Q&A
Discussion on economic forecasts and tax revenue projections
5:33:58
·
6 min
Council Member Brannan and OMB Director Jiha engage in a discussion about New York City's economic forecasts and tax revenue projections for FY25. Brannan highlights the council's more optimistic economic outlook compared to OMB's conservative estimates, while Jiha emphasizes the need for caution in budget forecasting.
Key points:
- Council's forecast shows higher tax revenues and more resilient economy than OMB's projections
- OMB's growth expectation for 2025 is 1.4%, lower than the 1.9% consensus estimate
- Jiha stresses the importance of cautious forecasting to avoid potential budget deficits
Justin Brannan
5:33:58
Thank you, speaker Adams.
5:33:59
We've also been joined by council members Krishnan, Abreu, and Rivera on Zoom.
5:34:07
Director, the council yesterday released our economic and tax forecast for the f y 25 executive budget.
5:34:14
And the findings from our updated analysis remain consistent with what the council has been contending throughout the process, which is New York City's economy continues to show durability and resilience with higher tax revenues and projected by OMB over f y 24 and 25 even though our economic growth lags below our long run average.
5:34:37
OMB's executive budget shows economic growth expectations for 2025 at 1.4%.
5:34:44
Should note that this is significantly lower than the 1.9% consensus estimate based on the Wall Street Journal's April survey of economic forecasts.
5:34:54
The Wall Street Journal survey reflects 58 out of 66 forecasters projecting 2025 real GDP growth above OMB's 1.4 expectation.
5:35:06
1.4 percent expectation.
5:35:08
This can be understandable given the early timing of the economic data used for OMB's forecast to look at the executive budget by the beginning of April.
5:35:17
But considering the April consensus projections reflecting stronger economic growth than OMB's forecast, do you anticipate tax revenue estimates can come in higher than you expect since OMB's tax revenue forecast is driven by significantly lower growth assumptions?
Jacques Jiha
5:35:37
You know, it's, we, to be, we all wish there is, more revenues, you so that we could invest more in New Yorkers.
5:35:49
That's our wish.
5:35:50
But as I indicated to you at this point in time, I don't have any reason to believe fiscal year 'twenty four in particular is going to be worse than what we already, forecast.
5:36:04
Give you a sense of we have about a month and a half left into the fiscal year.
5:36:09
Okay?
5:36:09
For the 1st month or the Q3, which is a critical month, which is the month of April, the tax revenues are $200,000,000 below OMB's forecast.
5:36:19
So for us to get through your forecast, we have to make up 200 plus another 600, talking about another $800,000,000 Okay.
5:36:27
And within a month and a half.
5:36:30
The month of May is not a strong month in term of tax collection.
5:36:34
So we have to have a very, very, very robust month in June.
5:36:40
Okay.
5:36:41
And when in an economy that is showing all signs of weaknesses, I mean, whether it's GDP, national employment growth, even the latest employment in New York City, we lost like a 1,000 job last month.
5:36:55
So again, I don't I can't get to that number.
5:36:59
I wish, okay, because as I said, if we had more, revenue, if we we have more revenue, it's better for New York for New Yorkers because we invest more in New Yorkers.
5:37:08
But at this point in time, I don't have any reason to believe that we gonna get, there's a need for us to revise our forecast because as I said, it's gonna be extremely difficult to even get to our numbers.
Justin Brannan
5:37:25
So to push back on that, what do you make of the 58 out of 66 other forecasters who are projecting growth higher than OMB?
Jacques Jiha
5:37:35
It's, you you look you're talking about going from 2 and a half, percent, okay, to OMB 1.4 and to your forecast, which is 1.9.
5:37:46
Is this your forecast, my forecast?
5:37:48
Nobody knows what's gonna happen in the economy.
5:37:51
We all know that direction directionally, we're going in in the opposite direction.
5:37:56
We're going toward a slowdown of the economy.
5:37:59
So no one is telling talking about the, you know, the economy going up.
5:38:03
Everyone is talking about a deceleration of the economy like we see in the Q1.
5:38:07
Q1, we move from an economy of 2 a half percent, throughout fiscal year 20, 3, okay, with the last quarter worth of 3%.
5:38:17
Okay?
5:38:18
The Q1, we went down to about, hey, 1 a half percent.
5:38:22
Same thing with the job market.
5:38:23
The job market the the economy was generating about 225,000 jobs, some you know, to what, on average, in fiscal year 20 3, and we're down to about a 175,000 job last month.
5:38:34
So, again, it's not like we're saying things are collapsing between 15, 14.
5:38:39
It's it's not so significant directionally, but we both your forecast and our forecast is looking at a slowdown of the economy.
5:38:48
So is if your forecast on that to be, better than ours, okay, I'll be very happy because as I said, more revenues that we could have so we could invest in.
5:38:59
But right now, we have to be extremely cautious.
5:39:02
I keep telling folks, we have to be extremely cautious.
5:39:06
See what's going on in California.
5:39:08
Okay?
5:39:09
Alright?
5:39:10
Over forecast, aggressive forecast, $45,000,000,000 deficit.
5:39:16
Okay?
5:39:16
Always remember, we're making decision long term spending decision on forecast that could go up and down that no one knows.
5:39:25
So you have to be cautiously conservative, okay, as you make those decision because you cannot afford to be wrong.
5:39:34
Because if you are wrong, you end up calling services.
Justin Brannan
5:39:38
But California situation is very different from what's going on here.
5:39:42
Right?
5:39:42
Which is?
5:39:44
People didn't have to pay their taxes for months after it was due.
5:39:48
That's why they they're in the situation they're in.
Jacques Jiha
5:39:50
Which one?
Justin Brannan
5:39:50
Where?
5:39:51
California.
UNKNOWN
5:39:52
Did you
Justin Brannan
5:39:53
just say California?
Jacques Jiha
5:39:54
California, they aggressively the forecast was extremely aggressive.
5:39:58
Okay?
5:39:59
The forecast was, you know, was extremely aggressive, and as a result, they had to revise down their forecast and end up, with a deficit of about $45,000,000,000 which requires some 30 something $1,000,000,000 worth of cuts in expenses.
5:40:14
That's what I'm saying.
5:40:15
We have to be cautiously.
5:40:17
We have to be very cautious as we make these decisions.
