New York City’s adopted $119.7 billion fiscal year (FY) 2026 budget is currently balanced (including pre-payments) but there are significant concerns over funding from Washington and slowing economic growth that could jeopardize its financial position and discretionary programs if greater preparation is not taken, according to a report released today by State Comptroller Thomas P. DiNapoli.
“New York City’s finances in fiscal year 2025 benefited from better-than-projected revenues and savings from the lower cost of services for asylum seekers,” DiNapoli said. “Employment and tax revenues continue to grow, buoyed by a financial sector that has generated near-record profits in recent years. While this has enabled the city to fund substantial spending growth, given the systemic restructuring of federal fiscal policy underway and the risk of its lasting consequences, the city is vulnerable to reductions both in federal spending and perhaps from state responses to this retrenchment. It is concerning that the city made no efforts to codify plans to bolster reserves or set aside additional funds in its rainy-day fund.”
In each of the last three fiscal years, New York City has spent more than it has collected in revenue. This is exemplified by the surplus amount used each year for prepayments, which has declined from $6.1 billion in FY 2022 to $3.8 billion in FY 2025. While some of the recent pressures on city finances have been alleviated, including the number of asylum seekers in the city’s care, many under-budgeted spending items remain, meaning additional revenues or cost savings will need to be identified to balance the budget in coming years.
DiNapoli’s report notes that for the fifth year in a row, the city collected over $3.5 billion more in city tax levies during the fiscal year than anticipated when the budget was adopted. Since June 2024, city revenue estimates, including both city tax levies and miscellaneous revenues, increased by $3.9 billion in FY 2025, $3.5 billion in FY 2026, $2.1 billion in FY 2027, and $2.4 billion in FY 2028.
Over the course of FY 2025, the city added nearly $3.9 billion in new agency spending and council initiatives for FY 2026, outpacing city-fund revenues added over the same period. The city was able to close its budget gap largely by using its surplus for prepayments and revising city-funded asylum seeker spending down by $1.8 billion in FY 2026.
DiNapoli’s report does not anticipate a substantial rise in asylum seeker costs from current projections during the financial plan period, but it is unlikely that the city will be able to generate enough in further savings in this area to close its budget gaps.
The city’s out-year gaps now total $17.1 billion over the three years including FY 2029, averaging 6.2% of city fund revenues, an improvement from last year when the gaps averaged 6.8%. The city’s contingencies, which remain at $1.45 billion for each year of the plan, can be used to reduce the gap to an average of 4.6% of revenues if they are not needed to fund other expenditures during the fiscal year.
DiNapoli’s report, however, notes that the city’s continued practice of addressing recurring costs one year at a time understates the published out-year gaps. The city expects major agencies, including the Department of Social Services, the Police Department and the Fire Department, to see city-funded spending decline in FY 2026, which DiNapoli’s report anticipates is unlikely.
The city also assumes spending on overtime, cash assistance and housing voucher programs, among other expenses, will decline in FY 2026, without explaining how. Given the spending risks DiNapoli has identified, the city’s budget gaps may be as high as $10.3 billion in FY 2027.
Given the recent unpredictability of federal fiscal and economic policy choices, the city should be preparing for scenarios where its federal, state and locally derived resources may be impacted. This would include curtailing new discretionary spending unless a funding source is identified and developing a new savings program that could achieve cost savings through efficiencies.
New York City’s continued economic growth relies on its ability to provide fundamental public services of high quality, while adapting to manage fiscal challenges that may emerge.
Report
Review of the Financial Plan of the City of New York
Related Report
Review of the Financial Plan of the City of New York (June 2025)