New York City’s $127.8 billion fiscal year (FY) 2027 budget, inclusive of prepayments of certain expenses, is nearly $5.9 billion more than projected at the same point last year, a significant increase that includes addressing known costs that were left out of previous financial plans. While the city was able to achieve budgetary balance in FY 2027, it shows a structural imbalance that could worsen if sustainable solutions are not found, according to a report released today by State Comptroller Thomas P. DiNapoli.
“New York City’s finances have improved modestly this year as the financial services industry produced robust revenues to help sustain programs and services, but the city has gone another year without increasing reserves and faces projected spending that will require hard choices if revenues do not come in better than expected,” DiNapoli said. “I commend Mayor Mamdani for being transparent in recognizing the fiscal risks ahead. Going forward, the city needs to make balanced and prudent fiscal choices to maintain its substantial operational needs while encouraging employment and business growth to enhance its economic and tax revenue base. Clear communication to the public about its fiscal challenges will be critical, particularly if the economic outlook weakens.”
The city’s FY 2027 budget, released in June, more accurately reflects recurring costs stemming from social services and education spending, and partially addresses overtime costs and subsidies to the Metropolitan Transportation Authority (MTA). These made up nearly 65% of the total added spending for new agency needs in FY 2027.
The city also added substantial spending for new needs, both to address unexpected costs (including rising health care plan costs) and for expanded initiatives such as child care. Combined with its efforts to address under budgeted initiatives, the city added an unprecedented amount of spending for new agency needs, averaging $10.3 billion annually.
Anticipated state support for the city has increased by an average of $2 billion annually from FY 2027 to FY 2030, including a one-time rise in unrestricted aid for FY 2027 and additional funding for child care and youth justice programs. However, these resources are expected to decline in later years, necessitating renewed discussions about the long-term burden of these growing programmatic expenses.
DiNapoli noted numerous reasons for concern in the coming years.
The city has not yet fully experienced stress on its budget from forces outside of its direct control, including federal funding uncertainty and a slowdown or reversal in economic growth.
City finances have become more reliant on Wall Street in recent years with over 21% of total private wages coming from the securities industry, up from 19% prior to the pandemic. A recession, particularly one that is rooted in the financial sector, would create acute pressure on the city budget.
So far, the state has mostly insulated the city from federal funding changes. However, the negative effects of federal funding policy changes on the state’s financial position are expected to accelerate, with major changes to health care and social services support being phased in over the coming years. The state’s fiscal position would also be hurt by a recession, potentially compounding the fiscal risks to the city.
The city’s stated out-year gaps now total a combined $23.4 billion from FY 2028 to FY 2030, excluding tax programs, 37% higher than the cumulative gaps since last June and the largest amount on record. DiNapoli’s office anticipates that even with better than projected revenues, the city’s gaps may be even higher, averaging $8.8 billion from FY 2028 to FY 2030, when additional risks are factored in.
The creation of a new Citywide Savings Program for FY 2027 in July after budget adoption shows the city’s recognition that more can be done on managing costs. Publishing the choices made in the FY 2026 Citywide Savings Program so that the cost savings can be monitored would help ensure such plans are being implemented effectively.
On another positive move, the city’s Charter Revision Commission recently voted to include a ballot proposal in November that establishes a target for all reserves but maintains loosely worded language on deposits, withdrawals and replenishment. Additional clarity on the sources and uses of the city’s Rainy Day Fund is needed to ensure deposits are made when the city has the available cash, without hurting the flexibility for their use when necessary.
DiNapoli recommends the city create a comprehensive multiyear plan for budgetary balance that shows the public how it is attempting to manage its costs, raise revenue in ways that do not affect competitive balance, and set aside funds for unexpected emergencies. The city has taken steps in each of these critical areas in recent months but will have to continue to do so to manage an uncertain economic and fiscal outlook.
Report
Review of the Financial Plan of the City of New York