"New York City’s November 2021 Financial Plan modification indicates that the recovery is underway, but that its trajectory is uncertain, with employment growth and improvement in the commercial real estate market expected to slow from earlier projections. The updated financial plan highlights why smart use of the city’s federal relief funds and better-than-projected revenues are necessary to shore up reserves. The city needs to find ways to balance its budget while maintaining service levels to smooth its path to recovery while navigating a difficult economic environment.

"Wall Street continues to have a positive impact on the city’s financial plan, notwithstanding recent volatility. As I noted in August, market returns in FY 2021 enabled record pension gains which will be used to narrow the outyear gaps to an average of $2.6 billion annually and alleviate risks from projected annual labor savings by $500 million from $1 billion the city had not yet identified. Bonuses in the sector should also help offset weaker aggregate wages in other sectors, such as tourism, however profitability and bonuses in the securities industry are not sustainable at these levels and industry employment has lagged national growth. Slower growth also highlights why the city must further help residents access state relief programs, including for small businesses, and that the federal government reallocate funds for rent relief. 

"The updated plan also raises concerns for the pace of recovery’s effects on the city budget. City tax revenues, which have generally beat expectations in recent years, are in line with projections, suggesting they may not provide the same source of upside for the city’s budget as it has in years past. In light of these revenue concerns, the city should take more aggressive steps to identify and implement operational savings. It did not take up this effort in the updated plan.

"The modification shows there is still much to be done to manage uneven service demands across the city. The next administration should make efforts in its preliminary budget next year to reasonably assess the effects of changes to the city’s revenue over the plan and make the hard decisions necessary to balance the budget for Fiscal Year 2023 and beyond."

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