When New York Mayor Bill de Blasio released his November
Uncertainties loom as de Blasio’s budget team scrambles to craft the balanced FY22 spending plan he must reveal by late January. The updated budget is $92 billion.
They include the next round of federal COVID-19 relief, one of many Washington variables in December. While House and Senate leaders are talking about a compromise package; a separate version could come when Democrat Joe Biden becomes president next month.
Also lurking are possible cuts and cost shifts from New York State; a projected Democratic supermajority in the New York State Senate; and pending city labor contract talks.
Hovering over all this is a coronavirus resurgence.
Hospitals are preparing accordingly and de Blasio has warned that the entire city could return to a more restrictive orange status — which now applies to Staten Island’s south shore — under Gov. Andrew Cuomo’s color-coded system for opening businesses. That could deepen the city’s revenue woes.
The city’s threshold for positivity rate is 5%. The daily coronavirus infection rate on Thursday was 3.9% whole the seven-day rolling average has spiked to 5.9%.
“The severity and duration of this fall's COVID-19 spike will play an important role in how prepared local governments are for 2021, particularly if any enhanced social distancing measures result in a notable slowdown in economic activity, especially during the holiday season,” S&P Global Ratings said.
Meanwhile, the administration has flip-flopped on the reopening of in-person school learning. Schools for the lowest grades will reopen Monday, de Blasio said.
“Until you have an effective vaccine going through, you’re going to have to deal with a spike in the coronavirus, which was anticipated for the late fall and early winter months,” said Howard Cure, director of municipal bond research for Evercore Wealth Management.
Widespread vaccine distributions could engender an eventual return to normalcy, said Preston Niblack, the city’s deputy comptroller for the budget.
“The question is, really, how long does it take, what’s the timetable and how much [economic] damage has been done in the meantime,” Niblack said on a Thursday webcast hosted by the business group Association for a Better New York.
Since the pandemic escalated in March, the city has had multiple warning shots from Wall Street.
On Oct. 1, Moody’s Investors Service downgraded the city’s general obligation bonds to Aa2 from Aa1, while also downgrading the state government. Moody’s also downgraded some city appropriation-backed debt, including Hudson Yards Infrastructure Corp.
S&P Global Ratings and Fitch Ratings assign AA ratings to the city’s GOs.
According to data on the Municipal Securities Rulemaking Board's
Federal aid is necessary but is no panacea, according to Ana Champeny and David Friedfel, the directors of city and state studies, respectively, at the watchdog Citizens Budget Commission.
“[They] have budget gaps so wide and face risks so substantial that even with considerable additional federal aid, the state and city still will have to implement significant actions to stabilize their finances in the long run,” they said in a commentary.
Between fiscal 2009 and 2012, the federal government provided the city with an estimated $5.8 billion in federal fiscal relief. The city received an additional $1 billion in federal stimulus funding between FY2013 and 2016.
Niblack, who works under city Comptroller Scott Stringer, urged de Blasio’s administration to approach outyear savings more proactively.
“Stimulus funds don’t last forever,” he said. “They’re there for a year or two to help you get your fiscal house in order. If you don’t get your house in order, you’re definitely going to have some problems.
“We need to get ahead of the curve before it smacks us in the face.”
The mayor made no reference to any Program to Eliminate the Gap, or PEG, which calls on department heads to earmarks savings.
“Now is the time to be looking at that,” Cure said.
Both Cure and the CBC called on de Blasio to negotiate with labor to identify efficiencies. “A lot is riding on labor savings yet to be negotiated,” Cure said. “There’s a need to bring labor to the table.”
PEG had been a staple of de Blasio’s four predecessors, although he loosely reinstated the process last year.
De Blasio, about to enter the final year of his second and final term, was silent about one of his trademark issues, a tax increase on wealthy residents that the New York State Assembly would have to approve.
Senate Majority Leader Andrea Stewart-Cousins, D-Yonkers, has declared that the Democrats will have secured 43 of 63 Senate seats — up from 40 — after flipping a Syracuse-area district. That would create a veto-proof majority. The absentee ballot count continues in two Suffolk County races in which Republicans lead.
That Senate breakdown could mean more city-friendly measures ranging from more direct aid to tax revenue.
“You always look to the state for what the city can and cannot do,” Cure said.
The state budget authorizes budget director Robert Mujica to make large unspecified cuts in local aid, including to school districts.
“Given the scale of expected revenue loss in New York, we expect the state will make cuts to K-12 funding,” Moody’s said. “To date, reductions have not been made as the state waits to see if additional fiscal relief from the federal government is forthcoming.”
De Blasio, whose eight-year run must end Dec. 31, 2021, because of term limits, has had to deal with a wave of staff departures, notably transportation Commissioner Polly Trottenberg, who had been with the mayor since his first day in office.
“It happens not infrequently during the last year of the last term of an elected official, but these are challenging times,” Cure said.
Trottenberg, a former U.S. transportation undersecretary who was also a Metropolitan Transportation Authority board member during part of her tenure, is working on a Biden panel advising the president-elect on infrastructure matters.
De Blasio denied any brain drain at City Hall.
“We have a very deep bench,” he told reporters. “Every single one of our commissioners who has succeeded has succeeded because they had a strong team around them.”
Mother Nature may also have a say in city spending. While snow levels are unpredictable, the Department of Sanitation's snow-removal budget has no rolling update. It is based on a City Charter-mandated formula that reflects average spending in the preceding five fiscal years. This average factors costs such as labor, training, salt and fuel.
“Because the average is retrospective, however, it does not factor in anticipated increases in costs … such as collectively bargained wage increases, changes in the price of salt and fuel, or additional funding to improve service,” said Daniel Huber, environmental analyst for the watchdog New York City Independent Budget Office.
Another year like 2020 with less than five inches of snow could lead to savings of $30 million, Huber said, while a year akin to 2011, with more than 60 inches, could lead to a snow budget shortfall of $58 million.
