New York Mayor Bill de Blasio's $82.1 billion
De Blasio, during an overflow news conference in the City Hall's Blue Room late Thursday afternoon, fielded questions about the depth of the city's reserves, its readiness for an economic downturn, possible state cuts to City University of New York and Medicaid programs, pension contributions and pushback from the City Council about spending levels.
"It was not a very dramatic presentation in that there are not a lot of big new initiatives," said Howard Cure, director of municipal bond research at Evercore Wealth Management. "It's always nice to see from a bondholder perspective to see the mayor cognizant of the need for bulking up reserves.
"He also recognizes the potential for an economic downtown," Cure said. "New York City is still vulnerable to the stock market. For any locality with a large pension program, it doesn't help to have a decline in equities. The financial services industry is still a big part of the employment base in the city."
The preliminary budget is up fractionally from the city's adjusted $81.7 billion budget in January. The council last June enacted a $78.5 billion spending plan.
The city has about $5 billion – about 6% of the preliminary budget -- in reserves, which the mayor called sufficient despite calls from city Comptroller Scott Stringer and budget watchdogs to bolster reserve levels.
"I do, because they're the most substantial reserves the city has ever had, because they're coupled with a series of other actions," said de Blasio. "Again, if we were just talking about reserves in isolation, that would be one thing – but we're not."
The cushion includes $1 billion each year in the general reserve and $3.4 billion in the retiree health benefit trust, in addition to the $1.1 billion in citywide savings program for fiscal 2016 and 2017 combined. The latter initiative includes $667 million in agency savings and $407 million in debt service savings, both over two years.
Moody's Investors Service rates New York City's general obligation bonds Aa2. Fitch Ratings and Standard & Poor's rate them AA.
Fitch called the city's cushion modest but adequate.
"While the city does not carry a meaningful fund balance, growing budgetary reserves and expense prepayments provide adequate protection against unforeseen conditions," Fitch said in July, when the city sold $750 million in general obligation bonds.
A big unknown is state assistance for CUNY and Medicaid. Cuomo's original call for the city to pay much more toward CUNY senior colleges and Medicaid stood to punch a nearly $1 billion hole in city coffers, though the governor days later backtracked a bit and said it was the starting point for discussions about efficiencies, notably within CUNY.
"It's still lurking out there, I think," Cure said. "Hopefully it will not impose on the city budget, but who knows at this point?"
If de Blasio has a doomsday plan, he didn't share it Thursday.
"If for any reason something goes wrong, we will have ways of fighting it," he said of Cuomo's proposal to have the city pay more for CUNY and Medicaid. "This one to me on its face is unacceptable and I'm very confident we'll deal with it."
The state must approve its fiscal 2017 budget by March 31, three months ahead of the city's deadline and time for the city to adapt a contingency.
De Blasio is expected to testify in Albany the last week in January.
The mayor's targeted spending hikes include an additional $600 million per year to the five pension systems, whose value is estimated at roughly $163 billion. That, he said, will cover costs stemming from mortality projections of increased lifespans for city workers. The city is aiming for full funding of the pension system by 2032.
In a swipe at New Jersey Gov. Chris Christie, de Blasio flaunted a graphic detailing the Garden State's nine downgrades by the three major bond rating agencies since 2010, when Christie took office.
"Consider what happens when a city or state forsakes its pension obligations. Just look across the river at New Jersey," said de Blasio.
The budget also calls for an additional $337 million for NYC Health and Hospitals, with de Blasio to announce a restructuring of the wobbly organization later this winter; $868 million to add nearly 12,000 seats to alleviate school overcrowding; and $115 million to extend the $15 minimum wage to all city employees and contracted workers providing human services.
The minimum wage is to take full effect by the end of 2018.
Other spending initiatives include beefed-up park security, an expansion of the ShotSpotter police gunshot-detection technology and a new Staten Island ferry.
Another variable is the City Council. While the council last year pushed to add 1,300 police officers over de Blasio's objections, nearly half the 51-member council this week wrote the mayor asking him to rein in spending.
