'Insulted' NYC Council starts hearings on mayor’s budget

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Hinting that there may be no early budget agreement this year, New York City Council Speaker Corey Johnson said the council was insulted that Mayor Bill de Blasio ignored its suggestions when presenting his latest budget proposal.

On the first day of Finance Committee hearings on the $92.5 billion executive budget for fiscal 2020, Johnson took the Administration to task for disregarding the Council’s response to the budget the mayor released last month.

“Typically we try to get this budget adopted by the first week in June,” Johnson said on Monday. “I doubt that’s possible. And I’m willing to wait until just before July 1 to negotiate this and get this right. I feel under no time restraint, or that this needs to be done quickly — it needs to be done the right way.”
In February, the mayor unveiled his preliminary budget, after which the 51-member city council held a round of hearings. At the end of April, the mayor released his executive budget and the council issued its response to the plan. The council is holding a second round of hearings, then negotiate adjustments with the mayor.

By law, the council must vote on a budget by July 1. The last three budgets were all approved ahead of schedule. It now appears that approval for this one may go right down to the wire.

Johnson praised Melanie Hartzog, Director of the Mayor’s Office of Budget and Management, who testified Monday, for working with Latonia McKinney, Director of the Council’s Finance Division, to restore $77 million of one-shot funding for fiscal 2020.

In its April response, the Council had highlighted the Administration’s failure to include continuing funding from fiscal 2019 of about $155 million in one-shots for programs such as: adult literacy to teach English to adults across the city; the extension of the beach and pool season to a week past Labor Day; bridging the gap social workers who provide services to homeless students; the addition of 5,000 summer youth employment program slots; and post-arrest diversion programs which help reduce the city’s jail population.

“The impact of avoiding these service cuts can’t be overstated and I thank the Administration for working with us to protect the city’s social safety net,” Johnson said Monday. “The restoration of the one-shots was only one item in our budget response, and speaking frankly - they never should have been left out in the first place. And I’d still like us to all recognize that there is still a lot of work ahead.”

New York State cutbacks to the city totaled $300 million, or half the amount the city had estimated.

"We were able to beat back some of the cuts, but we still suffered a serious blow to the city's finances," de Blasio said in last month's budget presentation at City Hall. "The state budget, in the end, it was not, thank God, the $600 million we faced, it was about half that in the end – about $300 million in cuts and unfunded mandates that now will affect Fiscal ‘20 and we're going to have to compensate for. That includes $125 million in financial assistance to families in need, TANF funding, and that includes support for people in shelter; $59 million in health services, and that includes money for child and infant immunization, family health, disease prevention, and emergency preparedness; and $25 million lost in education funding."
The Council had also called on the Administration to raise budget reserves by $250 million as a safeguard against an economic slump.

“The city needs sufficient reserves in case of an economic downturn to avoid service cuts and raising taxes,” Johnson, Finance Committee Chair Daniel Dromm and Capital Budget Subcommittee Chair Vanessa Gibson said in a joint statement last month. “In recognition of this, the Council is proposing to boost the city’s reserves by $250 million. Additionally, to avoid losing federal funds, the Council calls for $40 million to ensure the city gets an accurate count on the upcoming 2020 Census.”

About $916 million in savings were found in the executive budget from city agencies under the newly instituted program to eliminate the gap, or PEG.

On Monday, Dromm said it was surprising that the PEG was instituted to guard against possible hard times ahead, but that no extra money was allocated to boost the city’s reserves.

“When the Administration announced a mandatory PEG this year, the Council was hopeful that the mayor was finally getting serious about reigning in inefficiencies in spending. To quote the Citizens Budget Commission ‘the PEG is in-line with the Administration’s prior savings programs and a majority of this savings are from expense re-estimates, increased revenues, funding shifts and debt service savings rather than from improve efficiency.’ ”

The PEG was couched in terms of a potentially worsening economic situation and the need for belt tightening in anticipation of possible bad times ahead, he said.

“So what is truly baffling in light of this sentiment, the Administration has chosen not to add even a single dollar towards our reserves,” he said. “As the mayor grows the budget and increases spending it is even more important to concomitantly and proportionally increase reserves. By not doing so, the Administration is irresponsibly increasing the likelihood that deep programmatic cuts or tax increases will have to be made.”

He said the Council was reiterating its appeal to increase reserves.

“Save more now while times are good,” Dromm said, “So we are prepared for whatever the future has in store.”
Hatzog testified the city has kept reserves high.

“In addition to our aggressive savings plan, we maintained $5.72 billion of budget reserves in fiscal year 2020. This record level includes $1 billion in the general reserve, $250 million in the capital stabilization reserve and $4.47 billion in the retiree health benefits trust,” she said, adding that “Last June, we worked with you [the Council] to add $125 million in general reserves and $100 million to the health benefits trust in the current fiscal year. We look forward to discussing next year’s reserve levels with the Council as we head toward budget adoption.”

City officials can use three ways to set aside money: annual budget reserves, a “surplus roll,” and reduced deposits to the Retiree Health Benefits Trust fund. Two budget reserves — the general reserve and the capital stabilization reserve — are not available for spending beyond the fiscal year in which they are established. Surplus roll consists of a group of expenses made at the end of the fiscal year to effectively transfer resources from one fiscal year to the next in compliance with generally accepted accounting principles. The city uses these surplus funds to prepay general obligation and Transitional Finance Authority debt service, retiree health benefits costs and subsidies to other legally distinct entities. The city created the Retiree Health Benefits Trust in the 2006 fiscal year to help pay for the future costs of health insurance and other post-employment benefits.

The $116.9 billion 10-year capital plan through 2029 at $116.9 billion has ballooned from February's budget of $104.1 billion. Hartzog said the plan supports the city’s infrastructure needs and prioritizes maintenance and state of good repair.

“The plan funds critical projects like adding school seats, expanding Housing New York 2.0 and improving our roadways and sewer systems,” she said. “Further, the capital strategy now reflects $8.7 billion in funding for borough-based jails.”

The city is one of the largest issuers of municipal debt in the U.S. As of Dec. 31, the city had about $38 billion of general obligation debt outstanding.

In March, Moody’s Investors Service raised its rating on the city’s general obligation bonds to Aa1 from Aa2.

“I’m glad that we were able to make some headway this week between the release of the executive budget and today’s hearing, but we are a long way away from adoption,” Johnson said. “The Council is ready to roll up its sleeves and continue to work together with the Administration to get this done. I hope that the Administration is willing to do the same.”

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Budgets Bill de Blasio Corey Johnson Daniel Dromm Melanie Hartzog City of New York, NY New York City Pension Funds New York City Industrial Development Agency New York City Municipal Water Finance Authority New York City Housing Development Corporation New York City Transitional Finance Authority New York City Housing Authority New York City Transit