IBO: Bright Budget Picture for N.Y. City

Projections of New York City revenue and spending under Mayor Bill de Blasio's November financial plan reflect an even brighter fiscal outlook than anticipated, according to the Independent Budget Office watchdog organization.

IBO projects the city will end the current fiscal year with a surplus of $744 million, $639 million more than de Blasio's office anticipated, the organization said in a Dec. 23 report.

The November plan covers fiscal 2015 through 2018.

Assuming the city uses this year's surplus prepay some of next year's expenses, IBO projects the city will end 2016 with a "very small shortfall" of $184 million, roughly $1.7 billion less than de Blasio administration's gap estimate for next fiscal year. IBO also projects small surpluses for 2017 and 2018, years for which de Blasio officials anticipate shortfalls exceeding $1 billion.

Amy Spitalnick, press officer for the Mayor's Office of Management and Budget, said securing major debt service and pension savings, combined with strong revenues, have reduced gaps, which already had been well below historical averages.

"We are intentionally prudent in how we project revenue growth, as we've seen the risk in neighboring states like New Jersey, which over-projected revenue and face enormous deficits as a result," said Spitalnick.

In a separate analysis last week, city Comptroller Scott Stringer said the city's economy outpaced that of the nation over the first three quarters of the calendar year. "Until we see a slowdown in revenue growth, outyear budget gaps should remain manageable throughout the four-year financial plan," said Stringer. "The city is prudently managing its expenses, including implementing the new citywide agency savings and efficiency program, to continue to build up a budgetary cushion for future years."

Barring a major deterioration in the global economy or a resumption of a political crisis in Washington over raising the debt ceiling, some of the biggest risks to IBO's fiscal outlook for the city may come from local spending needs.

One risk could come from still unsettled contracts with many of the city's uniformed workers—police, fire, sanitation, and correction. Shortly after the release of the November plan, which includes funding for all city workers based on the settlement pattern with the teachers union and District Council 37, the city reached a tentative deal with eight unions representing 12,000 high ranking uniformed officers.

"This deal departed a bit from the prior pattern and, if extended to all of the uniformed unions, would cost about $460 million more than budgeted over the four years of the financial plan based on IBO's preliminary estimate," the organization said.

Moody's Investors Service rates the city's general obligation bonds Aa2. Fitch Ratings and Standard & Poor's rate them AA.