The below are State Comptroller DiNapoli’s prepared remarks for the Aug. 12, 2026 meeting of the New York City Financial Control Board.
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Thank you, Governor Hochul…and thank you Mayor Mamdani for your report to the Board.
I’d like to also acknowledge City Comptroller Mark Levine, and public board members Bill Thompson, Kathy Wylde and Marjorie Henning.
Let me also thank Michelle McManus and the Financial Control Board staff.
Today, my office released our report on the City’s Fiscal Year 2027 Budget and Financial Plan, which we’ve distributed for today’s meeting.
A year makes a lot of difference. A year ago, I was here explaining that the City had developed a habit of underbudgeting major expenses— often by the billions. Then as the fiscal year went on, the City found billions in resources, often from revenues beating its very conservative estimates, and drawing down on its surplus roll.
This past lack of transparency created a shock, for some, when the new administration took the step to more fully disclose these costs and provide more realistic revenue projections to help pay for them.
Put this into perspective, my office projected $127.7 billion in spending entering FY2027, while the prior City administration pegged these costs at just under $122 billion. The City’s adopted budget now projects spending at over $127 billion in FY 2027 as well, inclusive of prepayments.
This budget transparency is so critical for enabling a more honest discussion of the City’s fiscal challenges. After some initial confusion, this has helped the public understand more about what is really happening with the City’s finances. These conversations have not always been easy. I commend the mayor for the more realistic approach.
With that goal of transparent and open dialogue in mind, I will provide some observations from the State’s Comptroller’s office on the City’s current economic and fiscal outlook.
City Spending
The story of FY 2026 was dealing head on with underbudgeted expenses, which had created a distorted perspective of the costs that were fueling growth of the City’s budget gaps.
Revised expenditure projections included public assistance, rental assistance, subsidies to the Metropolitan Transportation Authority and overtime, along with a host of smaller underbudgeted items for healthcare and mental health, youth programs and legal services.
The amount added to address the underbudgeting issue was not small. In FY 2027 alone, these costs amounted to more than $6.4 billion in underbudgeted expenses that were not included at this time last year.
These were not the only new expenses added, however. The City has had to deal with higher than anticipated healthcare costs, judgments and claims. It has also funded several new initiatives, including 2-K, which is expected to expand and require more resources in the coming years.
Overall, more than $10 billion in new agency needs was added to FY 2027 since we spoke a year ago, a substantial addition to spending for any year.
The recognition of these expenses required several budgetary decisions to close the gap. On the spending side, the City substantially expanded its FY 2026 citywide savings plan in February. In May, it added cost containment strategies for major cost drivers, a prudent first step that was enabled only after the City accurately accounted for these items.
Sources of Funding Suggest Potential Stress
Despite these efforts generating $3 billion in resources this year, it was once again the City’s revenue growth that was the biggest factor that allowed the City to maintain balance in FY 2026 and achieve budget balance entering FY 2027.
City fund revenue exceeded adopted projections by $5 billion in FY 2026, the sixth year in a row that it exceeded expectations at budget adoption by at least $3.5 billion.
In what has become a common refrain, Wall Street had a very strong year, with profitability supporting business tax growth exceeding 7% and a record size bonus pool helping preliminary PIT revenues exceed 12% growth over the prior year.
While Wall Street has been a key part of the City’s economic growth story in recent years, I do want to caution that the sector is prone to cycles. The share of local wages attributed to the industry, which drives personal income tax collections, is rising again, leaving the City, as well as the State, prone to revenue volatility associated with the financial sector.
Concerns over the City’s largest revenue source, the property tax, have also abated as commercial real estate has strengthened.
Asking rents and vacancies in the City’s office market continue to outpace other large office markets across the nation, and the retail sector has also experienced improvement.
Residential property values, which have been more resilient since the pandemic than commercial values, saw another year of strong growth in the FY 2027 property tax roll.
Tourism numbers also came very close to full recovery, but choices made at the federal level on trade and immigration stalled years of improvement in 2025.
Sales and hotel taxes continue to strengthen however, and the City remains a leader among national destinations in the recovery of visitors.
All of this is to note that the pressure to balance the budget comes not amid revenue weakness, but a period of economic and revenue strength.
Concerningly, despite slow but steady economic growth, better than projected revenues were not enough to close the gap once expenses were properly budgeted. The City also anticipated revenues that required approval of the State, including a new second home surcharge, along with decoupled business taxes from provisions in the federal H.R.1 bill to close the budget gap.
Even with these new resources, additional state aid and several one-time actions on spending, including a significant pension restructuring, were needed to achieve balance.
Current revenue projections anticipate that growth will continue. While this is not unreasonable, a recession and/or actions taken in Washington remains the most concerning risks facing the City’s finances.
Sources of budget uncertainty remain elevated
Fiscal risks stoked by federal actions have hung over us for the last two years. Tariffs. Immigration. Energy. Inflation. Politicizing the disbursement of federal funds. It can feel like planning and preparation is an exercise in futility due to this shifting landscape.
But I would suggest this is exactly the time to plan, prepare, and develop options that will provide us with choices down the road and alleviate more difficult decisions later.
Even if federal and economic risks can be avoided, the City faces its own questions about growth in certain difficult to control costs, such as healthcare, the cost of new and expanded programs, including childcare, and the negotiation of the next round of labor contracts. These questions too will be easier to solve if steps to prepare are accelerated now. The July announcement of a 2.5% savings target for FY 2027 shows that the City understands this, but more can be done.
Since State fiscal year 2022, the State has been consistently growing its fiscal cushion. The State has about $15 billion across its three rainy day reserve funds, about 115 of State operating fund spending in SFY 2027. The City, by contrast, has about $2.5 billion entering the fiscal year, including in-year reserves, or nearly 3% of City-funded spending.
Inclusive of the retiree health benefits trust, which provides additional budgetary flexibility, the City’s available resources would be about 8% of FY 2027 city-funded spending, still below the State’s reserves percentage.
As I have recommended, the State has consistently shifted from reliance on informal reserves to making consistent deposits to its statutory rainy-day reserve funds, which now have the highest balance in State history. The State has made deposits in each of the last three years, in contrast to none made by the City over the same period.
The Charter Revision Commission’s proposed amendment to set guidelines for the City’s reserves is only the first step in putting together a robust reserve policy with purpose and structure.
I urge the City to develop a policy that responds to what fiscal monitors have already suggested. This will allow the City to make decisions out of a position of greater fiscal strength over time.
Going Beyond the Rules of the Financial Emergency Act
Occasionally at past FCB meetings I have brought up the fiscal discipline embedded in the Financial Emergency Act that provides a blueprint for managing City finances in a prudent manner, while also giving confidence to investors who buy the City’s bonds.
These measures, which include barring deficit financing without state approval, GAAP based-budgeting, the timely presentation of regular budget updates and adoption of a balanced budget, contingencies in the expense budget and the continued meeting of this board all continue to provide confidence that the City is working within ample controls and under state oversight, and that fiscal issues will be discussed in a transparent manner.
But changes to modernize the City’s fiscal controls beyond the FEA, like the ability to enhance its rainy-day fund for example, should be done with the same discipline. As a case in point, the now abandoned planned use of reserves to achieve budget balance proposed in February, despite a growing economy, was cited by rating agencies as part of the justification for the City’s outlook revision.
More than 50 years of operating within these rules, even with slight adjustments, has rightfully given confidence to those who monitor the City’s budget. But it does not take long for that confidence to be questioned, especially if actions taken go against the spirit of the rules.
A Call for Transparency
At the start of my remarks, I commended the City for transparently reflecting spending that for years was known to be out of step with reality. Now at the close, I will note that this type of transparency can, and should, be expanded.
First, restarting quarterly meetings on the progress of the City’s savings programs with the City’s fiscal monitors. This stopped during COVID but did not restart and coincided with an era of unrealistic spending projections. This would provide the public with information, and the City with an extra set of eyes, on its success at achieving planned savings.
Second, laying out the full costs of significant initiatives that it plans to undertake, such as expanding childcare supports, would provide a more comprehensive understanding of what the budget risks could be and the funding needed to close future gaps. This is critical as we enter a period where it is likely that additional revenue options will be discussed.
Lastly, tying program funding to outcomes, which is still too difficult using the City’s current financial reporting and performance indicators, would go a long way toward starting to show the public how money is used.
Conclusion
So, that’s where we are.
The City owes it to its residents and businesses to communicate the budgetary and operational challenges before us and be transparent about how the City intends to overcome them without hurting affordability or adding to burdens that could weigh down future economic growth.
As always, the Office of the State Comptroller stands ready to assist in any way we can, and we will continue to monitor the revenue and expense choices being made to analyze their effects on the City’s services and quality of life.
Again, my thanks to my colleagues on the board and the staff at the Control Board, the Mayor’s Office, the City Comptroller’s Office, the City Council and the State Division of the Budget, for your work during these times.