DiNapoli: New York City Faces Budget Risks of $2 Billion
New York City’s fiscal year 2011 budget could be greatly impacted by the outcome of the State budget, according to a report New York State Comptroller Thomas P. DiNapoli released today. While the City’s current plans greatly reduce the $4.9 billion budget gap that the City had projected for fiscal year 2011, proposed reductions of $1.2 billion in State assistance could increase the City’s budget risks to about $2 billion, according to the report.
“The City has been far more fiscally responsible than the State,” DiNapoli said. “But, unfortunately, fiscal problems trickle down, and the State’s actions could have a harsh impact on the City’s finances.”
The DiNapoli report found that while the impact on the City of the global economic downturn has not been as painful as initially forecast, New York City has lost nearly 162,000 jobs and the unemployment rate has hit 10.5 percent, the highest in 17 years. The effects of the recession contributed to a decline in City tax revenue, which fell by $2.8 billion in fiscal year 2009, or 7.1 percent – the steepest decline in at least 30 years.
The City has relied upon conservative budgeting through the recent recession, and its fiscal health has been aided by a faster-than-expected recovery on Wall Street, which is on pace to post record profits in excess of $55 billion in 2009. The City in its January 2010 financial plan estimated a surplus of nearly $2.9 billion in fiscal year 2010, which reflects an improved revenue outlook ($1.8 billion); a drawdown on reserves ($600 million); and agency cost-reduction actions ($484 million). The surplus is being used to help balance the fiscal year 2011 budget.
The DiNapoli report also notes that the City will grapple with growing out-year gaps related, in part, to the expiration of federal education aid. The out-year gaps could total $6 billion, according to the report.
Click here for a copy of the report.