New York City’s fiscal condition continues to improve, but remains at risk for deficits because it has relied on nonrecurring resources to balance its budget, New York State Comptroller Thomas DiNapoli said in an annual report on the city’s fiscal plan.
“Next year’s budget will be balanced, but there are still significant out-year budget gaps to be closed and risks to be managed,” DiNapoli said. “The city has relied heavily on reserves and other one-shot sources of revenue, leaving fewer reserves to cushion the impact of potential budget risks.”
Risks include the pace of economic recovery, the timing of the receipt of proceeds from the sale of taxi medallions, the cost of new labor agreements, and the potential for future reductions in federal aid, DiNapoli noted.
Most of the reserves accumulated during the last economic expansion will be exhausted by the fiscal 2014, leaving the city with little cushion against budget risks.
Among the nonrecurring resources DiNapoli listed in the fiscal 2013 budget are a projected $1 billion in proceeds from the taxi medallion sale and $1 billion from the Retiree Health Benefits Trust, a fund in which the city deposited surplus resources to pay for future retiree health benefit costs.
The city has been redirecting about $3.1 billion of those resources to help balance the budget.
The budget gap for 2013 was initially projected at $4.6 billion, but in a recently revised financial plan, the city showed it had closed the gap and narrowed shortfalls for the following three years. Even so, future budget gaps still exceed $3 billion per year.
According to the report, most of the budget gap improvement has come from freeing up $5 billion in reserves, $1 billion in proceeds from the anticipated taxi sale and savings from agency actions.
DiNapoli also noted improvement in the city’s economic recovery, citing newly released data that show New York has regained all of the jobs it lost during the recession, even though the unemployment rate remains at 9.3%.
Previous data had indicated that the city recovered only half of the jobs lost during the recession.
Wall Street, which is a key driver for the city’s economy, so far has been slow to recover from the recent financial crisis.
“While the broker-dealer operations of the member firms of the New York Stock Exchange (the traditional measure of Wall Street profitability) had a strong first half in 2011, they lost $4.9 billion in the second half,” the report said.
Earnings for 2011 were only $7.7 billion, the lowest level of profitability in Wall Street since 2002.
Last year was the second year that profits declined by more than 50%. As a result, many Wall Street firms have announced large bonus reductions, and job losses are expected to resume this year.
