De Blasio warns of ‘stark’ New York budget landscape
New York City Mayor Bill de Blasio warned about a worsening budget picture amid possible roadblocks to any further federal rescue aid and more dire projections from a budget watchdog.
“We’ve got a stark choice ahead,” de Blasio told reporters Monday.
A new estimate by the Independent Budget Office is forecasting a much deeper revenue shortfall for New York than what City Hall expects, as the city scrambles to recover from the effects of COVID-19.
IBO, in its May budget outlook, projected a $9.5 billion revenue gap for fiscal 2020 and 2021, nearly 30% above the $7.4 billion that de Blasio’s budget office cited and up slightly from IBO’s forecast of a month earlier.
IBO now expects 2020 tax revenues to be $2.9 billion, or 4.6%, lower than it forecast in February and $6.6 billion, or 9.9% lower in 2021.
New York State’s also-dire financial situation could worsen the problem, IBO said. “State funding — which supports a large share of spending in many city agencies — is also in serious jeopardy.”
Without a further rescue package from Congress, “a whole series of rough decisions have to be made, across all agencies and personnel,” the mayor added. That implies layoffs, though he did not use the word on Monday.
The Democrat-majority U.S. House of Representatives last week passed the $3 trillion Heroes Act — the latest aid bill — though it faces headwinds in the Republican-controlled Senate.
“I don’t know what some people are thinking in Washington,” de Blasio said. “This is the epicenter of the nation. It all comes down to the stimulus.”
The City Council is considering de Blasio’s $89.3 billion executive budget for fiscal 2021, down $6 billion from his January preliminary budget, which he submitted before the coronavirus pandemic struck.
The mayor and council must agree to a balanced budget by July 1, and then the New York State Financial Control Board must sign off.
In the executive budget, 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.
Budget observers are especially watchful of any borrowing to cover operational costs, according to Maria Doulis, vice president of the Citizens Budget Commission. De Blasio’s budget includes no borrowing,
“We’ve seen how debt can get state and local governments, and even national governments across the world, into trouble because it’s just a slippery slope,” Doulis said on a Bond Buyer podcast. “It becomes seen as an easy option when it’s not.”
IBO estimates that through 2024, city spending on debt service and fringe benefits will rise by an average of 7.1% annually.
After adjusting for the prepayment of current-year debt service costs with prior-year resources, IBO estimates the city’s debt service expenditures will total $7 billion in 2020, or 7.2% percent of total city spending.
The projected increase in debt service costs is almost entirely a product of OMB’s estimate of new long-term bond issuance, according to IBO. Debt service on new long-term bonds issued during the plan period is expected to add roughly $2 billion to debt service costs by 2024, less any savings accrued from the retirement of older debt and refundings that may occur.
Fitch Ratings and Moody’s Investors Service have lowered their outlooks on the city to negative, citing the pandemic. S&P Global Ratings and Fitch rate the city’s general obligation bonds AA, while Moody’s rates the bonds Aa1.
City Comptroller Scott Stringer has launched an investigation into the city’s preparedness and response to the COVID-19 pandemic. Stringer's office has requested documents city officials received, created or issued related to COVID-19 ahead of the March 22 statewide stay-at-home order.
Controversies have included a reported dispute between city health commissioner Oxiris Barbot and police hierarchy about the availability of protective masks.