 billion in Federal categorical aid currently included in the City's operating budget (about 8.3 percent of the city's current $115.03 billion budget). These funds support affordable housing programs, public education, healthcare, infrastructure, and touch the lives of every New Yorker. While not all Federal funds are at risk, any reduction in this aid would put pressure on the City's finances.

The City also did not include deposits into its Rainy Day fund (the Revenue Stabilization Fund or RSF) in its budget for FY 2025. The City currently holds $1.96 billion in the RSF. The Comptroller continues to believe strongly that the City should establish a transparent policy of regular efficiency and long-term savings planning as part of the annual budget process, regardless of whether there is fiscal tightening projected on the horizon, as well as continues to urge the adoption of rules to determine the fund's target size, deposits, and withdrawals. This is particularly true when facing the tax revenue risks and potential loss of Federal aid presented by the incoming Trump Administration.

The City's Adopted Capital Commitment Plan for FY 2025 through FY 2028, released in September, totals $86.67 billion in all-funds authorized commitments. The largest increases over the four-year period are for education/CUNY projects ($3.10 billion) and housing and economic development projects ($3.10 billion). While the size of the City's capital program increased overall, it still requires the further funding for other City projects, including the construction of the city's borough-based jails. Since releasing the Adopted Capital Commitment Plan, as part of the recent agreement reached between the City Council and the Adams administration on the City of Yes housing plan, new capital commitments include $4 billion, including $1 billion from the State ($2 billion for housing programs and $2 billion for infrastructure projects).

To read the full Annual Report on the State of the City's Economy and Finances, click here.

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