By Michael V. Cusenza
Mayor Eric Adams last Thursday released the City of New York’s November Financial Plan Update for Fiscal Year 2024 (FY24). With the city facing outyear gaps reaching levels unprecedented for this stage of the budget cycle, the Adams administration took targeted but significant and necessary steps to responsibly manage the city’s finances with minimal impact to services New Yorkers rely on and deliver a balanced budget, as required by law. The FY24 budget is $110.5 billion and remains balanced.
The November Financial Plan Update was crafted in the face of significant fiscal challenges, with the city having spent $1.45 billion on the asylum seeker humanitarian crisis in FY23 and set to spend nearly $11 billion on this crisis over just FY24 and FY25 without significant and timely state and federal support. Through strong fiscal management and with the limited fiscal tools available — including a successful Program to Eliminate the Gap (PEG) — the administration kept the FY24 budget balanced with minimum disruption to services and without raising taxes on working-class New Yorkers — despite having received limited state and federal aid.
“For months, we have warned New Yorkers about the challenging fiscal situation our city faces,” said Adams. “To balance the budget as the law requires, every city agency dug into their own budget to find savings, with minimal disruption to services. And while we pulled it off this time, make no mistake: Migrant costs are going up, tax revenue growth is slowing, and COVID stimulus funding is drying up. No city should be left to handle a national humanitarian crisis largely on its own, and without the significant and timely support we need from Washington, D.C., today’s budget will be only the beginning.”
In August 2023, Adams laid out new projections estimating the cost of the asylum seeker crisis to grow to at least $12 billion over three fiscal years — between FY23 and FY25 — if circumstances do not change. With sunsetting COVID-19 stimulus funding, slowing FY24 tax revenue growth, expenses from labor contracts this administration inherited after being unresolved for years, and a lack of significant state or federal government action on the asylum seeker crisis, the mayor took action the following month, announcing a 5 percent PEG on city-funded spending for all city agencies with plans for additional rounds of PEGs in the Preliminary and Executive Budgets. New city-funded spending was limited to those protecting life and safety, fulfilling legal mandates, maintaining necessary operations, or generating revenue.
The FY24 budget has grown $3.4 billion since budget adoption in June, in recognition of $2.6 billion in grant funds and $776 million of better-than-expected revenue growth, primarily driven by income and sales tax collections. Outyear gaps are $7.1 billion in FY25, $6.5 billion in FY26, and $6.4 billion in FY27.
To meet skyrocketing costs associated with care for asylum seekers, the city added $6.2 billion over FY24 and FY25 in this plan, bringing total funds budgeted for migrant needs over the two fiscal years to $10.8 billion. The administration added the following on top of previously budgeted funding: city funds of $1.4 billion in FY24 and $4.8 billion in FY25, state grants of $447 million in FY24 and $272 million in FY25, and federal aid of $10 million in FY24.
The PEG implemented by the administration in the November Financial Plan Update to keep FY24 balanced was successful, setting up the city to save $3.7 billion over two fiscal years. Every agency met their savings target.
Looking forward, asylum seeker costs in this plan contributed significantly to a historically large $7.1 billion FY25 budget gap — $2 billion greater than it was in June’s FY24 Adopted Budget — despite the successful PEG in this plan. By law, this gap must be closed in mid-January, two months from last Thursday.
“The Council recognizes that the City’s budget has serious forthcoming gaps from the expiration of federal COVID stimulus funds, economic impacts of the pandemic, and additional spending. This includes expenditures on services in response to an increased number of asylum seekers arriving in the city, but those did not create our budget gaps and are not the only factors contributing to our fiscal reality. This moment requires effectively managing with precision to protect vital services for New Yorkers. The administration’s approach of reducing budgets of all agencies broadly through additional cuts and a hiring freeze, along with inflicting cuts on our libraries, CUNY, and cultural institutions, is too blunt and not the prudent or sole choice. With clear evidence that city agencies are lagging in their ability to provide New Yorkers with necessary benefits and services at historic levels, the administration must prioritize real exemptions from cuts to turn around city agency performance issues,” City Council Speaker Adrienne Adams and Finance Chair Justin Brannan said in a statement.
“The administration’s response in providing services for asylum seekers has relied far too much on expensive emergency contracts with for-profit companies that cost the City billions of dollars,” they continued. “We urge the administration to shift as many contracts as possible to non-profit organizations with more expertise and commitment to the long-term public interest of the city. It is also essential that the City explores new revenues that can support our budget without impacting working-class New Yorkers, which in some cases will require authorization from Albany for the city to reduce ineffective tax breaks and have revenue options to preserve our fiscal health. Additional aid from all levels of government will be necessary, and the City must be united with stakeholders in advocating for increased support from the state and federal governments. We will closely examine the Mayor’s November Plan for the impact on New Yorkers, and will voice our concerns, and negotiate with the Administration to further address them.”
The Council Common Sense Caucus, which counts Councilwoman Joann Ariola (R-Ozone Park) and Councilman Bob Holden (D-Maspeth) among its members), penned a joint statement. It reads in part:
“No one who has been paying attention to the tens of thousands of migrants flooding our shelter system will be surprised by the severity of the budget cuts proposed by Mayor Adams today.
“However, unlike many of the financial crises our city has faced in the past, this current disaster is almost entirely self-created, the results of decades of terrible policies and irresponsible decisions. And this time around, there will be no State bailout, no federal funding, no silver bullet to save us. The only way to keep our city from falling off the fiscal cliff is to end the so-called ‘right to shelter’ for non-citizens.
“Contrary to popular misconceptions, there is no constitutional obligation, nor any city, state, or federal law that requires the City of New York to house, feed, and provide every service imaginable to foreign nationals at our taxpayers’ expense.
“It is indefensible to cut the essential services [the residents] rely upon because their tax money is being used to pay for those same services for foreign nationals.”
Members of Adams’ administration seemed to concur.
“New York City should not carry this burden on its own,” First Deputy Mayor Sheena Wright said. “The federal and state government must play their part in delivering long-overdue support, funding, and resources.”