With New York City, New York state and the Metropolitan Transportation Authority all needing additional federal aid to mitigate the impact of COVID-19, failure to aid one could hurt the others, state Comptroller Thomas DiNapoli said in a
“Without additional federal budget relief, the city will need to make hard choices to ensure budget balance in the current fiscal year and to close next year’s budget gap,” DiNapoli said.
The city enacted its
DiNapoli’s office has cited risks of $1.8 billion in the current fiscal year and more than $2.3 billion in subsequent years, which could increase next year’s budget gap to $6.5 billion.
The largest risk, he said, is the expectation of $1 billion in recurring labor savings. While the city reduced the budget for police overtime by $350 million in the current fiscal year, it has yet to present a plan to realize the savings.
It also remains to be seen whether the city’s revenue forecasts are conservative enough, DiNapoli added, given the uncertainties surrounding the pandemic and the city’s recovery. The city expects a strong rebound next year but the recovery may be slower than anticipated, he added.
In addition, Gov. Andrew Cuomo has indicated actions will be needed to close a $13.3 billion gap in the state’s budget without increased federal aid, including an $8.2 billion largely recurring reduction in aid to localities. “This would likely have a significant impact on the city’s budget and its residents,” DiNapoli said.
City-funded debt service is projected to reach $9 billion by FY 2024, up 44% in just five years. Debt service as a share of tax revenue would reach 13.5%, DiNapoli said, below the city’s ceiling of 15% but close to the peak it reached during the Great Recession.
The state-run Metropolitan Transportation Authority also faces an unprecedented financial crisis. Although it has received $4 billion in federal aid, it still projects a budget gap of $9 billion over this year and next. The MTA has requested a further $4 billion in aid. “Even with additional federal aid and returning ridership, the MTA will still need to make difficult decisions to balance its budget,” DiNapoli said.
Congress is debating the size and content of another COVID-19 relief bill, but the Senate and House of Representatives are gridlocked.
In June, the city projected a two-year revenue loss of $9.6 billion from the COVID-19 pandemic. To offset the loss and to address its other needs, the city freed up $11.4 billion in resources. Nearly $4.1 billion came from reserves, including $2.6 billion from the Retiree Health Benefits Trust. The city also reduced the general reserve for FY 2021 from $1 billion to $100 million, the statutory minimum for the start of the fiscal year.
Despite a balanced budget in the current fiscal year, the city projects a budget gap of $4.2 billion for FY 2022 because it relied heavily on nonrecurring actions to balance this year’s budget. In addition, the city’s four-year financial plan includes sizable risks.
More than 944,000 jobs evaporated in March and April, the largest job loss since the Great Depression. The unemployment rate, which had fallen to a record low of 3.4% in February 2020, spiked to 20.4% in June, the highest level in 44 years.
The loss represented one-fifth of the jobs in the city and erased nearly all of the gains over the past 10 years.
Moody's Investors Service rates the city's general obligation bonds Aa1. S&P Global Ratings and Fitch Ratings rate the city's GOs AA.
