Lander presents grim forecast for NYC’s financial recovery
Recovery remains incomplete, uneven
On Tuesday, New York City Comptroller Brad Lander, a former Brooklyn councilmember, spoke during his first meeting of the New York Financial Control Board.
The meeting was also attended by Gov. Kathy Hochul, Mayor Eric Adams, State Comptroller Thomas DiNapoli and the private members of the Financial Control Board: Bill Thompson, Rossana Rosado and Steve Cohen.
“As you are all well aware,” said Lander, “we are currently facing a period of significant economic uncertainty and mixed signals. Fiscal Year 2022 was a year of robust economic recovery in New York City. Private sector payrolls increased by 300,000 and they were back to 96 percent of pre-pandemic levels, and the unemployment rate dropped by 4.6 percentage points.
“Tourism made a strong comeback. We saw a record number of new business applications. The city’s tax revenues reached a new peak. It is a testament to the strength of federal fiscal and monetary policy interventions and to the city’s economic resiliency that tax revenues continued to grow throughout the pandemic.”
However, he added, the recovery remains incomplete and uneven. The city, he said, is still 160,000 jobs short of the pre-pandemic peak.
And even if the Federal Reserve successfully lowers inflation without causing a recession, higher interest rates will slow economic growth, he added. Many of the problems caused by inflation and job losses are borne disproportionately by low-income and minority New Yorkers.
“In June 2021, the mayor forecasted FY 2022 tax revenues at $62.4 billion. In June 2022, the forecast rose to $68.6 billion, 10 percent higher than originally projected,” he said.
However, he continued, in the future, economic growth will be moderate and tax revenues will drop next year. Only in FY 2025 and FY 2026 does the city’s tax forecast rise moderately.
“In addition, the expiration of stimulus funds creates fiscal cliffs in FY 2025 and FY 2026, particularly for important recurring programs funded through these one-time dollars like the 3K expansion,” said Lander.
Overall, Lander estimated budget gaps of $869 million in FY 2023, $6.43 billion in FY 2024, $7.07 billion in FY 2025, and $9.55 billion in FY 2026. He said these gaps will require “strong fiscal discipline” in order to avoid harmful costs to services.
On the good side, he said, the city has set aside $2.2 billion in long-term reserves (the Revenue Stabilization Fund and the Retiree Health Benefit Trust) in FY 2022 to help weather the possibility of a recession.
“While this deposit was slightly lower than the $2.5 billion that my office recommended, it was a strong step towards fiscal stability, and the Mayor and City Council deserve credit for it,” he said.
“We continue to recommend that the city formally adopts an explicit policy, backed by a quantitative assessment of economic risks and revenue volatility, to set a goal for the size of long-term reserves and policies for deposits and withdrawals,” Lander summed up. “My office supports state legislation to make the General Debt Service Fund a permanent feature of the city’s financial and budgetary system.”
Leave a Comment
Leave a Comment