TESTIMONY
Louisa Chafee, Director of the New York City Independent Budget Office, on the Financial Outlook and Operational Challenges Facing New York City
4:48:58
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7 min
Louisa Chafee reviews the preliminary budget for New York City, detailing fiscal outlooks, operational challenges, and the impact of proposed budget cuts.
- IBO forecasts a $6 billion surplus for the current year, $2.8 billion higher than the city administration's prediction.
- IBO's analysis predicts moderate, but slowing economic growth, with job numbers returning to pre-pandemic levels.
- Reductions in city workforce salaries due to staffing vacancies and other factors result in lower city spending.
- Proposed budget cuts potentially impact early childhood programs, services for justice-involved individuals, and older adult centers significantly.
- The Independent Budget Office emphasizes the importance of sound fiscal management to navigate financial uncertainties without compromising city services.
Louisa Chafee
4:48:58
Good afternoon.
4:49:03
Good afternoon, Chair Brennan and members of the Finance Committee.
4:49:06
I'm Louisa Chaffey, Director of the New York City Independent Budget Officer.
4:49:10
I'm here today with my colleague, Sarah Parker and Sereta Subramanian, IBO's senior research and strategy officers.
4:49:17
We appreciate the opportunity to discuss the preliminary budget with you today.
4:49:22
Recently, IVO has published 3 reports on this budget, an analysis of the preliminary budget, IBS details on the economic and revenue forecasts and an in-depth examination of the program to eliminate the gaps.
4:49:37
The pegs.
4:49:39
We're here today to report on highlights.
4:49:41
First, the fiscal outlook.
4:49:43
IBO forecasts a $6,000,000,000 surplus in the current year, which is $2,800,000,000 higher than the administration's expected surplus of $3,100,000,000 This higher surplus results from IPO's forecast of 900,000,000 more in city tax revenues and $1,900,000,000 less in city funded spending than the administration anticipates.
4:50:09
IBO estimates that next fiscal year 2025 will end with a surplus of 3,300,000,000.
4:50:16
This is driven by using the 2024 surplus to prepay some of next year's expenses and an additional 2,000,000,000 in anticipated tax revenues, but it's offset by $1,500,000,000 in additional spending over the administration's projections.
4:50:33
Recognizing that the city continues to face financial challenges, IBIO's analysis concludes that the city's budget gaps from 2026 through 2028 are within the range that the city has closed in the past.
4:50:47
IBS economic forecast predict moderate, but slowing growth for the local economy.
4:50:52
The Federal Reserve's actions to raise interest rates the easing of supply side bottlenecks and productivity gains have helped reduce inflationary pressures.
4:51:01
It's increasingly clear in recent months that the economy has reached a position where the question is not weather growth will continue, but how great that growth will be.
4:51:13
Over 77,000 jobs were added in New York City in 2023, almost exactly in keeping with IVO's projections over the past year.
4:51:22
While the numbers, while the job numbers for New York City are back to pre pandemic levels, the city still lags behind the national economy.
4:51:31
IBO estimates that the city will add around 90,000 jobs in 2024 before gradually moderating in the future years as post pandemic recovery fades.
4:51:42
IBO estimates that the city tax revenue will grow by an annual average of 3.1%, growing from $73,800,000,000 in 2024 to $85,300,000,000 in 2028.
4:51:56
IBO anticipates higher tax receipts than the administration in every year of the financial plan.
4:52:02
Real property tax as the single largest tax revenue for the city is expected to help drive this growth.
4:52:10
Now let's turn to expenditures.
4:52:12
IBO's reestimates of lower spending include reductions in the following areas.
4:52:18
$1,600,000,000 last on city workforce salaries and fringe due to staffing vacancies.
4:52:25
2,400,000,000 less on asylum seekers across 20242591,000,000 less intuition savings from Charter from Lower Charter School Enrollment through 2026 through 2027.
4:52:40
These reductions are partly offset by additions elsewhere.
4:52:46
The preliminary budget included a 2nd round of pegs reductions totaling 934,000,000 2024 $1,800,000 for 2025.
4:52:57
Despite these pegs, the overall city budget increased from a 100 and to $116,000,000,000 in 2024 due to restorations and other increases.
4:53:10
Many of the human service areas that sustained cuts in both pig plants will greatly impact the nonprofit community based organizations.
4:53:18
That are under contract to provide programs to the city.
4:53:23
These include the Department of Education's early childhood programs, programs for justice involved, individuals, and older adult centers.
4:53:32
Early childhood programs face especially notable cuts potentially sprits draining many New York families relying on these publicly funded services.
4:53:42
These cuts are compounding long standing challenges fell by nonprofits under contract with the city.
4:53:49
Late registration, late payment, inequity and pay scales and potential fiscal cuts due to the end of the COVID era fiscal supports.
4:53:59
Despite schools receiving full, fair, student funding, The Department of Education faces a significant budget for shortfall due to the end of the 7,000,000,000 in federal education COVID related funds.
4:54:12
The community schools peg, though fully restored for 2024, also leaves future years underfunded.
4:54:19
This could mean fewer resources for staffs and students and reduced contracts for community based organizations, which provide these wraparound services.
4:54:29
The November plans 5% cut to the city library system resulted in the decision to hold services on Sunday.
4:54:37
Shut libraries, and this reduction remains unchanged in the preliminary budget.
4:54:42
Even as the city council and the administration negotiate, these cuts are occurring now in real time and are already impacting communities.
4:54:51
The administration anticipates costs of $4,200,000,000 in asylum seekers this year compared with the IVO's estimate of $3,600,000,000.
4:55:01
A notable expense by either estimate, but it's still manageable within the context of the overall city budget of a $116,000,000,000.
4:55:10
Especially when a portion of these funds be that 4.2 or 3.6 are expected to be reimbursed by the state.
4:55:18
If claims are properly submitted.
4:55:23
IBO wants to emphasize to the council how much the city workforce has shrunk.
4:55:27
Decreasing from over 300,000 active employees to close to 285 active employees.
4:55:36
285,000 active employees since 2020.
4:55:39
Hiring freezes and slow hiring practices have left the city's struggling to recruit, retain, and replace agency staffing.
4:55:47
This change in staffing has led to operational challenges across numerous critical areas as experienced by New Yorkers day to day and supported by data as seen in the mayor's management report and extensively discussed today.
4:56:02
While the city must continue to navigate financial uncertainties, IBS findings indicate that with sound call management and careful prioritization, New York City can achieve a balanced budget without fundamentally comprising city services.
4:56:16
We're here to answer any questions and provide further details as needed.
4:56:20
Thank you for the opportunity to testify today.
