Reports

New York City’s FY 2023 Budget and April Financial Plan shows the city has benefited from stronger-than-anticipated tax collections, outsized federal grant revenue from relief programs, savings in pension contributions from extraordinary asset gains in FY 2021, and announced additional savings programs, including significant vacancy reductions. However, better-than-projected fiscal performance may be short-lived amid inflation, geopolitical tension and supply chain issues.

The Comptroller is responsible for ensuring State and local governments use taxpayer money effectively and efficiently, including through the review of contracts. This year’s State budget allowed at least $11 billion in spending without a competitive process or the benefit of an OSC review. OSC’s oversight adds tremendous value, and contract review was completed in an average of just 5.3 days in 2021. A bill to statutorily restore certain OSC oversight authority for billions of dollars in contract spending should be enacted in this legislative session.

The personal income tax (PIT) is the single largest source of revenue for the State of New York, accounting for two out of every three tax dollars collected by the State. Accordingly, the State’s overall financial health and its ability to sustain investments in public services is linked to PIT collections. This report describes recent trends in personal income taxpayer filings between 2015 and 2019. 

Historic federal aid and better-than-expected revenues allowed for a steep increase in spending in the Enacted Budget. However, sustaining new recurring commitments over a longer time period may be difficult as new economic risks emerge, federal funding is spent down, and temporary tax revenues sunset. Bolstering reserve funds is essential for ensuring services New Yorkers rely on can be preserved through economic challenges and fiscal uncertainties.

Despite unprecedented federal aid, the MTA is still faced with determining how it will close its budget gaps in the future. If riders do not return faster than the MTA projects, or if new sources of revenue are not found, rising debt payments could force the MTA to close future budget gaps through service cuts, greater than planned fare hikes, or delays to critical capital projects.

The February Plan benefits from New York City’s continued economic resilience in 2021 and includes more proactive planning to fund budget risks and generate savings. The City is expecting to generate a surplus of $3.7 billion in fiscal year 2022 due to federal aid, better-than-projected tax revenues, and planned savings. The surplus could reach at least $4.5 billion if revenue and spending remain on their current tracks.

Historic relief funds from the federal government, provided in response to the COVID-19 pandemic, boosted New York’s per capita balance of payments from Washington from second-to-last in federal fiscal year 2019 to 40th in 2020. During this period, New York received $1.59 for every tax dollar paid to Washington, an increase from 91 cents from the prior year, but still below the national average of $1.92. 

Unrestricted State aid for cities, towns and villages has remained flat or declined over the last decade. When adjusted for inflation, unrestricted aid to local governments has actually declined by 24% since 2011, when the State’s real property tax cap was enacted.

Although the Division of the Budget forecasts in the State Fiscal Year 2022-23 Executive Budget that the budget will remain in balance for the next five years, the direction of the pandemic, inflation, and supply chain issues all remain risks to the state’s economic recovery and financial plan. The budget also proposes billions of dollars in spending that would bypass critical oversight if enacted.

Update: Supplemental Report on the State Fiscal Year 2022-23 Executive Budget (As Amended by the Governor)

The City experienced significant growth in its fulltime workforce in the years prior to the COVID-19 pandemic, much of which was driven by new or expanded services. The pandemic, and the City’s efforts to manage the budgetary implications of its impact, have led to a decline in staffing which has undone much of this growth.

Extraordinary emergency federal aid eliminated the most serious potential fiscal impacts of the pandemic. However, school closures, the necessary integration of remote learning, and the inability to provide in-person supplemental services to students have disrupted two consecutive school years, with significant negative impacts on student learning outcomes.

New York City Health + Hospitals initially experienced some challenges with staffing and supply shortages and capacity limitations. As the pandemic unfolded, the agency assumed a significant role in planning for and responding to New York City’s public health emergency, launched the largest test and trace program in the country and implemented a vaccine program. The agency managed financially early in the pandemic due to the receipt of federal COVID-19 relief funding but, with the rise of new variants and subsequent increase in hospitalizations, costs continue to grow.

NYCHA, like many landlords nationally, faced a significant decline in rent collections due to severe economic disruption and employment losses experienced as a result of the pandemic. The Authority has also seen increased delays in resolution times for non-emergency service requests, resulting from changes to work order guidelines on in-unit repairs during the pandemic.

Immediately following the start of the COVID-19 pandemic, about one-fifth of firefighters and a quarter of EMS staff were unavailable for duty on medical leave. Meanwhile, medical emergency calls to 911 surged to the highest daily number in FDNY history (over 6,500).

The Municipal Water Finance Authority reports that drinking water quality, water supply, and wastewater treatment were not impacted by COVID, but the pandemic has negatively affected revenues. The System’s total operating revenues declined by nearly $164 million (4.3 percent) from FY 2019 to FY 2021.

The pandemic has disrupted the provision of services to students and precipitated declines in enrollment at CUNY, as in most education systems. CUNY received more than $1.5 billion in federal aid across three federal relief packages to mitigate the impacts of the pandemic, including a minimum of $634 million which must be provided directly to students. Only $386 million of the total remains to be allocated in fiscal years 2022 and 2023.

Prior to the pandemic, enrollment in the City’s cash assistance program had been on the decline, reaching a record-low level of 325,000 people in March 2020. Enrollment then grew sharply, by about 20 percent between February 2020 and September 2020, when the caseload peaked at 391,432 people, before beginning to decline. However, since September 2021, after federal extended unemployment benefits came to an end, enrollment has risen again

The Administration for Children’s Services has reported sharp declines in service levels during the COVID-19 pandemic. As schools operated remotely, the number of abuse and neglect reports from school staff and other mandated reporters slowed, resulting in fewer investigations by the agency.

To alleviate population density during the pandemic, the City accelerated the release of some inmates utilizing reintegration hotels with support services run by non-profit organizations. However, more than 1,200 correction officers had been reportedly infected with COVID-19 through March 2021.

The pandemic required a shift in agency operations, initially changing traffic patterns and requiring a pause in construction and repair work. As the City began its recovery, adaptations were needed to expand outdoor public space to encourage economic activity amid the public health crisis. The agency managed the administration and enforcement of the Open Streets and Open Restaurants programs.