New York City Mayor Bill de Blasio responded to the economic and financial uncertainty that followed Donald Trump's victory in the presidential election with a budget update that showcases caution and fiscal responsibility.
The Fiscal Year 2017 $83.46 billion budget remains balanced, according to the November Financial Plan Update released
The plan also marks the first time the de Blasio Administration has included a Citywide Savings Program in an annual November update to the budget.
"This year's plan proves yet again that we can be both progressive and fiscally responsible," de Blasio said. "With this updated budget, we are announcing $1 billion in savings -- and our plan to build on these savings during next year's budget process."
The update released Thursday cuts this year's tax revenue projection by $127 million, a shortfall the city will cover with agency and debt service savings, which lets the administration reduce the fiscal 2018 out-year gap by $576 million.
Debt service savings total $151 million in fiscal 2017, $33 million in 2018, $72 million in fiscal 2019 and $83 million in 2020.
"The mayor's latest budget plan takes a cautious path amid signs of slower economic growth and political uncertainty following the election of Donald Trump as president," said Doug Turetsky, chief of staff of the NYC Independent Budget Office. "Although the budget grows by $1.3 billion, this is driven by a nearly $900 million increase in federal aid and more than $400 million in state aid."
The watchdog Citizens Budget Commission concurred.
"It is a budget update that demonstrates caution, primarily by beginning to implement a savings program early in the fiscal year," said CBC Vice President Maria Doulis. "The Administration should build on the savings program substantially in the January proposal to build budget reserves in this uncertain economic climate." The November plan also includes $120 million dedicated to covering pension fund obligations in fiscal 2018 after the fund's poor performance this year.
"The expanded spending on social services and police is starting to take a toll on the city budget," said Howard Cure, the director of municipal bond research for Evercore Wealth Management. "A little more troubling were the problems with the city pension funds."
Poor pension fund performance will push taxpayer contributions to $241 million in fiscal 2019 and $361 million in 2020. The city is required by law to cover any returns below an assumed growth rate of 7%; the funds grew 3.2% in fiscal 2015 and 1.5% in 2016.
The budget also unveiled several savings initiatives. To that end, the city will start contracting directly with storage service vendors to cut yearly costs by 40%, resulting in annual savings of $3.7 million starting in fiscal 2018.
The city will reduce the issuance of paper checks by increasing the number employees and vendors paid electronically and will eliminate inter- and intra-agency checks, saving $1 million in fiscal 2018, $2 million in 2019 and $3 million in 2020.
The city plans to use its vehicles more efficiently by expanding car sharing and intra-agency transfer of available vehicles, saving $10 million in fiscal 2018, $13 million in 2019 and $11 million in 2020.
"We are once again proving to New Yorkers that we will continue to prioritize the initiatives most important to the city's future while protecting the city's fiscal health," de Blasio said.
Cure warned that while the update contained debt service savings from refinancings, this could stop if interest rates go up.
He added, however, that the city's financial industry could benefit with a new president coming into office, if an ease in rules and regulations pushes the equity market higher and therefore strengthens city pension performance.
