New York Mayor Bill de Blasio and City Council leaders were all smiles as they announced an agreement on an $85.2 billion fiscal 2018 budget.
“We believe this budget continues our work in building a better and fairer city,” de Blasio said Friday night in the City Hall rotunda, surrounded by Council Speaker Melissa Mark-Viverito, finance committee chairwoman Julissa Ferreras-Copeland and many of their peers.
It marked the earliest handshake deal since 1992 and comes more than three weeks before the council by law must act on it. Approval is expected next week.
De Blasio and council members are up for re-election this fall.
The balanced budget -- up 14% from de Blasio's first enacted spending plan three years ago -- accounts for $1.2 billion in the general reserve, $4.2 billion in retiree health benefits trust fund and $250 million in the capital stabilization reserve. This, said de Blasio, will enable the city to retire some debt in the face of potential federal cuts or an economic downturn.
"We understand what’s happening in our nation, we understand the challenges emanating from Washington, D.C., so we have to both achieve those strategic investments while constantly being prepared for what may lay ahead," he said.
De Blasio said the retiree health benefits trust fund will gain an additional $100 million, the general reserve will receive a further $200 million and the capital stabilization reserve will continue at $250 million annually over four years.
“If you annualize that for the fiscal ‘18 budget, our reserves will total $5.65 billion, by far the highest the city of New York has ever had,” said de Blasio.
The budget recognizes $100 million in savings from a partial hiring freeze, as well as debt-service savings. The city in fiscal 2017 paid nearly $6 billion in debt service, or about 7% of the overall budget.
Friday night's smiles and handshakes contrasted sharply with the news earlier that day out of the city’s money-bleeding Health + Hospitals unit. H+H interim chief Stanley Brezenoff announced the elimination of 476 jobs, mostly middle management positions, in a move the city expects will save $60 million in FY2018.
H+H said it laid off 396 persons on Friday and a further 80 positions will go unfilled.
For the third quarter of fiscal 2017, the system reported an operating loss of roughly $673 million.
Rising costs and reduced federal funding have further hamstrung an already burdened system. Friday's job cuts confirmed the suspicions of skeptics who questioned whether de Blasio's transformation plan, announced last year, would involve neither large-scale layoffs nor hospital closings.
The city has subsidized H+H, formerly Health & Hospitals Corp., since its creation through operating and capital support, plus a capital reserve replenishment obligation on the system’s $870 million of outstanding bonds.
The city's recent spike in support to prop up the system “illustrates the enterprise risk the hospital system poses to the city, especially during a period of cost-cutting and considering the city's high fixed costs for debt service, pensions, and retiree health care,” said Moody’s Investors Service.
Howard Cure, director of municipal bond research for Evercore Wealth Management, noted the emphasis on middle-management layoffs.
“I still contend that the real savings would come from closing down or significantly scaling back entire hospitals,” said Cure. “Most of the staff are unionized and it would be politically much more difficult to make those cuts.”
Commenting on the budget overall, the watchdog Citizens Budget Commission praised the city’s Office of Management and Budget for creating a savings unit that had spotted ways to improve operations and to provide recurring savings.
“City agencies should similarly review their operations to enhance productivity and reduce expenses,” said CBC.
Moody’s rates the city’s general obligation bonds Aa2. Fitch Ratings and S&P Global Ratings rate them AA. All three assign stable outlooks. The city had $38 billion of general obligation debt outstanding as of March 31.
“The city's institutionalized budgetary controls and early recognition of future budget pressure help it maintain a balanced financial position and weather economic downturns,” Moody’s said in a commentary that preceded the city’s last GO sale in February, for about $900 million.
The budget calls for, among other items, $105.53 million in capital funding; $110 million to assist with capital projects in libraries across the city, the management of which has drawn criticism from some council members and budget watchdogs; and $23 million to eliminate the home care and case management wait lists.
Mayoral budget director Dean Fuleihan said the administration made some tweaks to the capital plan.
“There are programs that have been added, and when we put out the financial plan, we’ll give you the details that delineate that total amount,” he told reporters. “We’re still finalizing the details.”