New York City faces a potential financial crisis as a $10 billion budget deficit looms

New York City, battered by economic headwinds and mired in a stubborn recession driven by an epidemic that has hit employment, tourism and tax revenue, is teetering on the brink of a severe budget crisis.

For the first time in six years, city officials expect business tax revenue to fall. Personal income and related tax revenue are expected to decline 7.7 percent, the largest decline in twelve years.

The struggles of Wall Street may require the city to disburse billions of dollars to workers’ pension funds, to meet its obligation to provide a minimum guaranteed return.

The city’s commercial office market is on the brink of the potential for working from home. The transportation system’s financial situation is so grim that the state’s comptroller has warned that the Metropolitan Transportation Authority may seek more financial support from the city. And as the nation regained the jobs it lost during the pandemic, New York City still 176,000 short jobswith the situation particularly bad for black New Yorkers, whose unemployment rate remains more than 10 percent Almost three times The national average.

Mayor Eric Adams took office in January as the nation’s largest city faced one of its most challenging periods. The coronavirus pandemic has lowered tourism and some tax revenue, while violent crime and unemployment rates have risen.

But thanks to an extraordinary influx of federal aid, financial disaster was averted, enabling the city to break a record A budget of 101 billion dollars in June.

This financial recovery may soon give way.

Last week, the Adams administration directed city agencies to cut their city-funded expenditures by 3 percent this year, and 4.75 percent the following year. Even the police department, which is sometimes exempt from blanket belt-tightening, should cut its budget.

The mayor sounded the need for fiscal conservatism in the face of a new chapter-sized mandate from Albany that he says would cost at least $500 million a year; Imminent contract negotiations with 300,000 city workers; A growing number of asylum seekers Expand the city’s shelter resources; And the potential shortage of pensions.

Overall, the city’s revenue stream is expected to decline this year and next — the first two-year decline in audited state comptroller records, which go back to 1980. The state comptroller said recently that the city faced a potential budget gap in 2026 of nearly 10 Billion dollars.

“Since taking office in January, public safety and financial discipline have made us hallmarks of our management,” Mr. Adams said in a statement. “We are currently facing new costs that will increase the city’s liabilities by billions of dollars, including increased pension contributions, termination of employment contracts, and higher healthcare expenditures. In response, we are asking every city agency to tighten their belt without laying off a single employee or reducing services.” .

James Parrott, director of economic and financial policy at the New Schools Center for New York City Affairs, said it appears the mayor was using the economic downturn “to propose a really conservative budget approach at this point to lower the expectations many parties have of what to expect from the city’s budget for the year or the next two years.”

New Yorkers have already felt the impact of the city’s dwindling services. The city is building fewer affordable housing units than in years past, emergency response times are up, and serious violence-related injuries in prisons are on the rise.

If the city had to cut billions of dollars in spending, it could lead to fewer garbage pickups, fewer protected bike lanes, and even fewer police officers on the streets at a time of rising crime fears.

The city bounced back into much worse economic environments, most notably in 1975, when it recovered from the brink of bankruptcy. City leaders have also found ways to cut the deficit by billions of dollars after September. 11 economic downturns – in part via property tax increases – and the Great Recession, which ended in 2009. A spokesperson for the mayor did not respond directly when asked if Mr. Adams would consider raising property taxes, the only tax the city could raise private done without the legislative approval of the state.

The cuts are due to take effect in November, although the city council could object.

Lined up in front of the mayor is a group of increasingly hostile counterparts who look suspiciously at austerity and question the timing of his cost-cutting efforts. Among them are labor leaders eager to settle for more generous new contracts, and the city council aggressively reconsidering its earlier approval of recent city education budget cuts, and whose support for the mayor’s November budget cut is by no means guaranteed.

However, Andrew Wren, chair of the nonpartisan Citizens Balance Committee, said: Mayor’s Budget Cuts It is an important first step.

Even without a recession, the mayor faces a really tough financial challenge. “A recession would make it a lot more,” Mr. Ren said.

Budget experts predict that city agencies will struggle with some of these cost-cutting requirements by eliminating job openings. Many of these jobs are open because Large numbers of people have left the city government, and the city is struggling to replace them. Some of these experts argue that demanding cuts with the expectation that agencies will avoid service cuts is unrealistic, especially since some programs, such as expanding pre-kindergarten for 3-year-olds, rely on federal aid drying up.

Four agency leaders said this cost-cutting effort would mean eliminating jobs that needed to be filled and exacerbating the city’s employment problems and service delivery issues.

“It’s definitely affecting service delivery in the city,” said Mr. Barrott. “It will affect the morale of city workers.”

According to many accounts, morale and service delivery are already suffering.

As of this summer, the city government’s overall vacancy rate was 7.9 percent — nearly five times higher than in recent years, according to the latest data from the Citizens Budget Committee. Nearly 25 percent of jobs in building management are still vacant. The park department had trouble recruiting entry-level staff, IT workers, and lifeguards.

a recent study by the Administrative Staff Association found that more than 70 percent of members who responded said they took on more work thanks to colleagues who left their agencies.

Opposition to the mayor’s cuts is growing.

Adrian Adams, chair of the board, recently described management’s decision to freeze hiring as part of its cost-cutting efforts as “counterproductive.”

New York City Comptroller Brad Lander agreed, and on Friday sent a letter to its budget director warning that “imposing a hiring freeze at this time could jeopardize the critical programs that New Yorkers depend on.”

When former police officer Adams was running for election last year, he won the support of many city residents The most powerful trade unions, which represents many black and Latino New Yorkers. Mr Adams is expected to seek their support again in his re-election campaign, Who already collects money for.

While union leaders could in theory postpone contract negotiations until the economy improves and the city is in a better position to award increases, union members may be too restless to wait.

In an email to members on Tuesday, Michael Mulgrew, president of the United Teachers Federation, noted this.

“We plan to move as aggressively as possible to reach an agreement given how inflation has raised the cost of living over the past year,” he said.

Henry Garrido, executive director of the city’s largest municipal union, District 37, has adopted a similar position.

“We ask the mayor to stop making mistakes of the past by cutting off vital services, and urge him to come to the negotiating table in good faith,” he said in a statement issued last week.

Mr. Garrido said in an interview that the union’s top priorities will include a wage increase and a policy that allows employees to work from home when required.

“We have a serious problem with recruitment and retention,” Garrido said. “We have a lot of competing organizations trying to recruit and retain our members, particularly in healthcare and information technology.”

At the moment, there is only enough money earmarked for a 1.25 per cent increase, a number that even the mayor admits will not be enough.

“We are clear, this is a beginning, not an end,” Mr. Adams said earlier this month at a government Financial Supervisory Board meeting. “However, while we are committed to paying fair wages, we will not make deals that the city cannot afford.”

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