Watchdogs Worry About De Blasio's Last Budget, City’s Fiscal Future
(photo: Michael Appleton/Mayoral Photography Office)
New York City’s budget has grown massively under Mayor Bill de Blasio and reached a record high of $98.7 billion for the current fiscal year. The latest spending plan, which the mayor dubbed a “recovery budget,” deployed a huge infusion of federal stimulus funds to restore services that were cut at the height of the COVID-19 pandemic, to expand existing programs, and launch new initiatives. But despite the mayor’s assurances that his successor, due to take office January 1, will inherit manageable budget gaps in the years ahead, fiscal watchdogs have expressed serious concerns about structural deficiencies.
Those include the criticism that, yet again, de Blasio pushed his administration to find few recurring operational savings that will help mitigate future financial trouble while adding new spending that may not be supported by federal aid or tax revenue, depending on many fluid pieces of the overall picture.
“It is a budget entirely focused on what it's going to take to bring this city back fully, bring back the lives of our people, jobs, livelihoods, revenue for our city, all of the above,” de Blasio said at an August 3 meeting with the New York State Financial Control Board, which monitors the city’s fiscal practices. “It is balanced and fiscally responsible with manageable out-year gaps,” the mayor said.
De Blasio painted an optimistic picture while acknowledging the lifeline provided by the federal government in the form of $6 billion in direct aid for the city to fill tax revenue gaps created by the pandemic and another $7 billion in education funding. But he also boasted of his administration’s budgeting policies and the reserves the city built up in the years before the pandemic.
“We survived the worst of the covid era until the stimulus was available because we had prepared long in advance for any potential type of downturn, even though you could not have possibly imagined the one we got,” he said. Those reserves, roughly $6 billion, were nearly depleted last year as the pandemic ravaged the city but the latest budget restored them to about $5.1 billion, including the first ever Rainy Day Fund, newly-authorized by state legislation, worth $500 million.
Nonetheless, the city foresees budget gaps of above or close to $4 billion in the next three fiscal years. By some estimates, the gaps are larger, since the mayor has yet to fulfil a promise to find $1 billion in labor savings.
In a report on the city’s financial plan issued last week, State Comptroller Tom DiNapoli warned of long-term risks to the city’s recovery and its budget. “New York City faces economic uncertainty as it emerges from the pandemic,” DiNapoli said in a statement. “The city must balance the expansion of services now with the ability to fund these services in the future. Recurring spending should match recurring revenue so the city can close its gaps and build back reserves. Taking these actions should help mitigate future uncertainties so the city may have greater flexibility down the road.”
Though the city did benefit from revenues that were higher than expected and lower costs of contributing to the city pension system, that also spurred new spending, DiNapoli pointed out. Both personal income tax revenues and lower pension expenses are “not guaranteed going forward and could be a source of budgetary volatility,” the comptroller’s report said. And looming on the horizon is the expiration of labor contracts with municipal unions, which could add additional recurring costs to the city budget.
The more immediate risk the city faces is the spread of the Delta variant of COVID-19, which threatens to stall the recovery if the city and state have to revert to restrictions that could throttle the economy. Several industries, such as tourism and hospitality, continue to struggle and any faltering steps to their revival could be undone by a new round of restrictions.
With those risks in mind, DiNapoli has recommended that the city add to its reserves and find more recurring savings, echoing the broad consensus among fiscal watchdogs.
As is the case each year, the mayor’s office issued a relatively concervative projection for revenue. City Comptroller Scott Stringer believes that revenues will be higher and that the city will end the fiscal year with a $1.13 billion surplus, also reducing future budget gaps. But he also pointed to several risks including funding for overtime costs, the Fair Fares discounted MetroCard program, spending on homeless shelters, rental assistance, and the unspecified labor savings.
“I don't think it's appropriate to take the view that we're going back to normal and the gaps will solve themselves,” Stringer said in a July appearance on What's The [Data] Point?, the podcast produced by Gotham Gazette and Citizens Budget Commission, a nonprofit fiscal watchdog.
“I think the mayor and the Council missed a real opportunity to start to think about what a post-pandemic New York will look like through the lens of our tax revenues,” he added.
Stringer noted that the current reserves are about 10.8% of city spending, and has for years called for increasing reserves to between 12-18%, or $9 to $13 billion a year. And he worried that the new $500 million rainy day fund does not have any safeguards. “There's no penalty for early withdrawal and I worry that when next year's budget or the next budget comes, it's going to be easy to tap that money for pork barrel spending rather than to hold it for real emergencies,” he said.
Ana Champeny, Citizens Budget Commission director of city studies, expressed concern that one-time federal stimulus funds are going towards recurring spending, “which we see as putting sort-of a really big fiscal cliff in the future for the city.”
“Our concern is that the gap and the challenge that the next administration is going to face is bigger than what's shown on paper,” she said.
CBC has urged the city to continue depositing funds in reserves each year to create an adequate cushion for potential future crises. “The amount of reserves that the city will need for the next crisis is still far greater than what they have,” Champeny said, noting that the administration increased new spending on city agencies by $1.5 billion and spent $516 million on City Council initiatives in the current budget.
James Parrott, an economist at The New School, has a more optimistic view of the city budget. He noted that fiscal rating agencies have recently issued improved outlooks for the city “from negative to stable.”
“You look at the rating agencies, look at the monitors. No alarm bells going off,” he said. “There's, you know, understandable caution being expressed.”
One of the major foundations of the city’s revenue is property taxes, which have helped keep the city afloat in previous financial crises but took a major dip during the pandemic. But, Parrott noted, the real estate market appears stable and on a path to recovery, so property taxes may not pose a risk next year. Commercial and office holdings remain a serious concern, though.
There’s also the possibility of additional federal funding in the coming years. A federal infrastructure program could help the city pay for the debt accrued from funding capital infrastructure projects every year, which is part of the annual operating budget. And additional federal funds for childcare, eldercare, and other social programs could also reduce the city’s annual spending on those fronts in terms of use of city tax dollars.
Another consistent cause of concern may also be irrelevant next year: the state budget. The mayor has, almost every year, had to push back against cuts and cost shifts from the state when it faces its own tough budget decisions. But the state’s future budget gaps are marginal compared to previous years, easing some of the tension that the next mayor will face come budget season. “There's always a risk that the state would try and offload more expenses on the city,” Parrott said. “That situation does not exist right now.”
Some, including DiNapoli and Citizens Budget Commission, have raised questions about increases in taxes on the wealthy that were included in the current state budget, which took effect in early April, and if that may contribute to any pandemic-era movement out of state by high-income individuals that could wind up undercutting tax revenues, but those results have yet to be seen. There are also questions about how remote work, return-to-office challenges, and other pandemic trends may impact tax revenues.
Parrott's greatest concern is the recovery of New York’s labor market. Unemployment in the city was down to 10.6% in June 2021, after peaking at above 20% in May 2020, but that was still higher than the state unemployment rate (7.7%) and the national rate (5.9%).
“I'm very concerned that unless the city responds in a more proactive way that we could be looking at two, three, four years of double-digit unemployment for African-Americans and Latinx people in New York City,” he said. “That's by far the biggest problem that we're facing, an unemployment crisis that is not going to lend itself to a quick recovery.”
Parrott urged the administration and City Council to prioritize workforce training and education programs, particularly to respond to changing job patterns caused by the pandemic.
“If [de Blasio] is seen as responsible for double-digit unemployment rates for Black and brown workers stretching into 2024, that I think really tarnishes his leadership legacy because I think it's a problem we can anticipate at this point,” he said.
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by Samar Khurshid, senior reporter, Gotham Gazette
@samarkhurshid @GothamGazette
Initiative Offers Blueprint for Inclusive New York City Recovery and Growth
City resources on offer (photo: Ed Reed/Mayor's Office)
The New York City Inclusive Growth Initiative -- an effort organized by three major nonprofit groups -- this week released a “blueprint” of 50-plus recommendations for the next Mayor and City Council to guide an equitable recovery from the devastating covid pandemic. Noting the propensity for change during times of crisis and the history of disasters like Hurricane Sandy and the 2008 financial crisis that only worsened existing disparities, the Inclusive Growth Initiative report calls for an incoming city government that puts low-income New Yorkers, immigrants, and communities of color at the center of recovery initiatives and future growth.
The project aims to challenge city leaders “to rethink how to approach economic success” and “change the way development is done — to prioritize infrastructure and development projects that proactively address long-standing disparities and meet the material needs of New Yorkers, especially the communities that are usually left out of the decision-making process.” It calls for comprehensive planning, better city agency coordination, more public input, and greater transparency.
A group of 18 community organizers from non-profits across the city convened for several months to put together the blueprint. The Inclusive Growth Initiative was initially founded in November 2020 by the New York City Employment and Training Coalition (NYCETC), a group supporting workforce development training for 600,000 New Yorkers; the Association for Neighborhood & Housing Development (ANHD), an umbrella group for affordable housing and community development advocacy in New York; and the Regional Plan Association (RPA), a think tank focused on urban planning including around transit, housing, economics, open space, and more. The three groups then helped assemble the 18-member steering committee and support its work.
The effort intends to offer a framework for the next city government -- set to take office January 1 -- to be proactive in rolling out policies geared toward an equitable recovery, aiming to create a ‘new normal’ instead of returning to pre-pandemic ways of doing business. The agenda also appears aimed at heading off another instance of ‘disaster capitalism,’ where shocks to public systems are often taken advantage of by powerful private interests and socioeconomic disparities only worsen.
The blueprint is broken down into three pillars: economic development, workforce development, and affordable housing, while it also touches on many other issues that intersect. It includes ideas to create accessible and paid local civic engagement, invest more in social infrastructure, including bringing more voices into land use decisions, ramping up and better integrating workforce development programs, and boosting the rehabilitation and expansion of affordable housing.
Among the broader recommendations are: “Prioritizing investments in real estate and physical infrastructure that are also investments in social infrastructure, including parks, libraries, transit and more”; “Shifting government approach around workforce development policies and systems to being seen as a fully integrated part of the city’s overall economic development, as opposed to the current view as a poverty reduction strategy”; and “Creating a housing plan focused more on outcomes than outputs, and targeting subsidies and tax incentives toward development projects that meet the deepest needs of households within that plan, and more.”
The recommendations begin, though, with making it easier for all to engage with government decision-making. Suggestions include providing compensation for time spent at public forums and long-term strategic planning groups, more assertively reaching out in communities, and making meeting times and locations flexible are all proposed to ensure that government responds to the needs of those who often don’t have time to advocate for themselves through the traditional avenues of community input.
There are dozens of more specific recommendations, too, like “Create a utility-consumer bill of rights that prevents threats of life safety,” “Raise new revenue for street improvements by managing and fairly pricing more curb space,” and “Require major economic development projects to prioritize local residents as first-look candidates for jobs generated by the development.”
“We have a rare window of opportunity to undo decades of flawed decisions and unintended consequences, starting by recognizing that a genuinely inclusive workforce development system sees people as the source of our economic prosperity and growth,” said Jose Ortiz, Jr., CEO of NYCETC, in a statement accompanying the release of the blueprint. “There are always New Yorkers left behind during recovery, and all too often they are people of color, immigrants, and other historically underserved groups. By embracing the Blueprint’s Inclusive Growth mindset, we can finally tear down barriers to individual and communal success and build a truly fairer, better city.”
The blueprint documents the deep economic and racial disparities that have defined New York for decades. According to the Initiative’s findings, which analyze U.S. Census data, New York City has the highest number of low-wage workers and the State has the largest income gap in the country. While the top 5% of New York City earners experienced a roughly 25% increase in mean household income since 2006, the lowest quintile of earners only experienced a 5% increase in income. Simultaneously, while white earners’ median income increased almost 30% since 2006, Black median income only rose only 10%, Hispanic income rose 15%, and Asian income rose 20%. New York City has also become more unaffordable since 2000, with overall income increasing 31% compared to an 87% rise in consumer prices.
Beyond the financial disparities across race and economic class, the city’s welfare infrastructure, designed to alleviate these inequities, is also lacking adequate investment, the Initiative found. New York City’s affordable housing program, for example, is overwhelmed by need -- for example, there are 170,000 New Yorkers waitlisted for NYCHA public housing. Furthermore, the report argues, community input into development decisions leaves out the voices of low-income residents and people of color who may not have the flexibility to engage in time-consuming, unpaid community engagement opportunities.
Massive job loss caused by the pandemic -- five times greater than during the Great Depression -- has only made matters worse. New York City lost 1,025,000 jobs in the months after the March 2020 covid shutdown, and has so far only regained 47% of them. The losses have exacerbated inequalities and have primarily been in hotel, restaurant, and arts and entertainment industries, which include more low-income earners. Meanwhile, high-income industries like in the finance and tech sectors have even seen some expansion.
Working from this dire illustration of New York City’s rampant inequalities, the Inclusive Growth Initiative hopes to guide the city’s incoming governmental leadership to realign the fight against poverty and for economic growth. The report envisions inclusive growth that “would ensure that all New Yorkers have access to quality careers and livelihoods, affordable housing, and economic opportunity.”
The Inclusive Growth Initiative report points to the “role of white supremacy at the heart of our current systems,” including its most recent manifestations in the form of hate crimes against Asian and Pacific Islander communities and police brutality against African-Americans. One goal is creating “prosperity for most people,” with emphasis on the need to listen to and invest in historically ignored communities. A central tenet of the report’s new vision for government’s approach to economic growth is that “communities who have been left behind have more of a say in shaping economic development processes, planning and leadership.”
The report lays out a vision to tackle wealth and power disparities exacerbated by the pandemic, climate change, and long-term disinvestment. Key to the vision is that almost all initiatives are rolled out in low-income and communities of color first, where the problems are usually the most acute.
The project proposes that city government focuses on creating a more sturdy small business framework that better supports minority- and women-owned businesses (MWBEs). Specific proposals include fast-tracking MWBE certification and encouraging big chains to offer supplier opportunities to local businesses.
The report also puts health and wellness at the center of development efforts, including covering gaps in existing medical and mental health services for employees. This initiative extends to many parts of life and society, including suggestions for adding after-school and summer programs in addition to funding apprenticeship and other non-college paths. Agricultural infrastructure to supply communities with reliable, healthy food year-round, as well as investment in other social infrastructure like parks, libraries, and transit are also part of the blueprint.
Reforming New York’s land use decision-making process is another key piece of the recommendations. Arguing that many land use decisions are made largely by developers, city government, or both, with limited community input, the report advocates for the creation of a centralized database for community land use projects and more analysis of the outcomes of public-private partnerships to tackle discrepancies in input toward and outcomes of land use decisions.
Developing New York’s workforce should be central to the city’s economic development plan, the report says. Starting by empowering the Mayor’s Office of Workforce Development to exercise greater influence in the city’s investment decisions and creating a permanent Workforce Development Fund, the Inclusive Growth blueprint details plans to offer city-run workforce development and entrepreneurship programs, integrate more immigrants into the workforce, and strengthen worker protection from discrimination and abuse.
The affordable housing ecosystem is also a central focus of the report. Currently, the report says, the city’s affordable housing programming underserves very and extremely low-income New Yorkers. The new housing vision calls for a “focus on racial equity based outcomes, increasing options for the deepest need households, and supporting opportunity, mobility, and self-determination for NYCHA residents.” To help people stay in their homes, the blueprint recommends investment in low- and extremely low-income rental assistance as well as strengthening renter protections like Universal Access to Counsel and Senior Citizen Rent Increase Exemptions.
Along with ensuring the renewal of 547,900 rent-regulated units set to expire over the course of the next mayor’s first term, the report calls for the creation of more affordable housing in areas with a lower share of affordable units to combat neighborhood-level segregation.
Improving NYCHA residences, integrating NYCHA campuses into surrounding communities, and legalizing basement apartments and accessory dwelling units are also recommended by the Inclusive Growth Initiative.
The report ends with an ask of the next mayor -- likely to be Democratic nominee Eric Adams -- to enact an economic recovery that breaks away from “the old playbook” that tends to compound inequality by allowing the same mostly white and wealthy powerful interests dominate.
“As a Native New Yorker, public housing resident, and climate activist, I am glad to work amongst the other Steering Committee members to elevate decades of community concerns and collectively develop the Inclusive Growth framework,” said Daphany Rose Sanchez, Executive Director at Kinetic Communities Consulting and Inclusive Growth Initiative Steering Committee Member, in a statement accompanying the blueprint’s release. “To me, this framework is a first step towards reframing our city. It is an opportunity to develop and sustain equitable, restorative, and sustainable pathways forward for BIPOC, immigrant, and low-income communities who are often ignored and disinvested in.”
According to the announcement of the blueprint, the Inclusive Growth Initiative’s work was supported by NYCETC, ANHD, and RPA via “original research, providing leadership and facilitation, lending policy and issue expertise, and utilizing relevant connections to give the cohort access to government and civic organizations.” And the effort is funded by the Ford Foundation, JPMorgan Chase & Co., PNC Foundation, and Robin Hood Foundation.
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by Carmen Vintro
@GothamGazette
Ben Max contributed to this story.
The Money - and Debate - Race in the General Election for NYC Mayor
The road to City Hall (photo: Benjamin Kanter/Mayoral Photo Office)
With just three months to go, the November general election is looking increasingly one-sided as Brooklyn Borough President Eric Adams, the Democratic nominee, has an overwhelming fundraising advantage over Republican nominee Curtis Sliwa and several independent candidates in a city where registered Democrats outnumber Republicans nearly seven to one.
Adams, who officially launched his general election campaign last week, has raised more than $5.1 million in private donations as of July 11, the latest campaign finance deadline. He has received more than $8.1 million through the city’s campaign finance program, which matches small dollar donations with public funds. That includes an additional $367,000 in matched dollars which he was awarded in the latest round of payments last week. The payment was based on reported contributions through June 11 and Adams is the only mayoral candidate so far to qualify for additional public funds since the primaries concluded.
In total, Adams has spent $11.2 million and has a hefty $2 million on hand.
To qualify for matching funds, mayoral candidates must raise a minimum of $250,000 in eligible contributions from a minimum of 1,000 donors who are city residents. The first $250 of each qualifying contribution is eligible for an 8-to-1 match under new campaign finance rules that both Adams and Sliwa have opted for. Under that option, the maximum individual contribution is capped at $2,000 per donor. A second option has a smaller match ratio (6-to-1 of the first $175 of each donation) and higher contribution limits ($5,100 for mayoral candidates). On Thursday, the Campaign Finance Board (CFB), which oversees the city's voluntary matching funds system, awarded over $1.4 million to 45 qualifying candidates for citywide and local races.
Sliwa, the Republican mayoral nominee, has only raised about $592,000 for his campaign and had spent most of it, as of July 11. He had $62,000 remaining in his coffers. His campaign manager, Robert Hornak, told Gotham Gazette the campaign had hoped to qualify for public funds and believed Sliwa had met the necessary threshold, but the campaign's matching claims were not audited by the CFB in time for the latest dolling of public funds.
Sliwa's campaign has submitted $285,000 in matching fund claims – higher than the $250,000 minimum – which have to be reviewed by the CFB. He has raised about $373,076 from city residents and $218,758 from outside the city.
"There is absolutely no doubt that we will make it in our August filing," Hornak said over the phone Wednesday. "Our digital fundraising and mail response has been huge in recent weeks, and we'll probably be over by easily $50,000 or $100,000 in matchable contributions in our next filing." The next filing, covering activity from July 12 to August 23, is due August 27.
Sliwa’s fundraising will also determine whether there will be one or two official debates ahead of the election. By law, the CFB will sponsor an initial public debate for the general election (in partnership with media outlets) as long as two or more candidates in a mayoral race raise and spend $182,150 by October 1, which both Sliwa and Adams have already done. That debate is scheduled for October 20, hosted by WNBC. For the second “leading contenders” debate, scheduled for October 26, candidates must either qualify for public matching funds by the latest campaign finance deadline prior to the debate, which is October 22, or will have to raise and spend at least $2.25 million by then.
Under CFB rules, if Sliwa doesn't qualify for public funds there would be only one mandatory debate with candidates from the two major parties in October but a second voluntary one could still take place.
There are several independent candidates also competing in the general election but none appear to be running viable campaigns and are unlikely to appear on the debate stage.
Fernando Mateo, who lost to Sliwa in the Republican primary and is now running on the Save Our City Party line, is the only other mayoral candidate who has qualified for matching funds. He has raised $542,000 in private donations and received roughly $2 million in public funds overall. He has spent just under $2.5 million, according to CFB filings, and had about $113,000 left as of July 11.
Mateo’s fundraising and expenditure qualify him for the debate with Adams, and potentially Sliwa, though it is not clear that he is actively running or if he will terminate his campaign.
"Well, I'm on the ticket. Let's just leave it at that," he told Gotham Gazette on Monday.
Reigniting his campaign for the general election "is something that I am considering," he said. "I haven't ruled it out. I'm just waiting to see how the momentum is going between the two major parties."
The final list of candidates on the ballot will be posted in mid-August, according to Valerie Diaz, a spokesperson for the New York City Board of Elections. A number of other mayoral candidates are reported to be running, including Bill Pepitone on the Conservative Party line, potential Working Families Party candidate Deborah Axt, Libertarian Stacey Prussman, and independents Raja Flores, Quanda Francis, and Cathy Rojas. None of them appear likely to qualify for matching funds or the debate.
If Sliwa fails to qualify in the next round of public payments (due August 27), the CFB and broadcasters could still hold two debates with the two major contenders but participation in the second would be voluntary. Such was the case in the Republican mayoral primary in May where neither Sliwa nor Mateo met the legal criteria to trigger a debate.
A second debate could also be triggered if Mateo, who has raised and spent the requisite thresholds this election cycle, decides to maintain his campaign. "Absolutely, I would participate" in the debates he said, adding, "or I would at least consider participating. Let me put it to you that way."
Adams' campaign did not respond to a Gotham Gazette inquiry about whether he would participate in a voluntary debate with Sliwa.
“Whatever debates are put in place by the Campaign Finance Board, I’m going to do ads, we have a street team, we are going to do mailings,” Adams said on PIX 11 last month in response to accusations from Sliwa that he is blowing off the general election. “I’m going to continue the flow we had during the Democratic Primary.”
“You don’t win a baseball game in the eighth inning. No premature celebration. We have another inning to go,” he said at the launch of his general election campaign on Monday. “We have to make sure that our message continues to resonate.”
It is unlikely there will be mandatory debates for the other citywide offices, comptroller and public advocate. Only one candidate for comptroller, Democratic nominee and current City Council Member Brad Lander, has received public funds. Republican candidate Daby Carreras, Conservative Party candidate Paul Rodriguez, and Libertarian John Tabacco did not qualify. No public advocate candidate has either. In that race, incumbent Jumaane Williams, a Democrat, will likely face off against Devi Nampiaparampil on the Republican Party line, Anthony Herbert on the Conservative and Independence Party lines, and Devin Balkind on the Libertarian line.
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by Ethan Geringer-Sameth, reporter, Gotham Gazette
@GeringerSameth @GothamGazette
Samar Khurshid contributed to this report.
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