DiNapoli: New York City Financial Position Improved,
But Challenges Remain
New York City has adopted a $65.9 billion balanced budget for Fiscal Year 2012, but it relies on more than $5 billion in nonrecurring resources to achieve that, according to a review of the city's fiscal plan released today by New York State Comptroller Thomas P. DiNapoli. These nonrecurring resources will have to be replaced in subsequent years.
"While the national economic recovery has recently hit a rough patch, there are reasons to be cautiously optimistic about the city's recovery from the financial crisis," said DiNapoli. "Private sector industries have begun to add jobs and the unemployment rate, while high, has declined from its peak. However, in the absence of a stronger recovery or relief from federal and state mandates, closing the structural budget gap in the coming years will be challenging."
DiNapoli identified several factors that could create obstacles for the economic recovery including the European sovereign debt crisis, failure to raise the federal debt ceiling, federal budget cuts, interest rate hikes, high energy costs and high consumer debt levels.
Wall Street had a strong start to 2011, earning $9.3 billion, nearly half of the city's $20 billion forecast for the entire year during the first quarter. However, weaker second quarter results have led to talk of renewed job losses. While the securities and banking sectors continue to deal with fallout from the financial crisis, Wall Street's dramatic turnaround since 2008 has been the most significant factor contributing to the city's recovery.
As the state and federal governments focus on balancing their budgets, the amount of financial assistance to New York City could be reduced. Current efforts to reduce the federal deficit will likely lead to cuts in aid to localities, which could hit New York City hard.
Coming out of the recession, New York City is in a much stronger position than most jurisdictions, but the city still projects a budget gap of $4.6 billion for FY 2013 and even larger gaps in subsequent years because of its heavy reliance on nonrecurring resources and the growth in nondiscretionary expenses.
For a copy of the report, click here or visit: http://osc.state.ny.us/reports/budget/2011/nyc_budget_rpt_72012.pdf