New York City’s $124.7 billion fiscal year (FY) 2027 Executive Budget, released in May, continued the city’s recent efforts to detail the substantial spending challenges it faces while identifying ways it plans to manage them, but defers decisions to achieve structural balance into the future, according to a report released today by State Comptroller Thomas P. DiNapoli.

“New York City’s resilient economy continues to bolster revenues to help the city sustain its essential programs and services,” DiNapoli said. “Still, the city needs clearer plans to strengthen reserves and address spending growth, particularly for its largest cost drivers. Proactive and prudent fiscal choices in the coming year will help the city maintain services and expand its broad economic base.”

The city closed its FY 2027 budget gap without major new taxes but relied heavily on several one-time measures. Eliminating the proposed property tax increase, estimated to generate $3.7 billion in FY 2027, left a significant shortfall in the budget. The city partly addressed this by slowing planned spending growth, implementing cost containment initiatives and securing additional state aid.

The city’s savings program identified agency-level reductions previously targeted in February, including $1.1 billion in FY 2027, and added new cost containment measures for the city’s growing educational and social service programs totaling nearly $1.2 billion in FY 2027. More detail is still needed on how these savings will be achieved and sustained.

The city received more than $2.7 billion in additional state aid to fund city spending for childcare, education, the Metropolitan Transportation Authority, and public health measures in FY 2027. However, much of this funding will have to be renegotiated next year.

The city’s use of one-time actions could worsen its structural budget gap if not addressed through recurring measures in the coming years. These actions include a $1.2 billion write-down of a prior year labor reserve that will be used to fund a $900 million increase in expense prepayments in FY 2027, as well as the re-amortization of its unfunded pension liability for four of its five pension systems, yielding $1.6 billion in FY 2027 savings and providing similar recurring savings through FY 2032.

The city’s latest financial plan estimates annual average budget gaps of $8.6 billion annually through 2030, highlighting the differences between recurring revenue and spending that will need to be managed.

DiNapoli’s office identifies additional budget risks averaging approximately $1.8 billion annually from FY 2028 to FY 2030, primarily from pension costs, overtime and rising social services, partially offset by better-than-projected property and personal income tax revenues. When adjusted for these risks, the city’s projected budget gaps rise to roughly $10.4 billion annually in the out-years of the financial plan.

To strengthen its long-term fiscal position, the city should formalize and publish policies on annual reserve contributions based on the city’s fiscal performance and set clear guidelines for when these funds may be used. The city should also continue to monitor and expand on its savings initiatives. These measures would put the city in a better position to manage an economic slowdown or future emergencies.

Report

Review of the Financial Plan of the City of New York

Related Reports

Review of the Financial Plan of the City of New York (March)