Spending increases in New York City's $78.5 billion budget merit a good, hard look, according to an official with a nonpartisan budget watchdog.
"There's a lot of new spending, which raises the question of whether it's sustainable," said Maria Doulis, director of city studies for the Citizens Budget Commission.
Late Friday, the 51-member City Council approved Mayor Bill de Blasio's executive budget for fiscal 2016, which starts Wednesday. Budget passage contained little of the acrimony of past years and was a far cry from the fractious state legislative session in Albany.
The new budget is up 4.7% from what the council passed last year and marks a 12% rise in spending over the two years after de Blasio took over City Hall from Michael Bloomberg.
The spending plan includes a last-minute concession by de Blasio to fund the hiring of nearly new 1,300 police officers, for which council Speaker Melissa Mark-Viverito had lobbied hard. The additional police, social service providers and other related programs will add about $200 million to the spending plan.
De Blasio's executive budget boosted reserves, including $1 billion a year in the general reserve; $2.6 billion for the retiree health benefit trust fund; and the inaugural $500 million capital stabilization reserve.
Both Doulis and city Comptroller Scott Stringer say the city should have built up more reserves. "Clearly, we can and must do more," Stringer told the council in May.
Moody's Investors Service rates the city's general obligation bonds Aa2. Fitch Ratings and Standard & Poor's rate them AA. All three affirmed their ratings in the spring.
"The city's economy is reliant on a volatile financial services sector, but it continues to diversify, and its finances will benefit," said Moody's. "Despite its strong budgetary controls, high costs for debt service, pensions and retiree health care will continue to be a challenge for the city."
According to the Independent Budget Office, much of de Blasio's projected savings comes from re-estimates of borrowing costs. The budget includes a "citywide savings program" valued at $589 million in fiscal 2015, followed by $466 million in 2016 and an average of $617 million annually in 2017 through 2019.
"More than $900 million of the cost savings result from changes in the Mayor's Office of Management and Budget assumptions about interest rates that the city will pay on future bond offerings," IBO said in a commentary.
The city has nearly $40 billion of general obligation debt as of March 31.
"The good news is that the economy is doing well, and that makes doing the budget easier. It's harder in other times," said Doulis. "The tax base is diversifying and they've refunded some debt. That will trigger a positive reaction, but investors, along with the CBC, will continue to inquire about the risks."
Echoing her comments before the City Council in May, Doulis called for linking agency needs assessments to funding strategies related to the city's 10-year, $84 billion capital program, an amount that shot up 24% from de Blasio's preliminary estimate in February.
"Most agencies don't have needs assessments," she said. "Instead of agencies volunteering suggestions, we'd like to see some benchmarks tied to funding, both at the front end and the back end."
