QUESTION
Why are NYC's revenue forecasts conservative? Isn't there a concern that an overly conservative revenue estimate will lead to unnecessary service reductions?
0:49:11
·
4 min
Budget Director Jacques Jiha explains that NYC's conservative revenue forecasting is crucial to avoid mistakes that could necessitate service cuts.
- NYC's budget management prioritizes conservative revenue forecasting to prevent overspending and subsequent service reductions.
- Jiha emphasizes the severe consequences of overestimating revenue, highlighting the importance of caution in budget planning.
- Despite recent economic strength, the city's approach remains cautious, with forecasts being adjusted based on economic performance.
- The Budget Director reassures that adjustments to the executive budget will reflect the ongoing economic conditions, ensuring responsiveness to economic changes.
- The dialogue underscores a shared responsibility to secure the city's financial stability through prudent forecasting and budget management.
Justin L. Brannan
0:49:11
They both mentioned that the city the city's revenue forecasts are generally conservative.
0:49:17
Obviously, I understand the rationale for approaching revenue forecast conservatively in periods of growth to ensure we don't overspend.
0:49:24
But I guess, Is there not a concern that an overly conservative revenue estimate will lead to unnecessary service reductions?
Jacques Jiha
0:49:34
No.
0:49:36
The challenge that you have is, as I we say, to folks all the time.
0:49:41
Or we cannot afford to make a mistake when it comes to revenue forecast.
0:49:45
Because if we overstate our forecast and we spend the resources, we have to cut.
0:49:53
Okay?
0:49:54
So it's not like we say, you know, at, hey, we overstep our forecast and the other ramifications to it.
0:50:00
So therefore, we would have had a buildup rather than basically cut.
0:50:04
People think we take pleasure, okay, in coding services or coding programs.
0:50:10
Not at all.
0:50:11
Okay?
0:50:12
We all come to government, okay, to basically make a difference.
0:50:17
Okay?
0:50:18
So we don't think so.
0:50:19
We have to be extremely conservative because there are ramifications to what we do.
0:50:24
So overstating forecast spend the resources and then upstream the mistake, and then you have to cut back reverse.
0:50:35
It's a lot worse.
0:50:36
Okay?
0:50:37
Then basically say, you know what?
0:50:38
I'm conservative.
0:50:40
I'm gonna try to manage my budget as conservative as I can.
0:50:43
If Okay?
0:50:45
We are successful in terms of managing our budget.
0:50:48
And if we are successful by the economy, okay, is growing, continue to grow.
0:50:54
Okay.
0:50:55
It's icing on the cake.
0:50:56
We could add things on top of where we are because at that time, we know we have those resources.
0:51:01
But if we don't have those resources, I'm hoping that you're right.
0:51:04
I'm hoping that your your forecast is right because you could be it's a forecast.
0:51:10
You could be white or you could be wrong.
0:51:12
Okay?
0:51:13
I'm hoping that you're right.
0:51:14
Okay?
0:51:15
But this is a forecast.
0:51:17
So and we making decisions.
0:51:19
Okay?
0:51:20
That are weird.
0:51:21
Okay?
0:51:22
That are baseline on a forecast that can be wait or long.
0:51:27
So if you're gonna make a long term decision on a forecast, you better off being conservative to know that the revenue is gonna be there to support the program going forward.
Justin L. Brannan
0:51:39
Okay.
0:51:41
But when you said that the council was being too liberal, and then your forecast was actually higher than ours.
0:51:47
Is that just because you were working on outdated information?
Jacques Jiha
0:51:50
No.
0:51:50
What happened is, everybody knows, everybody was surprised to see us strong the economy was in the latter part of 2023.
0:51:57
Everyone.
0:51:58
Okay.
0:51:59
Everyone on the Wall Street, everyone.
0:52:01
Okay.
0:52:01
Everyone was looking for a soft lending of the economy recession, mostly last year.
0:52:07
And we ended up with a soft lending.
0:52:09
Better I'm not even a softening.
0:52:10
Something better than a softening.
0:52:12
Okay?
0:52:13
So and as a result, we had to revise up with our forecast.
0:52:19
Okay?
0:52:20
And but your forecast also assume a slowdown of the economy.
0:52:24
So it's not like just us assuming the slowdown of the economy.
0:52:26
We all assume a slowdown of the economy.
0:52:28
The difference you're talking about, it's a $1,000,000,000 here and there.
0:52:32
Okay?
0:52:32
In the scope of things, a $100,000,000,000 economy okay, a forecast of it's just very small portion.
0:52:38
It's very small piece.
0:52:40
So again, as I said, you are always better off when conservative because you are making long term decisions.
0:52:49
Okay?
0:52:50
Alright.
0:52:50
Based on the forecast, So you better off, okay, been very conservative.
0:52:55
And if, okay, the economy is stronger than you anticipate, it's acting okay.
Justin L. Brannan
0:53:02
So what extent do you think your current forecast with this continued strength that we're talking about, can we expect to see an adjustment in the executive budget?
Jacques Jiha
0:53:15
We will review as we always do our forecast in the executive budget.
0:53:20
Okay.
0:53:20
And when we will sit, we'll see where we, you know, we'll see where we are.
0:53:25
Whether or not we are more conservative than you or whether or not we're in line with your forecast at this point in time.
0:53:33
I cannot tell you because we already revised up our forecast base, okay, on the stronger than its ability to come.
0:53:41
That we had at the end of fiscal at the end of 2023.
0:53:46
Okay.
0:53:46
So if the economy remains strong, Okay?
0:53:49
It would be reflected in our forecast.
0:53:52
If it weakens, it also will be reflected in our forecast.
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