New York City now projects a surplus of $550 million in fiscal year 2020, reflecting stronger-than-expected personal and business income tax collections during the first four months of the year, according to a report released today by New York State Comptroller Thomas P. DiNapoli.
“New York City’s economy is thriving with historically low unemployment, strong Wall Street profits and record tourism,” DiNapoli said. “The risk of a recession has eased in the near term, but the city should continue to increase its reserves and look for opportunities for savings.”
The city intends to transfer the surplus to FY 2021 by prepaying certain expenses, which would reduce the projected FY 2021 budget gap to $3 billion. Even though the city introduced a new citywide savings program, the out-year gaps have grown slightly, to nearly $3 billion in FY 2022 and $3.2 billion in FY 2023.
Despite concerns that job growth would slow in 2019, the city’s economy was on pace, as of October, to add 87,900 jobs in 2019, similar to last year. The city added a total 820,400 jobs between 2009 and 2018, and the October unemployment rate of 4.1 percent remains near its historic low.
Still, the city did not raise its revenue forecast beyond the current fiscal year. DiNapoli’s office expects tax collections to exceed the city’s forecasts, assuming continued economic growth. However, there is also the potential for unplanned spending.
While the city’s budget assumes that securities industry profitability will decline by 26 percent in 2019, profits were up 10 percent in the first three quarters of the year. Stronger Wall Street profits are likely to yield additional tax revenue for the city.
City officials assume that economic growth will slow during the financial plan period, but they do not anticipate a recession. Although the likelihood of a recession in 2020 has diminished in recent weeks, the risk remains elevated over the longer term as changes in the business cycle are inevitable.
Future state actions represent the most immediate risk to the city’s finances. The state’s projected budget gap for State Fiscal Year (SFY) 2020-21, which begins April 1, 2020, has grown since August from $4 billion to $6.1 billion according to the state Division of the Budget, largely because of unplanned Medicaid spending.
The Governor’s executive budget, due in January, is expected to include proposals to limit the growth in Medicaid spending and eliminate the projected budget gap for SFY 2020-21. It remains to be seen whether any steps taken by the state will adversely impact the city’s or the Health and Hospitals Corp.’s budget.
In addition to the projected surplus, the city’s budgeted general reserve currently stands at $1.15 billion in FY 2020 and $1 billion annually in FY 2021 through FY 2023. The capital stabilization reserve, which is also part of the city’s financial plan, is budgeted at $250 million annually during FY 2020 through FY 2023. If not needed for other purposes, these reserves could be used to narrow the projected budget gaps for fiscal years 2021 through 2023.
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