New York City’s budget deficit could hit $13.9 billion by 2027 — more than twice the shortfall projected by Mayor Eric Adams — thanks to new and costly labor contracts, the migrant crisis and slow economic recovery from COVID-19, according to a new report from Albany.
The projection released Thursday by State Comptroller Thomas DiNapoli far exceeds the city Office of Management and Budget prediction of a deficit growing to $6.5 billion over the next four years.
Adams’ unveiled his record $102.7 billion budget proposal in early January, which DiNapoli assumes will grow to $104.8 billion before its due date on June 30.
The comptroller released the 51-page study days after City Hall struck a tentative deal with one of its biggest labor unions — District Council 37 which represents 90,000 municipal workers — to raise wages by 3% for the years 2022 through 2025 and 3.25% in 2026.
The new expense, by DiNapoli’s estimate, would mean the city is on track to spend $4.7 billion per year by 2027 for all labor costs – a figure which could grow to $5.4 billion annually.
Adams and DiNapoli agree costs like housing, food and legal services for thousands of arriving migrants could set the city back as much as $4.2 billion over the next two years.
However, the state study doubts Hizzoner’s recent $1 billion ask from President Biden to help ease the burden will be granted — and predicts NYC will likely receive just a fraction of the nearly $800 million Federal Emergency Management Agency grant approved last year to help cities across the nation pay for asylum seekers.
The report also notes that the city hasn’t yet budgeted for migrant shelter costs beyond the middle of 2024 — even though an influx of almost 30,000 since last spring has already strained Big Apple shelters, pushing some to full capacity.
The analysis also predicts that the seven Humanitarian Emergency Response and Relief Centers (HERRCs) will likely remain open past July 1.
DiNapoli warns that City Hall should set aside more money in the face of future budget gaps and dwindling pandemic-era federal relief – which former Mayor Bill de Blasio spent on pet projects rather than stashing away for a rainy day – even though tax receipts have remained strong.
Adams has already cut vacant positions in city agencies and ordered belt-tightening measures, but his budget director said additional cost-cutting measures are on the way to help pay for key items like the open labor contracts.
“The City must take care to balance any additional savings made through staffing changes with the risk of deteriorating core services and timely aid to those in need, which are fundamental to its economic recovery,” the report reads.
One area the city will continue to spend is on schools, after a law signed by Gov. Kathy Hochul last year mandating fewer kids per classroom across the five boroughs will boost Department of Education spending by at least $1.3 billion annually, according to DiNapoli.
The state’s class reduction goal will also require the DOE to hire 7,000 extra teachers, despite staffing shortages and lower student enrollment numbers.
“In the Fiscal Year 2024 Preliminary Budget, Mayor Adams continued his strong track record of responsible fiscal stewardship, which is especially necessary in light of the ongoing fiscal and economic headwinds facing the city. Since June, the city has achieved more than $3 billion in savings over Fiscal Years 2023 and 2024 without laying off a single employee or reducing service levels,” mayoral spokesman Jonah Allon said in a statement.
“At the same time, as the mayor stated in his testimony to state lawmakers last week, the city remains concerned about the potential impact of $4.2 billion in costs associated with asylum seekers over FY23 and 24, as well as the state’s proposed cuts and cost shifts that could total more than $1 billion annually, further straining our limited resources. The mayor will continue to budget responsibly and ensure the city spends within its means amid these challenging times, and we value Comptroller DiNapoli’s partnership.”