De Blasio strikes cautionary tone with $95.3B NYC budget
Mayor Bill de Blasio sounded a cautionary note related to state funding as he released New York's $95.3 billion preliminary budget for fiscal 2021.
De Blasio, briefing reporters on his seventh budget proposal at the City Hall Blue Room on Thursday afternoon, cited looming state cuts to cover its own projected $6 billion budget gap. About $4 billion of that relates to Medicaid overspending. Albany now reimburses the city for $2 billion on Medicaid.
"Our focus is on one place and that is Albany, New York," de Blasio saId. The state's gap surfaced "in a way we've never seen before," he added. "I've found that confusing. I don't know where this is going and you don't know where this is going."
City officials are bracing for Gov. Andrew Cuomo's planned budget release next Tuesday.
Any cuts, de Blasio said, would jeopardize New York City's Health + Hospitals unit, for which the mayor launched a transformation plan four years ago.
"Health + Hospitals is now functioning quite well," the mayor said. "This is now threatened. We will fight cuts that threaten the health and safety of New Yorkers."
In his latest swipe at the Metropolitan Transportation Authority, de Blasio cited additional pressures on the city to help fund the state-run system. The city has contributed $3 billion to the MTA's most recent capital program, and has had to budget $100 million more annually to the MTA's Access-a-Ride paratransit service.
"We're not going to keep on handing over money unless the money is used well," he said while calling for a more detailed audit of the MTA's finances.
The preliminary budget is nearly $1 billion more than the $94.4 billion plan the mayor released in November.
Budget growth since de Blasio and the council agreed to a $92.8 billion plan in June include $1.6 billion in labor settlements and benefits; $270 million in debt service; $256 million in educational mandates; and $175 million in criminal justice mandates. "These are ongoing needs we must fund," de Blasio said.
By law, the city must approve its budget by July 1 and provide a November budget and four-year plan update. The next stage for this year's budget cycle, following a round of City Council hearings, involves negotiations with council leaders, notably Speaker Corey Johnson, and the mayor's release of the executive budget in late April.
In the preliminary budget, the mayor said, the city has achieved $714 million in savings across fiscal 2020 and 2021, the mayor said. He added that avings offsets new spending of $441 million in fiscal 2020 and $243 million in 2021 of new spending is completely offset by savings.
In the fiscal 2021 preliminary budget, and each year of the financial plan, de Blasio said the city has set aside $1 billion in the general reserve and $250 million in the capital stabilization reserve. De Blasio's administration created the latter.
The Retiree Health Benefits Trust Fund now has $4.7 billion.
The city is awaiting Albany's sign-off on the establishment of a dedicated rainy day fund. Voters approved the measure in November by a roughly 70% to 30% count.
"We’re going to have to work together [with the state] to make this happen," First Deputy Mayor Dean Fuleihan said at a recent Citizens Budget Commission breakfast.
Strict state-imposed accounting rules in place since the financial crisis of the 1970s have prevented the city from setting aside revenues to use in a downturn. Instead, city officials use three alternative mechanisms to set aside resources: annual budget reserves, a “surplus roll” and reduced deposits to the Retiree Health Benefits Trust Fund.
The capital markets see rainy day funds as credit solidifiers.
Moody’s Investors Service upgraded New York’s general obligation bond rating to Aa1 from Aa2 last March 1. S&P Global Ratings and Fitch Ratings both rate the city's GOs AA. All three assign stable outlooks.
The city holds $38 billion of general obligation bond debt, according to Comptroller Scott Stringer's office. Transitional Finance Authority credits amount to roughly $47 billion of debt, while Municipal Water Finance Authority debt totals just less than $31 billion.
According to the Independent Budget Office, the city's budget prospects remain sound despite a slowing economy and fiscal perils from Albany and beyond. The Federal Reserve's recent cuts to short-term interest rates and the continued relatively low interest rate environment in which the city issues debt point to a continuation of low interest costs on the city’s variable rate bonds, IBO added.