March 14, 2012
New York City Financial Position Improves But Risks Remain
New York City's fiscal condition continues to improve, but the city still faces sizeable out-year budget gaps because it has continued to rely on nonrecurring resources to balance next year's budget, according to an analysis of its fiscal plan by New York State Comptroller Thomas P. DiNapoli.
"Next year's budget will be balanced, but there are still significant out-year budget gaps to be closed and risks to be managed," DiNapoli said. "The city has relied heavily on reserves and other one-shot sources of revenue, leaving fewer reserves to cushion the impact of potential budget risks."
According to DiNapoli's report, the major budget risks include the pace of the economic recovery, Wall Street restructuring, future reductions in federal aid, the cost of new labor agreements and the timing of the receipt of proceeds from the sale of additional taxi medallions.
Since June 2011, the city has closed a $4.6 billion budget gap for FY 2013 and narrowed the out-year gaps to $3 billion in FY 2014 and an estimated $3.5 billion in subsequent years. This improvement is attributable to freeing up nearly $5 billion in reserves, $1 billion in anticipated revenue from the sale of taxi medallions and savings from agency actions.
Preliminary employment data had indicated that New York City recovered only half of the jobs lost during the recession and that job growth slowed markedly during the second half of 2011, which raised concerns about the pace of the economic recovery. Newly released revised data show that New York City has regained all of the jobs lost during the recession even though the unemployment rate remains high at 9.3 percent.
Wall Street, a key driver for the city economy, faces continued challenges as it adjusts to regulatory reforms and recovers from the recent financial crisis. Broker/dealer operations of the member firms of the New York Stock Exchange (the traditional measure of Wall Street profitability) had a strong first half in 2011, but lost $4.9 billion in the second half. For the year, profits totaled $7.7 billion, the second year that profits declined by more than 50 percent and the lowest level of profitability since 2002. In response to weaker profits, Wall Street has reduced cash bonuses and is expected to resume downsizing.
The report also found that:
For a copy of the report, click here or visit: http://www.osc.state.ny.us/osdc/rpt16-2012.pdf