Pension overhaul will save New York City less money in the next few years than had been expected, according to a new analysis.
The changes passed in Albany will save the city $27 million in 2015 and $56 million in 2016 than Mayor Michael Bloomberg had projected based on Gov. Andrew Cuomo’s original proposal, according to the analysis of Bloomberg’s preliminary budget for fiscal year 2013.
Additionally, health care insurance costs are projected to average $45 million higher annually than the mayor estimated for 2013-2016, the New York City Independent Budget Office said Thursday.
The IBO’s report presents its new economic forecast and tax revenue projections, along with its review and adjustments of Bloomberg’s spending plans, including the financial plan through 2016.
Cuomo two weeks ago signed pension- overhaul legislation — a modified version of his budget proposal for a new pension tier — that he said would save the state more than $80 billion over three decades.
The mayor’s Office of Management and Budget projects that annual levels of new bond issuance will total roughly $5 billion a year from 2012 through 2015, down from 2010 and 2011, before declining in 2016.
Annual new-money bond issues reached $5.4 billion in 2009, peaked at $7 billion in 2010 and then declined to $5.8 billion in 2011, the IBO said.
The city now expects general obligation and Transitional Finance Authority bond issuance through 2016 to total $24.5 billion.
Low interest rates have enabled the city to recognize more than $875 million in savings for fiscal years 2010 through 2013 on variable-rate GO debt alone, the IBO said.
Additional savings have come on TFA variable-rate debt and through favorable rates on GO and TFA fixed-interest borrowing — both new-money and refunding issuances.
“With the Federal Reserve signaling that it will maintain its current low federal funds rate through calendar year 2014, there is reason to believe that the city will be able to recognize substantial additional savings,” the IBO said.
The independent watchdog also said that tax revenues are expected to rise by 4.3% this fiscal year and total $41.4 billion. In 2013, tax revenues are forecast to increase by an additional 5.5% and reach $43.6 billion.
It also estimated that the city will add 60,500 jobs in calendar year 2012 and an average of 72,400 per year through 2016, “but few of these will be on Wall Street.” It expects the most growth will be in leisure and hospitality, education and health care services, business services, and wholesale and retail trade.
The most conflicting signals have come from the financial sector, the IBO said. While the securities industry added jobs through most of 2011, the broker-dealer profits of New York Stock Exchange member firms were negative in the third and fourth quarters, resulting in $7.7 billion in profits for the year as a whole. The IBO called that the worst performance in a decade, aside from the meltdown of 2007 and 2008.
Based on IBO’s latest revenue and spending estimates, the city will end the current fiscal year with a $1.4 billion surplus, but the agency also estimates a budget shortfall of $2.2 billion in 2014, or 4.3% of tax and other city-generated revenues.
Debt service, adjusted for prepayments and defeasances, is expected to total $5.6 billion in 2012, up 13.4% from $4.9 billion in 2011, according to the IBO. That would represent the largest one-year percentage increase in debt service since the 25.8% figure from 2003 to 2004.
Debt service is projected to rise at a slightly lower rate of 12% in 2013, but faster than the IBO’s projected growth in tax revenues, rising to 14.3% of those revenues.