De Blasio releases $89 billion 'wartime' budget, calls for more federal help
New York Mayor Bill de Blasio released an $89.3 billion "wartime" executive budget for fiscal 2021 — down by $6 billion from his January request — as the city faces a $7.4 billion tax-revenue hit from the unprecedented COVID-19 outbreak.
His updated spending plan includes a draw on reserves.
De Blasio, meanwhile, implored the federal government for further help.
"We're taking the actions that we can take," de Blasio said Thursday morning in the City Hall Blue Room. "But the only force that can insure that we get through this the right way is the federal government. Now, it's their hour of decision."
The new plan amounts to $3.4 billion, or 3.7% less than the fiscal 2020 budget the city adopted last June.
According to the mayor, the city drew down $900 million from the general reserve and $250 million from the capital stabilization fund. Total reserves for FY21 are now $2.18 billion.
The Retiree Health Benefits Trust fund drew down $2.6 billion and has a balance of $2.08 billion.
The executive budget is part of a traditional cycle the ends with approval by the 51-member City Council by June 30.
This year, though, is atypical, given the rapid widening of the coronavirus pandemic over six weeks and the unprecedented loss of sales and income tax revenue from business closures, designed to offset virus spread. The pandemic itself, meanwhile, has strained the hospital system.
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"There has been nothing ever like this," said Andrew Rein, president of the watchdog Citizens Budget Commission. "This is more like a natural disaster, only global, not national. There are different models aboout how deep it will be and how long it will last. It will be hard to predict."
Broken down, the revenue drop is 3.5% in FY20, or $2.2 billion, and 8.3% in FY21, or $5.2 billion compared with the preliminary budget de Blasio released in January. Taxes hit by the pandemic include sales and hotel, personal income and business taxes.
He said the budget reflects four basic priorities: health, safety, food and housing. "If we can't provide the basics, you can kiss any recovery goodbye."
Moody's Investors Service on April 1 lowered its outlook on the city to negative.
The watchdog Independent Budget Office, working with limited data available, had projected an even worse revenue hit, at nearly $10 billion. IBO expects the local economy will lose about 475,000 jobs from the second quarter of calendar year 2020 through the first quarter of 2021.
The city on Tuesday added 3,778 to its coronavirus death count to include those who died in recent weeks without a confirmed diagnosis. The total now exceeds 10,000.
De Blasio had already struck a cautious tone in late January, pre-pandemic, when he released his $95.3 billion preliminary budget, citing state-imposed cuts and cost shifts.
The city was forced to backfill $800 million in state cuts, including a $360 million education shortfall and a $250 million sales tax intercept for distressed hospitals, which allows the state to take funding from city sales tax proceeds to pay a portion of costs related to hospitals the state considers distressed.
Also, the city had to cover a $123 million reduction in financial assistance for families in need, which de Blasio considers a critical source of funds for vulnerable New Yorkers. In addition, the city had to contribute an additional $63 million toward the Metropolitan Transportation Authority’s Access-a-Ride paratransit service.
While the new plan did not include borrowing for operating expenses, de Blasio has hinted at that option in recent press briefings.
Bonding to cover operating budget gaps is a red-flag matter in the capital markets. New York State, in its enacted budget, authorized the Metroplitan Transportation Authority to bond for up to $10 billion if needed for just that purpose. The MTA runs the city's subway-and-bus system.
The city last did that under Mayor Michael Bloomberg, who took office four months after 9/11.
New York at the time issued up to $2.5 billion in recovery bonds and used $1.5 billion in operating relief. It also drew down a $250 million surplus from the Municipal Assistance Corp. — formed amid the 1970s financial crisis — MAC debt was refinanced through a special entity, the Sales Tax Asset Receivable Corp. The city also stretched out pension fund contributions.
"That should be a last or near-last resort after you have exhausted all your other options," Rein said. "We're still paying the MAC bonds from the 70s. That's not right. It's just not right."
The crisis has also triggered second-guessing about the city's reserve levels. The executive budget calls for $2.7 billion in savings, with $2.1 billion of that from department heads through a program to eliminate the gap, or PEG.
Rein called such a move "a gentle-touch approach rather than a bold rapid response that recognizes the potential severity of the health and economic crises." The savings plan, according to Rein, should be "significantly larger" and geared toward recurring savings.
The budget is the seventh for de Blasio, who for most of his two terms has had budget flexibility thanks to prosperity.
"After increasing the city's budget by $20 billion and its workforce by 30,000 employees since taking office, Mayor de Blasio leaves New York with little capacity to weather these fiscal blows," said Michael Hendrix, director of state and local policy for think tank Manhattan Institute for Policy Research.
Moody's rates the city's general obligation bonds Aa1. S&P Global Ratings and Fitch Ratings rate them AA.