New York City ended fiscal year (FY) 2019 with a surplus of $4.2 billion, according to a report released today by State Comptroller Thomas P. DiNapoli. The surplus was generated by higher than expected revenues, especially tax collections, the city’s savings program and unneeded reserves in that year.
“New York City’s economy continues to expand, but the risk of an economic setback should not be overlooked,” DiNapoli said. “The city boosted its reserves in FY 2020, a practice it should continue given the threats on the horizon. The city should also step up its efforts to identify savings opportunities to help close projected budget gaps.”
The strength of the local economy has made balancing the city’s budget easier. Since 2009, the city has added 820,400 jobs, bringing employment to a record level of 4.55 million in 2018 and reducing the annual unemployment rate to 4.1 percent, the lowest on record. Strong job growth has continued this year and the unemployment rate remains near its record low. The city is on track to add 94,400 jobs in 2019, a faster pace than last year. In the absence of an economic setback, tax collections are likely to exceed the city’s forecasts given the current strength of the local economy.
The city increased the general reserve for FY 2020 to $1.15 billion, while maintaining the stabilization reserve at $250 million. If unneeded, these resources could contribute to a year-end surplus. The city also deposited an additional $100 million into the Retiree Health Benefits Trust, which now has a record balance of nearly $4.6 billion.
Despite a balanced budget for FY 2020, city officials project budget gaps of $3.5 billion in FY 2021, $2.9 billion in FY 2022 and $3.1 billion in FY 2023. The budgets for these years includes reserves of $1.25 billion that, if unused, could be used to narrow the gaps.
DiNapoli said the gaps are manageable under existing conditions, but the current job expansion is in its tenth year and changes in the business cycle are inevitable. While the financial plan assumes that the city’s economy will slow, it does not anticipate a recession.
Other issues facing the city include:
- The potential for state or federal budget cuts during the financial plan period ending in FY 2023. Although the immediate risk of federal budget cuts has been reduced by the recent two-year budget agreement, there still remains the potential for cuts during the latter part of the financial plan period given the large and growing federal budget deficit.
- The unfunded liability for other post-employment benefits (OPEBs) exceeded $98 billion at the end of FY 2018, an increase of $10 billion in one year. The annual budgetary cost for those benefits is projected to reach $3 billion by FY 2023, an increase of 25 percent in five years.
- The city’s current ten-year capital strategy (the largest on record) is expected to increase city-funded debt service by 49 percent between fiscal years 2018 and 2023. While the debt burden would rise to 12.9 percent of tax revenues, it would remain below the city’s target of 15 percent.
- The Health and Hospitals Corp., the New York City Housing Authority and the Metropolitan Transportation Authority each face significant operational and financial challenges, which could require additional support from the city.
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