TESTIMONY
Jacques Jiha, Budget Director, NYC Mayor's Office of Management and Budget on Fiscal Year 2025 Preliminary Budget
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15 min
Jacques Jiha outlines the fiscal challenges and solutions for NYC’s 2025 preliminary budget, emphasizing a balanced approach without federal aid.
- Jiha discusses strategies to manage the budget amid rising costs due to asylum seeker support, labor agreements, and the loss of stimulus funds.
- Mayor’s directives include not relying on federal aid, avoiding property tax increases, ensuring no layoffs, and making decisive savings decisions.
- Measures like a 5% cut in city-funded spending, a hiring freeze, and directives to limit spending on Other Than Personal Services (OTPS) have been implemented.
- Despite achieving $6.6 billion in gap closing savings, NYC faced a $7.1 billion budget gap for fiscal year 25.
- A balanced budget was achieved through reserves, non-tax revenue, and projected tax revenue growth; vigilant management and future cost reductions are planned.
Jacques Jiha
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Good morning.
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Speaker Adams, Chair, Wenon, and members of the Finance Committee And City Council.
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Thank you for the opportunity to testify here today about the fiscal year 2025 preliminary budget.
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I am Jacques Scheja, Director of the New York City mayor's Office of Management And Budget.
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I'm joined today by OMV First deputy director, Ken Gardner, and senior deputy director for anti government regulations and education at Tanya King.
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Late last summer, we were paying for nearly 60,000 SLMs seekers and more than 95,000.
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And pass through our shelter systems.
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Our forecast of the cause of caring for the migrants is based in part on the number of households in our care and an estimate of the number that will arrive in upcoming years.
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In late summer, we updated our forecast, cost forecast because we saw growth in household arrivals escalating faster than previously expected.
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At the time, we were clear.
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That this was our reality unless circumstances changed.
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The cause of the crisis was staggering.
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And along with the cost of settling labor agreements with our workforce and some setting of stimulus funds, pushed fiscal year 2024 for far out of balance and drove the fiscal year 25 gap to a very high level.
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On top of these concerns, the national economy was fragile because of the federal reserve's chief monetary stance.
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The question for most economists was not a whether we would be in recession, but when?
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Given these budget structures and fiscal uncertainties, the Mayor has asked to take immediate action to stabilize the city's finances.
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He gave me clear directions.
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First, do not expect the federal cavalry to ride to the rescue.
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Following his many trips, to Washington DC to advocate for assistance, he realized we will not receive timely and meaningful federal assistance to help deal with the migrant crisis by the November plan.
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2nd, we could not impose an ongoing burden on New Yorkers by raising property taxes.
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Homeowners were already struggling to make ends meet because of high inflation.
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And commercial property owners were facing record vacancy rate and therefore could not absorb a tax increase.
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3rd, we had to minimize service disruptions because the city must stay safe and clean and a welcoming place to work live and with a family.
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4th, no layoffs of city workers.
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As we had promised in August, because the federal government had not changed the circumstances, we did.
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We had to do everything within our power to remain balance in fiscal year 24 and ultimately balance fiscal year 25 without harming New York.
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This meant making tough, smart, and creative decisions to achieve substantial levels of saving and moderate new spending.
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We did not have the luxury of time, So we drafted and implemented a plan immediately because making the tough but necessary adjustments barely would stabilize these finances more quickly.
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In September, OMV advised agencies that there would be peg on 5% of city funded spending in the November financial plan and the preliminary and executive budgets.
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We also impose a hiring freeze with exceptions for critical positions that generate revenue or support public health and public safety.
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Further, the mayor also issued a directive that fools OTPs spending.
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These measures could be reevaluated later.
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If the economy improves substantially or the federal and and or state governments meaningfully increase aid.
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Because we are partners in the city's budget process and share between goals of caring for asylum seekers and protecting the city's physical integrity.
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I shared the plan with the speaker, finance chair, and other counsel leadership on September 9.
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4 days before city agencies were notified.
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At the time, I stated that we would begin we would begin implementing solutions in November because footloading then early in the budget cycle would increase the likelihood of stabilizing the financial plan quickly which would allow us to relax measures that might be painful for New Yorkers before we release the executive budget.
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Our strategy was prudent and effective and ultimately succeeded.
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The November plant peg generated 3,700,000,000 savings over fiscal years 2024 and 25, Despite these savings, we still faced a historically large $7,100,000,000 budget gap in fiscal year 25.
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And after the November plan was released, we recognized nearly $3,000,000,000 in unfunded needs, including support for cash and rental assistance programs.
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This meant that by law, we had less than 60 days.
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To cover $10,000,000,000 hole in the preliminary budget.
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This was a serious challenge, but we had a plan, and we executed that plan.
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The preliminary budget peg generated $3,100,000,000 in savings over fiscal 2020 5.
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This included $1,700,000,000 in a salem bunker cost reduction savings that was achieved by lowering household per diem costs and reducing the real wood in the asylum seekers sensors.
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In total, Our November January bags generated $6,600,000,000 in GAAP closing savings across fiscal year 2425.
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After restoration, a record level.
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Pursuant to the Mills directive, 95% of the agency savings over the 2 years had no impact on service delivery to New Yorkers.
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As a result of these decisive and timely actions along with better than anticipated economic performance in late 2023 that drove our tax revenue forecast upward by $1,300,000,000 in fiscal year 24 and $1,600,000,000 in fiscal year 25.
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We balance fiscal year 24.
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And the $1,000,000,000 or $9,400,000,000,000 fiscal year 25 preliminary budget.
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Now Let me be very clear.
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Tax revenue growth of nearly $2,900,000,000 over fiscal year 24 25 could not have closed the $10,000,000,000 hope.
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This was not simply the revenue problem.
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Indeed, the general print savings combined with the new tax revenue were not enough to close the $10,000,000,000 hold.
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So we had to tap into other resources to close the fiscal year 25 gap.
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We applied $1,400,000,000 in quality reserves and recognized non tax revenues of $650,000,000, we assumed $1,500,000,000 instead aid for migrants, of which we have promised $1,100,000,000.
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And about $207,000,000 in pension funds savings among other things.
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By taking these steps, we balance fiscal 2024 and 25 as required by law and reduce our key gaps meaningfully by an average of nearly 20%.
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Also, we are going to fiscal 25 with near record reserves of $8,200,000,000, which is more than 10% of CD revenue.
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We also reduced the risks in the financial plan and increased transparency by addressing long ignored fiscal beliefs.
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Invested more than $440,000,000 in additional resources for CityFabs vouchers in fiscal 24 and other resources for asylum seekers in the out years.
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Because we stabilize the city's budget and its outlook, we were able to restore several savings initiatives that support me or priorities.
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This includes funding for the upcoming police academy class, community schools, a parks job training program and full little basket collections for 23,000 beans across the city.
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Our fiscal management approach was validated last week by the state controller in its review in his review of the preliminary budget.
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And 2 weeks ago, the 4 leading credit rating agencies, namely Moody's, S And P, Fitch and KBRA cited our strong management in the face of many challenges as a reason to uphold the city's high credit ratings and stable outlook.
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More importantly, they emphasize the success of the measures we took to help close budget gaps in fiscal year 24 25 and please our strong management of the city's finances.
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With Moody's crediting, quote, our robust financial management in support of their affirmation.
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Because of our successful pegs and better than expected economy, we have, as promised, we assess the need for additional savings measures.
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Accordingly, the merger canceled the fiscal year 25 executive budget.
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Further, we are moving from a full hiring phase to a 241 attrition hiring model, meaning agencies will be permitted to hire 1 employee for every 2.
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That report so long as the demand within the budgeted headcount.
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Physicians that are directly related to public health and safety general revenue or advanced critical services like administering public assistance benefits will be permitted to hire on a one for one basis.
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We are also easing the OTPS fees restrictions, with the exceptions of CityFundi travel, concerned IT expenditures and advertising.
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But let me emphasize stabilizing the budget does not mean we are out of the woods.
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We still have a long way to go.
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We've been very concerned about ESalam secure funding, particularly in the Altiers.
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So we'll be reducing costs by an additional 10% in the executive budget requiring savings of close to $600,000,000 across fiscal year 2420 5.
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Our strategy will remain consistent.
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Control the sensors and reduce household per diem costs without impacting critical services.
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And as we typically do over the final months of the budget cycle, we will work with agencies to identify on their spending savings.
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Though we are taking action to reduce the cost of caring for the migrants, as in as of the end of February, we have just met over $4,000,000,000.
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To care for more than 170,000 asylum seekers who have passed full our care since the screening of 2022.
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We need more help from the state and federal government.
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To cover these expenses and what we will spend in the future.
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To conclude, by executing the plan we presented to you last fall and taking swift actions, our fiscal position has stabilized.
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And we avoided additional budget cuts that would have impacted each and every New Yorker.
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Nonetheless, we will remain vigilant because there are uncertainties and risks related to the local and global economies.
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And we face headwinds from the state, including $200,000,000 of cost shifts next fiscal year.
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As we get closer to budget adoption, I look forward to working with the council on our many joint priorities in order to support our recovery, promote public health and safety, expand opportunity, and and invest in the lives of evident in our Thank you, and I look forward to taking your questions.