By: Ilana Siyance
The economic outlook for NYC seems gloomy, and the city is expecting to eventually face a budget deficit of nearly $10 billion. The pandemic caused long lasting damage to the city and its economy. Not only is tourism down, but business and personal-income tax collection will be depressed.
As reported by the NY Times, city officials are expecting business tax revenue to decline this year, after six years of growth or stability. Personal income and related tax revenue is also slated to decline by 7.7%, marking the biggest decline in over a decade. Other troublesome economic indicators include lots of vacancies in commercial real estate, and higher unemployment– especially among Black New Yorkers, for whom unemployment is above 10%. Also, the MTA transit system is ailing from declined ridership and will likely need the city’s help.
Additionally, there are a mire of different crises crying out for attention, which the city will need to direct its attention towards, including a surge in crime, and a maximum capacity exceeded in the city’s homeless shelters. Additionally, the city is bracing itself for a potential shortfall of billions of dollars in workers’ pension funds, due to stock market declines.
In June, the city council and Mayor Eric Adam’s administration were able to pass a record-breaking $101 billion budget—thanks to extra funding available from federal aid. Last week, however, the Mayor’s office already expressed concern for the fiscal problems looming as well as inflation, by ordering all city agencies to cut their city-funded expenses by 3 percent for the fiscal year. The directive added a warning that there will be more cuts in the future, already outlining a 4.75 percent cut for next year. The cuts will include even the NYPD, which is already understaffed and underfunded. The admin blamed rising costs and expiring contracts as culprits.
“Since I took office in January, we have made public safety and fiscal discipline hallmarks of our administration,” Mayor Adams said. “We currently face new costs that will increase the city’s obligations by billions of dollars, including growing pension contributions, expiring labor contracts and rising health care expenses. In response, we are asking every city agency to tighten its belt without laying off a single employee or reducing services.”
Per the Times, the city’s revenue stream is expected to decline this year and next, which would mark the first two-year decline since at least 1980. The state comptroller, Thomas P. DiNapoli, recently said the city faces a potential budget gap of close to $10 billion in 2026. Cost cutting efforts will continue and they will undeniably have an impact on services delivery issues and staffing. “It does affect service delivery in the city, certainly,” said James Parrott, the director of economic and fiscal policy at the New School’s Center for New York City Affairs. “It will affect the morale of city workers.” The news comes at a time when many city agencies are already understaffed, and though there won’t be layoffs for now, cuts will likely eliminating the unfilled job openings.
“We’re clear, that this is a beginning not an ending,” Mr. Adams said earlier this month at a state Financial Control Board meeting. “However, while we are committed to paying fair wages, we will not make deals that the city cannot afford.”
