New York’s economic health is shaped by shifting population trends, business tax collections, and the state and city’s ability to manage structural budget gaps during periods of financial instability. This page covers CBC’s work on budget transparency, structural imbalances, rainy day reserves, economic competitiveness, and strategies for managing potential federal funding cuts.
This page was created with AICBC Insights uses AI to group, analyze and present data and recommendations from CBC's publications. Always reference the cited sources to verify important details..
The State should hold the line on taxes to maintain economic competitiveness.
Policymakers should review and reduce burdensome regulations that do not serve New Yorkers’ interests.
The State should curb the $5 billion in economic development tax breaks, capital spending, and programs that fail to deliver results.
Policymakers should shift funding from lower-impact programs to affordability and other priority needs.
The State should drive service quality and efficiency improvements with performance data, accountability, and targeted programs.
Key Data
As of April 2026, New York City's economy faces significant challenges, including 114,000 more people leaving the city than arriving in the previous year.
New York City faces significant economic instability characterized by anemic job growth, rising rents, and a net loss of 6,350 businesses in 2025. To maintain competitiveness and avoid fiscal decline, the city must address its $3.5 billion budget gap by improving government efficiency and eliminating ineffective spending rather than raising taxes.
Recommendations related to Economic Downturn
The mayor and City Council should adopt a sound budget that improves services, expands effective programs, eliminates ineffective ones, enhances affordability and holds the line on taxes.
The city should seek relief from Albany’s class size mandate to unlock $1.2 billion while preserving smaller classes where they matter most.
The city should align school budgets with declining enrollment to save $400 million.
The city should fix procurement to yield $700 million in savings.
The city should maintain current city-funded housing vouchers to save $330 million.
The Chief Savings Officers must dig deeper to eliminate spending that isn’t serving people well.
Key Data
$3.5 billion
— Projected amount the city will spend more than it received this year.
6,350
— Net number of businesses lost by the city in the first three quarters of 2025.
$3,800
— Average monthly asking rent in the city.
38%
— Amount more the state and its localities collect in taxes per person compared to New Jersey.
$1.2 billion
— Potential savings from obtaining relief from Albany’s class size mandate.
114,000
— Number of people who left NYC for other places in the U.S. last year than came here.
New York's high tax rates are eroding the state's competitive foundation, leading to business flight and a net loss of residents. Instead of raising taxes, the state should focus on efficient budget management and delivering high-quality services to maintain affordability and economic stability.
Recommendations related to Economic Downturn
The State and New York City should hold the line on taxes to maintain competitiveness.
Legislators should not include State or City tax increases in their one-house or enacted budgets.
The State and New York City should double down on getting the most out of their budgets by efficiently delivering high-quality services.
Key Data
$44 billion
— The amount by which state taxes this fiscal year are projected to be higher than just five years ago.
140,000
— The number of more people who moved from New York State to other parts of the country in 2024 than moved in.
$29.5 billion
— The amount by which state operating funds spending has increased more than inflation in the last 10 years.
41
— The number of publicly traded company headquarters that New York lost between 2020 and 2025.
43 percent
— The portion of New York State’s personal income taxes paid by filers with income over $1 million in 2023.
$21 billion
— The amount by which the Fiscal Year 2027 Executive Budget increased the 4-year plan’s tax receipt forecast.
New York businesses already face the highest combined corporate tax rate in the nation, and further tax increases would threaten the state's economic competitiveness by discouraging business growth and investment. Instead of raising taxes, the state should focus on improving its business climate by reducing regulatory burdens and curbing ineffective spending programs.
Recommendations related to Economic Downturn
The State should hold the line on taxes to maintain economic competitiveness.
Policymakers should review and reduce burdensome regulations that do not serve New Yorkers’ interests.
The State should curb the $5 billion in economic development tax breaks, capital spending, and programs that fail to deliver results.
Policymakers should shift funding from lower-impact programs to affordability and other priority needs.
The State should drive service quality and efficiency improvements with performance data, accountability, and targeted programs.
Key Data
17.44 percent
— The top combined corporate tax rate faced by New York City businesses, which is the highest in the nation.
22.48 percent
— The projected top combined marginal corporate tax rate in New York City if the proposed tax increase is enacted.
$19.7 billion
— Total statewide business tax collections in fiscal year 2025.
$5 billion
— The amount in economic development tax breaks, capital spending, and programs that fail to deliver results.
10th
— New York's ranking as the worst state to start a small business.
3rd
— New York's ranking for the slowest average growth in small businesses.
New York City is experiencing a decline in its share of high-income residents and overall population, driven by high costs of living, infrastructure challenges, and a perceived lack of value for tax dollars. To reverse this trend and ensure long-term prosperity, the city must prioritize housing production, public safety, and efficient service delivery rather than relying on tax increases that may further erode economic competitiveness.
Recommendations related to Economic Downturn
Expanding housing production to improve affordability is paramount to ensuring that living in New York remains feasible and attractive for a broad range of residents.
Clean and safe streets are equally vital, providing the order and quality of life that residents, businesses and visitors deserve.
High-quality and efficient public services — from transit to education — support a prosperous city.
Stable public finances preserve services for all New Yorkers.
Key Data
40%
— Share of New York’s personal income taxes paid by filers with adjusted gross income over $1 million in 2022.
35%
— Decline in the share of U.S. millionaires living in New York City between 2010 and 2022.
$2.5 billion
— Personal income tax revenue the City would have collected in 2022 alone if it had maintained its 2010 share of millionaires.
91,000
— Number of residents who moved out of the city to other parts of the U.S. in 2024 than moved in.
14.776%
— Combined top marginal tax rate for the highest earners in New York State and City.
Fifty years ago today New York City came within hours of bankruptcy, one of the most significant events of the Fiscal Crisis. This episode features interviews with two of the era’s heroes—Stephen Berger, who served as Executive Director of the State Emergency Financial Control Board, and Eugene Keilin, Executive Director…
Download the Presentation The New York State and New York City budgets are unaffordable and unprepared both for a recession and for federal budget cuts that will start hitting this fiscal year and grow in the future. Check out CBC’s New York State and New York City Fiscal…
New York State's fiscal foundation is weakening due to significant spending increases and growing budget gaps that are projected to exceed $14 billion by fiscal year 2029. These financial decisions, combined with the depletion of rainy day reserves, leave the state ill-prepared to manage potential federal funding cuts or an economic downturn.
Recommendations related to Economic Downturn
The State should set aside additional money to mitigate the initial impact of federal cuts.
The State should repay its unemployment insurance debt with other funds rather than using rainy day reserves.
Key Data
$7 billion
— Amount taken from the State’s rainy day reserves, weakening the ability to weather an economic downturn.
$14 billion
— Projected annual budget gaps by fiscal year 2029.
$22 billion
— The State's structural budget imbalance.
38 percent
— Portion of the New York State budget that is federally funded.
$254 billion
— Total amount of money the State passed a budget to spend.
12 percent
— Rate of State spending growth, which is four times the rate of inflation.
New York State's fiscal plan increases spending by over 12 percent, creating a long-term structural imbalance that exceeds $20 billion and leaves the state vulnerable to federal funding cuts. To ensure future competitiveness and stability, the state must prioritize core programs, reduce less impactful spending, and maintain reserves to mitigate potential economic downturns.
Recommendations related to Economic Downturn
State leaders should preserve core programs that have the greatest impact.
The state should shrink other programs despite their likely popularity.
Albany must protect recession-mitigating reserves to prepare for potential economic challenges.
State leaders should hold the line on taxes to ensure New York’s competitiveness.
Key Data
12 percent
— The rate by which adjusted State Operating Funds spending increased, which is approximately four times the rate of inflation.
$14 billion
— The amount of future annual budget gaps created by ballooning spending and lower projected receipts.
$20 billion
— The amount by which the long-run imbalance between receipts and disbursements exceeds once reliance on non-recurring resources is removed.
$49 billion
— The amount the State spent before providing transparency to New Yorkers regarding how their money is being used.
The $254 billion New York State budget fails to prepare for potential economic downturns like federal budget cuts or a recession by increasing spending and depleting reserves. Instead of prioritizing fiscal stability, the state has created a structural imbalance of approximately $20 billion that threatens future financial health.
Recommendations related to Economic Downturn
The state should put aside $2 billion to soften the initial blow of federal cuts.
Lawmakers should have used resources like the $2 billion for rebate checks or $2 billion of school aid for wealthy districts to increase the State’s recession-readiness.
Lawmakers should ensure that labor supports the MTA plan by agreeing to operational changes that reduce costs, increase efficiency, and preserve services.
The state should avoid granting the Governor extraordinary powers to make mid-year budget adjustments, as current law already provides the powers needed for rapid budget adjustments.
Key Data
$254 billion
— The total size of the late New York State budget.
12 percent
— The rate at which the budget increases State Operating Funds spending, which is four times the rate of inflation.
$20 billion
— The structural imbalance between future receipts and disbursements.
$7 billion
— The amount siphoned from the State’s reserves to replenish the Unemployment Insurance Trust Fund.
$3 billion
— The amount the MTA will contribute to support the plan, though no specifics have been provided.
$2 billion
— The amount allocated for rebate checks, school aid for wealthy districts, or the transaction risk reserve.
New York faces a precarious fiscal future with a structural budget gap on track to reach $18 billion, necessitating immediate restraint to prepare for potential federal funding cuts and a recession. State leaders should prioritize fiscal stability by limiting spending growth, maintaining the $20 billion rainy day fund, and establishing a $2 billion contingency fund to protect essential services.
Recommendations related to Economic Downturn
Keep spending growth close to inflation to restrain spending in anticipation of a recession and federal cuts.
Set aside at least $2 billion in a federal cut contingency fund to prevent an abrupt dislocation of services if federal aid drops suddenly.
Protect the $20 billion already set aside for a rainy day to be held for an economic downturn rather than spending it to backfill lost federal dollars.
Publish basic budget tables to increase transparency so New Yorkers know how their money is being spent when the budget is adopted.
Prioritize services by making tough decisions to protect New Yorkers in the long run, such as reining in Medicaid costs and better aligning education funding with student need.
Key Data
$20 billion
— Amount already set aside for a rainy day that should be held for an economic downturn.
$2 billion
— Minimum amount that should be set aside in a federal cut contingency fund.
$18 billion
— Amount New York is on track to spend more than it takes in over the next few years.
33%
— Increase in State operating funds since fiscal year 2020.
New York City faces significant fiscal risks from potential federal budget cuts and a possible recession, necessitating proactive measures to protect essential services and vulnerable populations. To build resilience, the city must exercise fiscal discipline by restraining spending, bolstering reserves, and ensuring accurate budget forecasting.
Recommendations related to Economic Downturn
The city should hold the line on new spending by not adding or expanding programs in the Executive and Adopted Budgets.
The city should buttress the fiscal year 2026 General Reserve by adding at least $1 billion to help absorb the immediate blow of federal cuts.
The city should strengthen the Rainy Day Fund by adding $500 million to be reserved for short-term emergencies like a recession.
The city should restrain spending growth by streamlining administrative overhead and increasing efficiency to minimize service disruptions.
The city should end budget-estimating gimmickry to ensure New Yorkers receive accurate and reasonable estimates of revenue and expenses.
Key Data
$7.4 billion
— amount of federal aid the city receives that is at risk.
1.8 million
— number of New Yorkers who receive SNAP benefits.
$1.4 billion
— annual federal operating support the New York City Housing Authority depends on.
$2 billion
— federal dollars that fund more than 96,000 housing vouchers.
$91 billion
— amount the state receives annually from Washington.
$1.1 billion
— amount the city spent more on fiscal year 2024 obligations than it took in.
New York City needs to improve its budget transparency by fully funding services and offsetting new spending with recurring savings to ensure long-term fiscal stability. To prepare for potential economic downturns, the city should prioritize building its Rainy Day Fund, which currently holds less than $2 billion despite the fact that an average recession could cost $11 billion in lost revenue.
Recommendations related to Economic Downturn
The budget should be transparent and accurately reflect the costs of planned programs and additional expenses that are currently underbudgeted.
If the City chooses not to fully fund a program, it should be clear that it will be trimmed or cut.
Added spending should be budgeted on a recurring basis and offset with recurring reductions from efficiencies or shrinking of lower impact or underutilized programs.
The City should deposit at least $500 million in the Rainy Day Fund in fiscal year 2024 to protect against economic downturns.
The City should budget to deposit at least $553 million in the Rainy Day Fund in fiscal year 2025.
Key Data
$1 Billion
— Minimum amount to be deposited into the Rainy Day Fund over the current and next fiscal year.
$2 billion
— Current balance of the Rainy Day Fund, which is insufficient to cover potential revenue losses.
$11 billion
— Estimated revenue loss that an average recession would cause over two years.
$500 million
— Recommended deposit into the Rainy Day Fund for fiscal year 2024.
$553 million
— Recommended deposit into the Rainy Day Fund for fiscal year 2025.
New York City residents report significantly lower satisfaction with quality of life and government services compared to 2017, with only 30 percent rating quality of life as excellent or good. This decline occurs amidst increased affordability challenges and a post-pandemic economic environment where only 11 percent of residents believe tax dollars are being spent wisely.
Recommendations related to Economic Downturn
The Administration should incorporate this type of standardized, statistically valid feedback into its management systems and policy development.
The City should prioritize spending on high-impact programs that deliver positive results and tackle the range of related policy challenges.
The City should consider how to reduce spending and offer tax relief to middle-income households, who are feeling the City’s unaffordability acutely.
Efforts to fix service shortcomings, particularly regarding safety, housing, cleanliness, and homelessness, should be continued and possibly intensified.
The Administration should continue its focus on public housing and services for the homeless, where partnership from the State and federal governments is critical.
Key Data
30%
— Percentage of New Yorkers who rate the quality of life as excellent or good, down from 50 percent in 2017 and 2008.
11%
— Percentage of New Yorkers who believe the government is spending tax dollars wisely, down from 21 percent in 2017.
24%
— Percentage of New Yorkers who rate NYC government services as excellent or good, compared to 44 percent in 2017.
24%
— Percentage of New Yorkers who believe the City promotes economic growth, down from 41 percent in 2017.
23%
— Percentage of New Yorkers who believe the City prepares for an emergency, down from 48 percent in 2017.
1 in 10
— Number of New Yorkers who are positive about how the City is addressing housing needs.
New York State faces a $16.8 billion structural budget gap, necessitating a shift toward spending restraint to ensure fiscal stability. While reserves have increased to $19.6 billion, they remain insufficient to weather a potential recession, which would require over $27 billion in savings.
Recommendations related to Economic Downturn
Closing these gaps will require the State to shift to restraining spending growth, rather than the recent trend of adding new spending.
The full balance of the State’s principal savings should be moved immediately into statutory lockboxes.
If receipts exceed projections this year, additional funds should be deposited in the Rainy Day Reserve.
Balancing the budget will require spending restraint.
Key Data
$4.7 billion
— Reduction in out-year budget gaps for fiscal years 2025 to 2027.
$16.8 billion
— Structural gap between recurring receipts and disbursements.
$19.6 billion
— Current level of the State's principal reserves.
$27 billion
— Amount the State should have in reserves to weather a recession.
$19.5 billion
— Increase in State Operating Funds spending from fiscal year 2021 to fiscal year 2023.
$20.6 billion
— Projected spending growth from fiscal year 2024 to fiscal year 2027.
The Metropolitan Transportation Authority faces significant fiscal risks, including potential revenue shortfalls from fare evasion, ridership recovery, and economic uncertainty that could weaken revenues. To ensure long-term stability, the agency must prioritize capital projects based on available funding and implement a clear, consistent congestion pricing system that avoids excessive exemptions and credits.
Recommendations related to Economic Downturn
The MTA should prioritize projects based on needs and available funding as capital needs will exceed available resources.
Key Data
$15 billion
— in capital investment expected to be supported by congestion pricing revenues for the 2020-2024 Plan
$1 billion
— in annual congestion pricing revenue expected to support capital investment
$325 million
— in revenue reduction caused by a 5-percentage point shortfall in ridership
$500 million
— in annual fare revenue shortfall resulting from a recent spike in fare evasion
$100 million
— in annual costs for each additional percentage point increase in employee raises
45 percent
— of the $55 billion in funding for the 2020-2024 capital plan is from sources that will not recur in the next cycle
New York State Budget Fiscal Year 2024 Major Actions and Fiscal Risks As of First Quarter Update New York City Fiscal Year 2024 Adopted Budget and Outlook
New York State has increased its rainy day savings to $19.5 billion, but these reserves remain insufficient to fully protect the state from the fiscal impact of a potential economic downturn. To better prepare for future recessions, the state should implement a more robust, formula-driven savings strategy that targets reserves equal to 22 percent of state operating spending.
Recommendations related to Economic Downturn
Combine all principal reserves into the Rainy Day Reserve (RDR) lockbox immediately.
Deposit up to an additional $2.4 billion to the RDR this year.
Set a target for the RDR of 22 percent of SOF spending.
Increase the maximum allowed RDR balance to 30 percent of SOF spending.
Mandate automatic RDR deposits when the economy is growing.
Key Data
$19.5 billion
— Current rainy day savings held in Principal Reserves.
$27.9 billion
— Recommended rainy day savings target for fiscal year 2024.
$2.4 billion
— Additional amount the state should deposit into the Rainy Day Reserve this year.
$2.0 billion
— Total reserves held at the onset of the COVID-19 pandemic.
$8.4 billion
— Amount by which current reserves fall short of the recommended level.
45%
— Percentage of New York State's own source revenue derived from the economically sensitive personal income tax.
New York State's fiscal year 2024 budget weakens the state's financial footing by increasing the long-term structural deficit to over $15 billion and failing to adequately prepare for future crises. While the budget includes some deposits to reserves to protect against an economic downturn, it simultaneously finances new spending by reducing proposed reserve deposits, thereby undermining the state's ability to respond to future emergencies.
Recommendations related to Economic Downturn
The Governor and Legislature should prioritize additional deposits to the Rainy Day Fund to ensure the State can save more and better protect New Yorkers from an economic downturn.
State leaders should avoid financing new spending by decreasing deposits to reserves, as this weakens the State's ability to respond to a crisis and builds recurring spending with non-recurring resources.
The Governor and Legislature should strongly support identifying and implementing productivity improvements during this round of collective bargaining between the MTA and its unions to ensure the transit system can flexibly respond to changing rider needs.
Key Data
$15 billion
— The long-term structural deficit is projected to be well over $15 billion.
$5 billion
— The budget widens next year’s budget gap substantially beyond the $5 billion projected in the Executive Budget.
$2.9 billion
— There are up to $2.9 billion in efficiency improvements possible for the Metropolitan Transportation Authority.
$1 billion
— The budget includes $1 billion to assist New York City in addressing the costs of asylum seekers.
$227 billion is the size of the NYS FY 2024 Executive Budget. The State's finances are in a precarious state, with the economy uncertain and the budget going from riches to rags. There is an $8 billion surplus this year, but outyear gaps of over $7 billion and a $12…
New York State's fiscal outlook includes a projected mild recession in 2023, leading to reduced revenue projections and widening budget gaps in future years. To prepare for potential financial instability, the state plans to increase reserve deposits and adjust the Rainy Day Fund to better protect savings for use during a downturn.
Recommendations related to Economic Downturn
The state should raise the balance and deposit caps on the Rainy Day Fund and tie it to State Operating Funds to ensure savings are better protected for use only during a downturn.
Key Data
$8.7 billion
— Projected surplus for fiscal year 2023.
$19 billion
— Projected principal reserves by the end of fiscal year 2023.
$5.7 billion
— Widened out-year budget gap in fiscal year 2025.
$9.0 billion
— Widened out-year budget gap in fiscal year 2026.
$7.5 billion
— Widened out-year budget gap in fiscal year 2027.
3.6 percent
— State Operating Funds spending growth in fiscal year 2024.
New York faces a structural budget gap exceeding $12 billion annually, with projected gaps widening to $9.0 billion by fiscal year 2026. To protect against a potential economic downturn and ensure long-term stability, the state must align spending with recurring revenues and restrain spending growth, which has increased by 12.8 percent this year.
Recommendations related to Economic Downturn
All New York State leaders should focus not just on today, but on protecting generations of New Yorkers from a future downturn and self-made fiscal crises arising from unaffordable spending or counter-productive taxes.
New York should focus on aligning spending with revenues to address the structural budget gap exceeding $12 billion annually, and should not create new fiscal cliffs.
At least half of any MTA stabilization plan should come from productivity improvements that reduce spending, which will require changes agreed to with labor.
The State should close its gaps, stabilize its finances and services, and be better positioned to protect New Yorkers by restraining spending growth above its already high level to be in line with its recurring revenue.
The MTA should follow through on planned fare increases to help stabilize its finances.
Key Data
$12 billion
— The annual structural budget gap that New York State must address by aligning spending with revenues.
$5.7 billion
— The projected budget gap for fiscal year 2025.
$9.0 billion
— The projected budget gap for fiscal year 2026.
$7.5 billion
— The projected budget gap for fiscal year 2027.
7.1 percent
— The average annual increase in State Operating Funds spending over the past three years.
12.8 percent
— The growth in State Operating Funds spending during the current year.
New York City faces a precarious mid-to-long-term fiscal outlook, with potential budget gaps reaching $11.5 billion by fiscal year 2026 and the risk of a recession causing up to $13 billion in tax revenue shortfalls over three years. To maintain stability, the City must address underfunded recurring expenditures and fiscal cliffs while prioritizing a $1 billion deposit into the Rainy Day Fund.
Recommendations related to Economic Downturn
The City should deposit at least $1 billion into the Rainy Day Fund this year to prepare for the rocky economic outlook.
Key Data
$13 billion
— Potential total City tax revenue shortfalls over three years if the city enters a recession.
$11.5 billion
— Projected budget gap in fiscal year 2026 if current risks and fiscal cliffs are not addressed.
$2.9 billion
— The fiscal year 2024 budget gap reported in the November 2022 financial plan that the City must close.
$1 billion
— The minimum amount the City should deposit into the Rainy Day Fund this year to prepare for economic uncertainty.
$4.3 billion
— Estimated City tax revenue shortfall in the first year of a potential recession.
$6.6 billion
— Estimated City tax revenue shortfall in the second year of a potential recession.
New York State faces a $12 billion structural budget problem as economic risks mount and pandemic-era federal aid expires. To maintain fiscal stability and avoid future service cuts or tax increases, the State must restrain spending growth and prioritize cost-effective management of major programs.
Recommendations related to Economic Downturn
Reducing SOF spending growth to 2 percent annually would eliminate the current 2027 budget gap and accommodate the loss of nonrecurring resources.
The State should bring the costs of Medicaid, education, transportation, housing, and environmental mitigation in line with available revenues.
Stabilizing the MTA’s operating budget should rely significantly more on efficiency savings.
The State should reject the proposal of extraordinary powers and broadly defined lump sum appropriations, as they create fiscal and ethical risks by allowing the Executive unilateral, near-universal spending authorities.
The budget should include proposals for more structural reforms, such as establishment of an independent fiscal analyst’s office, a transition to budgeting on a modified accrual basis, and implementation of a performance management system.
The State should identify the most cost-effective and achievable policies and projects from its menu of choices to begin making meaningful progress toward its climate goals.
Key Data
$12 billion
— The total structural problem the State has in its sights, comprised of a $6 billion gap in fiscal year 2027 and non-recurring resources.
$6 billion
— The budget gap opened in fiscal year 2027 due to dimmed projections of economic growth.
$3.4 billion
— The amount by which the State reduced tax receipts projections annually in fiscal years 2025 and 2026.
$2.5 billion
— The MTA's annual structural operating budget deficit.
$13 billion
— The amount of pandemic-related federal aid received for schools.
$10 billion
— The amount of pandemic-related federal aid received for Medicaid.
New York faces a potential recession with future budget gaps projected to reach $12.7 billion, necessitating immediate fiscal restraint and strategic planning. To ensure long-term stability and protect essential services, the state must limit spending growth, maintain reserves, and optimize investments in education, health care, and economic development.
Recommendations related to Economic Downturn
The state should stay the course on reserves to ensure a lifeline is available during the next recession.
New York should restrain spending growth by limiting it to 2% annually through 2028 to close the projected $12 billion gap.
The state should charge a diverse panel of stakeholders to identify ways to transform Medicaid and New York’s health system overall to control costs.
New York should better target education aid to high-need districts and reevaluate assistance to wealthy districts to stabilize the budget and increase equity.
The state should maximize job creation and environmental benefits by basing economic development and climate investments on data, evaluation and tradeoffs.
New York should implement comprehensive performance management to deliver high-quality, efficient services and focus funds where the impact is greatest.
The state should mind New York’s tax competitiveness to avoid chipping away at the revenue and economic foundation.
Key Data
$12.7 billion
— The projected budget gap for the year following the expiration of one-time money and the personal income tax surcharge.
$19 billion
— The amount the state plans to increase its rainy day reserves to over the next few years.
$3 billion
— The amount of annual aid received by wealthy school districts that already self-fund a sound basic education.
2%
— The annual spending growth limit recommended through 2028 to close the projected $12 billion gap.
50%
— The portion of the state budget comprised of Medicaid and education spending.
32%
— The education aid increase the state started to phase in during 2021.
The Metropolitan Transportation Authority faces a precarious fiscal future, with structural deficits exacerbated by potential economic downturns that could reduce tax revenues by $1 billion annually. To maintain stability, the agency must implement efficiency-focused operating reforms and restructure its long-term debt while navigating the depletion of federal pandemic aid.
Recommendations related to Economic Downturn
The MTA should seize the opportunity and runway created by federal aid to implement efficiency-focused operating reforms and restructure its long-term debt.
The MTA should restructure its long-term debt to reduce its structural deficit before the region’s critical transit system risks falling off the fiscal cliff.
The MTA should adopt a multi-year phase-in plan starting with efficiencies under the purview of management, followed by implementing changes collectively bargained with labor over time.
Key Data
$1 billion
— Potential reduction in annual tax revenues if the economy slides into a recession.
$2.0 billion
— Annual fiscal risks that could arise from a recession, collective bargaining costs, and other factors.
$220 million
— Potential increase in the deficit this year due to risks including recession, higher overtime, and lower ridership.
$800 million
— Potential increase in the deficit in 2023 due to risks including recession, higher overtime, and lower ridership.
$1 billion
— Potential increase in the deficit by 2026 due to risks including recession, higher overtime, and lower ridership.
New York City faces a precarious fiscal outlook with projected budget gaps of $4.6 billion in fiscal year 2025 and $5.9 billion in fiscal year 2026, exacerbated by potential recessionary revenue shortfalls of up to $16 billion over three years. To ensure future stability and preserve essential services, the government must improve operational efficiency, eliminate unneeded positions, and secure federal and state support for migrant service costs.
Recommendations related to Economic Downturn
The City should make additional and ongoing efforts to reduce budget gaps given the significant risk of a recession.
The City can and should both hire for critical functions and eliminate many more, ultimately unneeded, positions.
The federal and State governments should shoulder a significant portion of the $1 billion in new spending for services provided to migrants.
The City should improve the quality and efficiency of the City’s operations today to preserve services.
More transformative changes are needed to ensure future stability.
Key Data
$4.6 billion
— Projected budget gap in fiscal year 2025.
$5.9 billion
— Projected budget gap in fiscal year 2026.
$4.3 billion
— Potential revenue shortfall in the first year of a recession.
$10 billion
— Low-end estimate of revenue shortfalls over 3 years during a recession.
$16 billion
— High-end estimate of revenue shortfalls over 3 years during a recession.
$1 billion
— New spending included in the budget for services provided to migrants.
New York State's financial outlook has weakened, with downward revisions to tax receipts creating budget gaps that grow to $6.2 billion by fiscal year 2027. To prepare for a potential recession, the state must prioritize building reserves and reducing recurring spending in high-growth areas like Medicaid and school aid.
Recommendations related to Economic Downturn
The State needs to build reserves, vigilantly restrain spending growth, and identify and implement long-run cost savings.
It is imperative that the State continue on its path of depositing $15.4 billion into reserves, at least until there is a recession, whether it comes soon or in future years.
The State should seek to reduce recurring spending, especially in high-growth areas such as Medicaid and school aid, while continuing to build reserves.
Key Data
$6.2 billion
— budget gap projected for fiscal year 2027
$15.4 billion
— amount the State plans to deposit into reserves over four years
$1.9 billion
— downward re-estimate of tax receipts in fiscal year 2024
$3.4 billion
— downward re-estimate of tax receipts in both fiscal years 2025 and 2026
$6.1 billion
— downward re-estimate of tax receipts in fiscal year 2027
$893 million
— estimated State cost for New Yorkers remaining enrolled in Medicaid due to the continued public health emergency
New York State's Unemployment Insurance Trust Fund is currently insolvent, owing over $8.1 billion to the federal government due to the massive surge in claims during the COVID-19 pandemic. To address this debt and avoid future borrowing, the state must weigh options like increasing employer tax rates or using state revenues to accelerate repayment, while also considering long-term structural reforms to the system.
Recommendations related to Economic Downturn
The State should pay off the debt over time with higher tax rates, which is the standard practice.
The State could partially accelerate repayment of the debt using State revenues, which would reduce the time needed to return to a positive balance.
The State could rapidly pay off the debt using State revenues, which would provide immediate tax relief to employers.
Lawmakers should consider reforming the UI system to ensure it is better equipped to meet claims during economic downturns and not be forced to borrow from the federal government regularly.
Key Data
$8.1 billion
— The amount New York owes to the federal government for unemployment insurance debt as of June 7, 2022.
$14.7 billion
— The total amount of unemployment payments made by New York State in 2020.
$110 million
— The amount of interest New York accumulated for the federal fiscal year 2022 on its unemployment insurance debt.
$6.5 billion
— The total UI benefits paid out in New York in the second quarter of 2020.
$2.65 billion
— The balance of New York's Unemployment Insurance Trust Fund prior to the pandemic in February 2020.
New York City faces significant economic risks from inflation, global conflict, and potential recession, necessitating a proactive approach to fiscal stability. To protect essential services during future downturns, the city should immediately deposit at least $2.5 billion into its rainy day fund and establish a permanent, formula-based structure for future reserve contributions.
Recommendations related to Economic Downturn
The city should add at least $2.5 billion to the rainy day fund this year to prepare for potential economic instability.
The city should adopt a steady, annual formula for future deposits into the rainy day fund during years of economic growth.
The city should establish a target size for the rainy day fund, mandate deposits, and specify clear criteria for when funds can be withdrawn.
Key Data
$2.5 billion
— The amount proposed to be added to the city's rainy day fund this year to protect against future economic downturns.
$3.3 billion
— The amount of additional tax revenue available in fiscal year 2022 that could support a large deposit into the rainy day fund.
$1.5 billion
— The amount of additional tax revenue projected to be available next year to support the city's fiscal stability.
New York State should prioritize fiscal stability by identifying recurring savings to avoid a future "fiscal cliff" and by bolstering rainy day reserves to prepare for the inevitable next recession. Additionally, the state should lower or sunset recent tax increases to improve economic competitiveness and reduce the volatility of tax receipts.
Recommendations related to Economic Downturn
The State should start to identify recurring savings that should grow to $3.5 billion annually by fiscal year 2025 to ensure that drastic service cuts are not required when the federal funds are exhausted.
The State should deposit any receipts above the current projections to the Rainy Day Fund and Retiree Health Benefits Trust to build a stronger fiscal future for the State.
Given the State’s stronger-than-expected receipts throughout the pandemic, the latest tax increases should be lowered, reversed, or at least allowed to sunset.
The State should take steps to improve the Medicaid program’s fiscal stability and outlook by charging the Transformation Team to identify Medicaid efficiencies, program improvements, and savings.
The State should improve its capital planning processes, broadly adopt benefit-cost analysis, better identify needs and resources, plan for maintenance and improvements, and continuously assess the progress of its work to ensure infrastructure investments are managed effectively.
Key Data
$3.5 billion
— Recurring program spending supported by federal aid in fiscal year 2025 that will create a fiscal cliff thereafter.
$13 billion
— One-time federal COVID aid funds provided to New York’s schools.
$19.6 billion
— The estimated two-year impact of a typical recession on state revenues.
$2 billion
— The structural imbalance in the MTA's operating budget that will emerge when federal aid runs out.
$1 billion
— The amount the congestion pricing program is expected to generate in net annual contributions for the MTA capital plan.
$8.9 billion
— The projected increase in State Operating Funds spending in fiscal year 2022.
New York City experienced a severe economic downturn during the COVID-19 pandemic, losing 933,000 jobs in just two months, which wiped out 90 percent of the previous decade's growth. As of September 2021, the recovery remains sluggish, with only 48 percent of those lost jobs regained.
Key Data
933,000 jobs
— The number of jobs lost in New York City in just two months at the beginning of the recent recession, representing one of every five jobs.
48 percent
— The portion of lost jobs that were regained by September 2021.
860,000 private sector jobs
— The number of private sector jobs lost in the City in two quarters during the COVID-19 recession, representing 21 percent of private sector employment.
117,700 jobs
— The number of jobs lost in the education and health care sectors during the COVID-19 pandemic and recession, representing 14 percent of those sectors.
New York State's financial plan update includes $2.2 billion in additional tax receipts this year and $8.5 billion over four years, with $2.4 billion allocated to reserve funds. Despite these additions, the state's $7.2 billion in reserves remains insufficient to adequately prepare for a future economic downturn.
Recommendations related to Economic Downturn
The State should deposit the vast majority of the additional $3 billion in receipts into Rainy Day reserves.
The State should release future financial plan updates on time, as they are critical for the public to assess the State’s fiscal condition.
Key Data
$2.2 billion
— Additional tax receipts recognized in the First Quarter Financial Plan Update for the current year.
$8.5 billion
— Additional tax receipts recognized in the First Quarter Financial Plan Update over four years.
$2.4 billion
— Amount added to the State’s Rainy Day and Economic Uncertainties reserve funds.
$3 billion
— Potential additional receipts based on the Comptroller’s monthly cash reports.
$7.2 billion
— Total amount of reserves after the deposits outlined in the update.
At this time last year, New York State estimated that tax receipts would fall short of pre-pandemic estimates by $15 billion annually on average, totaling $60 billion over four years. Receipts, however, have been much stronger than expected. By April 2021, the State reduced its four-year tax receipt shortfall estimate by 80 percent, to $11.8 billion. Over the four-year period, the State also will receive at least $21.1 billion of targeted and general federal fiscal…
The next New York City Comptroller will play a critical role not only in holding the next Administration and agencies accountable, investing and managing five pension funds with $248 billion in assets, and partnering in $13 billion City debt issuance, but also in spotlighting and promoting New York City’s fiscal…
The American Rescue Plan offers a critical opportunity to stabilize New York's short- and long-term finances by supporting pandemic-related needs and avoiding tax increases. To ensure long-term fiscal health, the state and city must prioritize increasing government efficiency and effectiveness rather than simply delaying necessary fiscal adjustments.
Recommendations related to Economic Downturn
The State and City should use federal aid to support covid-related needs and spread aid over time while taking clear action to increase government efficiency.
The State and City should stabilize government finances without raising taxes by using federal funds wisely.
The State and City must improve government efficiency, effectiveness, and quality over the long run to avoid kicking their fiscal reckoning down the road.
The State and City should ensure that recurring revenues are sufficient to support critical services without being so high that they risk driving away residents and businesses.
New York State and City face combined budget gaps of $73.3 billion over four years, necessitating urgent fiscal stability plans regardless of potential federal aid. Even with significant federal assistance, the State and City must implement substantial gap-closing measures to address long-term financial risks.
Recommendations related to Economic Downturn
State and City leaders should act with urgency to develop and implement credible fiscal stability plans.
The State and City must implement significant actions to stabilize their finances in the long run, as federal aid alone is unlikely to solve the entire problem.
Key Data
$73.3 billion
— Total State and City budget gaps over four years.
$60.1 billion
— The most recent State financial plan's projected four-year deficit.
$13.2 billion
— The City's projected four-year budget gap in the November 2020 Financial Plan.
$57 billion
— Total gap-closing actions the State and City would need to implement if federal aid relieves the same portion of gaps as in the Great Recession.
$10.6 billion
— The amount of gap-closing measures the City would need to implement through January 2024 if federal aid provides a similar share of relief as in the Great Recession.
$4.8 billion
— The City's adjusted gap for fiscal year 2022 that must be closed by the release of the Preliminary Budget in January 2021.
The COVID-19 pandemic caused a significant economic downturn in New York City, with taxable sales declining 23 percent to $34.2 billion between June and August 2020 compared to the previous year. While retail shopping showed signs of recovery, sectors like tourism, accommodation, and food services experienced severe declines exceeding 60 percent.
Key Data
23 percent
— decline in New York City taxable sales from June to August 2020 compared to the same quarter in 2019.
$34.2 billion
— total New York City taxable sales from June to August 2020.
37 percent
— decline in New York City taxable sales from March to May 2020 compared to the prior year.
$9.0 billion
— dollar decline in restaurant sales from March to August 2020.
90 percent
— decline in the accommodation sector's taxable sales in June to August 2020 compared to the prior year.
21.5 percent
— share of retail taxable sales comprised by electronic retailers during the pandemic.
The Metropolitan Transportation Authority faces a severe fiscal crisis due to the COVID-19 pandemic, with projected operating budget shortfalls between $8.4 billion and $12.6 billion for 2020 and 2021. To manage this, the authority must prioritize operational efficiencies, re-evaluate capital investments, optimize service levels, adjust fare and toll policies, and limit borrowing to a last resort.
Recommendations related to Economic Downturn
The MTA should pursue greater efficiencies to lower operating expenses, which in large part require working collaboratively with labor unions.
The authority should prioritize planned capital investments to lower debt service costs, including postponing expansions and possibly slowing accessibility improvements.
The MTA should optimize service levels by continually adjusting capacity to current demand and safety requirements.
The authority should consider revision of fare and toll policies that seek more revenue from fares and to raise tolls proportionally more than fares.
The MTA should borrow for operating expenses only as a last resort, to be minimized and used only when other options are exhausted.
Key Data
$8.4 billion and $12.6 billion
— Estimated operating budget shortfalls for 2020 and 2021.
$3.8 billion
— Federal aid already received by the MTA.
$3.9 billion
— Additional federal aid requested by the MTA for 2020.
$4.5 billion to $8.7 billion
— Projected 2020-2021 cumulative operating budget deficit assuming $3.9 billion in new aid.
$500 million
— Annual savings sought from the Transformation Plan.
$64 billion
— Capital commitments planned for the next five years.
New York City adopted an $88.2 billion budget for fiscal year 2021 to navigate the severe economic and fiscal crisis caused by the pandemic. Maintaining this spending level depends on successfully implementing $1 billion in labor union savings and $350 million in agency overtime reductions to avoid potential layoffs.
Recommendations related to Economic Downturn
The City must successfully negotiate $1 billion in recurring savings with municipal labor unions to maintain the current budget level.
The City must ensure that reductions approved as part of agency savings programs, such as the $350 million reduction in police overtime, are successfully implemented.
The City should utilize attrition, increased productivity, and negotiated fringe benefit changes to achieve necessary budget savings without resorting to layoffs.
City leaders must focus on negotiating and managing the changes necessary to achieve the assumed savings targets.
Key Data
$88.2 billion
— The total budget adopted by New York City leaders for fiscal year 2021.
$1 billion
— The amount of recurring savings the City aims to negotiate with municipal labor unions.
22,000
— The number of employees who could face layoffs if the City fails to reach its savings target.
$350 million
— The reduction in overtime at the New York City Police Department approved as part of agency savings programs.
0.1 percent
— The growth rate of adjusted city-funded spending in fiscal year 2021.
$2 billion
— The amount by which adjusted city-funded spending in fiscal year 2021 exceeds spending in fiscal year 2018, after adjusting for inflation.
$88.2 billion is the size of the NYC budget adopted for FY 2021. After years of economic expansion, this is the first budget Mayor de Blasio and Speaker Johnson negotiated in a recession. CBC's Ana Champeny joined the podcast to discuss why this is just the first of many tough…
The fiscal year 2021 budget for New York City is precariously balanced with reserves and optimistic revenue assumptions, failing to adequately address the long-term fiscal crisis. Without implementing recurring efficiency savings and aggressive attrition, the City faces significant risks of drastic service reductions and layoffs as it navigates ongoing economic uncertainty.
Recommendations related to Economic Downturn
City leaders should sharpen their pencils and focus their management on actions that reduce the yawning multiyear budget gaps presented by the fiscal crisis.
The City must implement a program of recurring efficiency savings and aggressive attrition to avoid drastic service reductions and layoffs.
The City must provide specificity on the actions needed to produce $1 billion in savings from collaboration with labor unions.
Key Data
$300 million
— The amount by which the City aims to reduce police overtime, which is considered highly unlikely given the weak history of overtime management.
$1 billion
— The amount of savings the City aims to produce through collaboration with municipal labor unions, for which the budget currently lacks specific action plans.
New York State should implement a comprehensive, transparent performance management system to improve government accountability and service delivery, particularly as the state faces fiscal stress from the pandemic's economic impacts. Such a system would institutionalize goal setting, benchmarking, and data gathering to better inform resource allocation and management decisions.
Recommendations related to Economic Downturn
The State should implement a performance management system that identifies key agency and authority programs and establishes output and outcome goals for each program.
The State should implement a performance management system that identifies metrics for each program, including input, process, output, outcome, quality, and efficiency measures.
The State should implement a performance management system that establishes performance targets for each program’s outputs, outcomes, quality, and efficiency.
The State should implement a performance management system that establishes implementation benchmarks for new initiatives.
The State should implement a performance management system that identifies risks and pressures to State programs from adverse shocks such as natural disasters or economic downturns.
The State should implement a performance management system that institutes a management and accountability process to review metrics and incorporate findings into ongoing management.
The State should implement a performance management system that allows for oversight and auditing of data.
The State should implement a performance management system that links to the budget cycle to inform budget and policy decisions for elected officials, agency administrators, and staff.
The State should implement a performance management system that provides public information about agency, authority and program performance that is accessible, readily understood, and provides quantitative measurements of service delivery efficiency, cost, and quality.
The State should implement a performance management system that is established through statutory provisions that promote consistency in reporting across agencies, authorities, and administrations.
Key Data
34%
— The reduction in infant mortality rates in New York State over the past decade due to maternal care strategies.
$34 million
— The estimated savings in workforce costs at State agencies achieved by the Business Services Center in its first four years of operation.
1,683
— The number of data files available in the Open Data NY portal catalog as of April 2020.
244
— The number of data files available in the Open Data NY portal when it first launched in March 2013.
The New York City Economic Development Corporation faces significant fiscal strain due to the pandemic and the high costs of operating the NYC Ferry system, necessitating immediate budget adjustments. To maintain core operations during this economic downturn, the agency must prioritize efficiency, including potential fare restructuring and the cancellation of costly route expansions.
Recommendations related to Economic Downturn
All agencies should scrutinize their operations to find efficiencies and redesign or eliminate programs that are not cost-effective.
In the coming months, EDC should continue to identify ways to make its ferry operations more efficient, such as implementing dynamic fare pricing and delaying the launch of costly planned expansions.
EDC could generate additional recurring savings by modifying the ferry system’s fare policy and planned expansions.
NYC Ferry should charge higher fares on weekends and for noncommuters.
NYC Ferry should not run or expand routes to Coney Island and Ferry Point that will require extraordinarily high subsidies.
Key Data
$10 million
— Estimated reduction in operating costs for fiscal year 2021 resulting from ferry service changes.
$53 million
— Amount spent by EDC to subsidize NYC Ferry in 2019, the first full year of operations for the six initial routes.
$1.8 million
— Operating loss recorded by EDC in 2019.
$147 million
— Gross rental revenue for commercial properties managed by EDC in 2019.
$84 million
— Income generated by EDC's maritime portfolio in 2019.
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New York State faces significant fiscal stress with projected budget gaps reaching $19 billion by fiscal year 2024, necessitating strategic adjustments to balance the budget. To address these shortfalls, the state should implement targeted measures such as reducing school aid to wealthy districts, freezing middle-class tax cuts, and modifying capital spending plans rather than relying on steep, across-the-board cuts.
Recommendations related to Economic Downturn
The State should continue Medicaid Redesign Team efforts to find additional savings starting in fiscal year 2022.
The State should reduce school aid by $800 million by targeting districts that spend well in excess of a Sound Basic Education and can afford to pay for additional services.
The State should eliminate 50 percent of most Empire State Development (ESD) economic development capital spending to reduce unproductive capital projects.
The State should freeze the implementation of middle class tax cuts at the calendar year 2020 rate.
The State should temporarily suspend the sales tax exemption on clothing items costing less than $110 to generate additional resources.
The State should reduce the capital plan by 10 percent and shift 90 percent of paygo capital projects to debt finance to preserve cash for closing budget gaps.
Key Data
$13 billion
— Projected budget gap for fiscal year 2021.
$19 billion
— Projected budget gap for fiscal years 2023 and 2024.
$800 million
— Recommended reduction in school aid to wealthy districts.
$3.1 billion
— Amount of reserves the State would need to use in fiscal year 2021.
$1.0 billion
— Target for asset sales in fiscal year 2022 and 2023.
$774 million
— Additional resources generated in fiscal year 2021 by suspending the clothing sales tax exemption.
The COVID-19 pandemic created significant economic stress, necessitating a transparent process for the state to manage budget modifications and revenue shortfalls. Providing advance notice of spending cuts and publicizing detailed financial plans are essential for localities and school districts to effectively manage the impact of the crisis.
Recommendations related to Economic Downturn
The notification and details of the Executive’s plan should be made publicly available as soon as practicable to ensure the Legislature and the public can reasonably understand possible reductions for each affected program and, where applicable, the impact on each local government or school district.
The notification should include a detailed description of revenue shortfalls or spending overages.
The Division of the Budget, Senate, and Assembly should fulfill their existing obligation to provide “Quick Start” revenue and spending forecasts in the fall of each year.
Providing as much advance notice as possible will allow localities and agencies facing budget cuts to plan and manage the impact.
New York City's fiscal year 2021 executive budget relies on short-term strategies like reserve diversion and optimistic revenue projections, leaving a $5.0 billion gap for fiscal year 2022. To better navigate the ongoing economic downturn, the city must implement a larger, more sustainable savings plan that prioritizes recurring efficiencies over temporary spending delays.
Recommendations related to Economic Downturn
The City should identify non-core services and subsidies to reduce or suspend, while seeking additional efficiencies in agency operations, employee benefits, contracts, leased space, and fleet operations.
Spending reductions should be focused on paring down to efficiently provide core needed services to strengthen the City’s ability to weather the full length of the economic downturn.
The savings plan should be larger with more recurring value to address the multi-year fiscal crisis.
Key Data
$2.7 billion
— The total value of the two-year savings program.
2 percent
— The portion of the budget covered by the two-year savings program.
$2.6 billion
— The amount diverted from the Retiree Health Benefits Trust to balance the budget.
$1.4 billion
— The amount of other reserves used to balance the budget.
$5.0 billion
— The looming gap projected for fiscal year 2022.
7.4 percent
— The budget's assumption for tax revenue growth rebound in fiscal year 2022.
New York City needs to establish a well-designed Rainy Day Fund to protect against economic downturns and emergencies, as current saving methods are insufficient and lack transparency. State and city leaders must enact legislation that mandates specific deposit rules and restricts fund usage to ensure the city remains fiscally prepared for future crises.
Recommendations related to Economic Downturn
State law should define a recession as two successive quarters of economic decline as indicated by private employment or gross city product.
An emergency should be defined as severe when it is accompanied by a revenue shortfall or expenditure increase equal to or greater than 1 percent of the budget.
Withdrawals from the RDF should be limited to no more than two-thirds of the fund balance in any year, to ensure funds are available for the second year of a recession or emergency.
The City should implement mandatory deposits equal to 75 percent of the tax revenue growth above 3 percent to ensure sufficient funds are accumulated.
The City should set a target size of 17.2 percent of tax revenue for the RDF, which can serve as a cap on the size of the fund.
Key Data
$1.25 billion
— Amount of reserves New York City has set aside for the upcoming year.
$6 billion
— Near-term revenue loss estimated by the Office of the New York City Comptroller.
$20 billion
— Estimated three-year shortfall if a recession occurs similar to those in the recent past.
$9 billion
— Amount that would have been netted in reserves over the last 10 years if a Rainy Day Fund strategy had been followed.
17.2 percent
— Recommended target size of tax revenue for the Rainy Day Fund to serve as a cap.
The onset of the pandemic has triggered an abrupt economic slowdown and increased the likelihood of a recession, necessitating a "bare bones" state budget that prioritizes essential services and pandemic response while deferring non-essential policy changes. State leaders must avoid tax increases and utilize emergency federal aid to address revenue shortfalls without abandoning necessary structural reforms to the Medicaid program.
Recommendations related to Economic Downturn
Quickly enact a "bare bones" budget that supports the estimated pandemic response need.
Do not consider tax increases at this time, as New York's already high taxes and the federal cap on state and local tax deductions risk the state's competitiveness.
Leverage and continue as needed the work of the Medicaid Redesign Team (MRT) to design appropriate responses to unsustainable expenditure growth.
Appropriately use emergency federal aid, such as the temporarily increased federal share for Medicaid, to replace lost tax revenues or support the response.
Understand this budget will have to be revised in the coming months as more information becomes available about the economic and fiscal impacts of the pandemic.
Key Data
$4 billion
— Estimate of revenues likely to be below Executive Budget projections.
$7 billion
— Potential revenue loss if a recession or sharper declines in the stock market occur.
$34 billion
— Potential state revenue shortfall over three years based on previous recessions.
$18 billion
— Amount of the State’s $35 billion five-year budget gap caused by unsustainable, unbudgeted Medicaid expenditure growth.
$35 billion
— The State's five-year budget gap.
$4.5 billion
— Potential relief provided through a temporarily increased federal share for Medicaid.
New York City and State face significant revenue shortfalls in the event of a recession, with projected losses of $34 billion for the state and $15-20 billion for the city. To prepare for these economic downturns, leaders must restrain recurring spending, prioritize savings in rainy day funds, and enact legislation to ensure these reserves are used exclusively during emergencies.
Recommendations related to Economic Downturn
State leaders should close state budget gaps by restraining recurring spending without tax increases or fiscal gimmicks.
The state should save any revenues coming in above current projections in its rainy day funds.
The state should stop increasing school aid to wealthy districts and put away those funds to protect New Yorkers in the future.
The mayor should immediately ask agencies to develop plans for productivity-based savings totaling 1% or more of city-funded expenditures.
The Council should identify savings and not add funds to support new or expanded programs.
Both mayor and Council should commit to putting all funds above projections into reserves.
The State must pass legislation enabling the use of a rainy day fund, with the requirement that it only be used during an economic recession or severe emergency.
Key Data
$34 billion
— Three-year revenue shortfall for the state in the event of a recession.
$15-20 billion
— Three-year revenue shortfall for the city in the event of a recession.
6-16%
— Percentage of the projected recession shortfall currently held in reserve by the city and state.
$700 million
— Revenues already identified by the state above current projections that should be saved.
New York State faces a significant fiscal imbalance with a projected $28.8 billion four-year budget gap, necessitating immediate spending restraint to prepare for potential economic downturns. To stabilize the budget and avoid counterproductive tax increases, the state should implement structural reforms in Medicaid, education aid, and economic development programs.
Recommendations related to Economic Downturn
Reconstitute the Medicaid Redesign Team to identify savings, specifically to address high and rapidly rising long-term care costs and to reform Medicaid supplemental payments.
Focus education aid on needy districts to fund fully a sound basic education (SBE).
Reduce unproductive economic development program spending to align spending with projected receipts.
Consider reforms to retiree health benefits to significantly reduce post-employment benefit costs and future liabilities.
The Executive, with the support of the Legislature, should exercise powers granted under the Medicaid global cap to prevent Medicaid spending from exceeding budgeted amounts in future periods.
Key Data
$6.1 billion
— budget gap next fiscal year
$28.8 billion
— four-year gap
$6.7 billion
— in savings that are not yet specified
$2.2 billion
— is 'solved' by permanently delaying annual Medicaid bill payments
$12.5 billion
— Medicaid spending contributes to the total four-year State budget gap
$1.6 billion
— in state school aid in school year 2017-2018 received by wealthy districts
Creating a rainy day fund allows New York City to save during prosperous times, preventing the need for service cuts or tax increases during a potential recession. A recession could lead to multi-year revenue shortfalls of at least $15 billion, making the establishment of this savings mechanism essential for fiscal stability.
Recommendations related to Economic Downturn
Voters should vote yes to approve the change to the city charter to create a rainy day fund.
Voters should vote yes on Ballot Question 4 to create a rainy day fund to protect New Yorkers when they need it most.
Key Data
$15 billion
— Potential multi-year revenue shortfalls resulting from a recession.
New York City voters are encouraged to approve Ballot Question 4, which would amend the City Charter to establish a Rainy Day Fund for setting aside revenue during periods of economic growth. This fund would provide a critical financial buffer to prevent severe service cuts and tax increases during an economic downturn or emergency.
Recommendations related to Economic Downturn
New York City voters should support Ballot Question 4 to amend the New York City Charter to allow the City to create and use a Rainy Day Fund.
The City must limit the use of the Rainy Day Fund to times of economic recession and severe emergency to ensure it is not used during periods of economic growth.
New York State and City tax revenues are highly dependent on high-income earners, whose income is largely derived from capital gains that fluctuate significantly with economic conditions. This reliance creates substantial budgetary volatility, as evidenced by multi-billion dollar swings in tax collections during past economic downturns.
Key Data
$47.1 billion
— New York State's PIT revenue raised in state fiscal year 2015-2016.
37.0 percent
— Share of total New York State PIT liability accounted for by taxpayers with taxable income of $1 million or more in 2016.
$5.7 billion
— Decline in New York State PIT revenue in fiscal year 2009.
$11.4 billion
— New York City PIT revenue in city fiscal year 2016.
38.9 percent
— Share of total New York City PIT liability accounted for by tax filers earning $1 million or more in 2016.
$2.3 billion
— Decrease in New York City PIT collections in fiscal year 2009.
The MTA's financial plan relies on the assumption of continued economic growth, which, if interrupted by a recession, could lead to a revenue shortfall of nearly $1.7 billion. To mitigate these risks, the Authority must prioritize realistic budget planning, including securing zero-cost wage settlements and ensuring that cost-cutting measures do not negatively impact service.
Recommendations related to Economic Downturn
MTA leaders should focus on developing and detailing the Transformation Plan, realistically assessing its savings potential and pursuing the changes on which it depends to ensure fiscal stability.
The Authority should specify the elements of the Budget Reduction Program and integrate them with the Transformation Plan without causing a negative impact on service.
MTA leaders should seek zero-cost wage settlements in current collective bargaining to address the operating budget imbalance.
The Authority should prioritize monitoring economic developments to adjust as needed to potential downturns.
Key Data
$1.7 billion
— Estimated loss of revenue across a four-year MTA financial plan if a recession similar to the average of three previous recessions occurs.
2.4 percent
— Estimated shortfall of total revenue across a four-year MTA financial plan in the event of a recession.
57 quarters
— Duration of unbroken economic growth through 2023, which the financial plan assumes will continue.
$740 million
— Cumulative cash deficit projected for the MTA in 2023.
Establishing a Rainy Day Fund would allow New York City to accumulate resources during periods of economic growth to mitigate the need for spending cuts and tax increases during future economic downturns or emergencies. This proposal includes specific charter amendments to codify deposit and withdrawal rules, ensuring the fund can be utilized without violating balanced budget requirements.
Recommendations related to Economic Downturn
The city should establish the Rainy Day Fund to save resources during times of economic expansion.
The city should specify that Rainy Day Fund deposit and withdrawal rules be codified in City law.
The city should permit use of the Rainy Day Fund without violating the City Charter and the State Financial Emergency Act for the City of New York balanced budget requirements.
The Charter Revision Commission should have language reviewed and modified as appropriate by those with deep expertise in drafting legislation.
Key Data
$100 Million
— The minimum amount required for the general reserve at the beginning of any fiscal year.
New York State's current education funding formula is flawed, leading to inequitable distribution where wealthy districts receive excess aid while some districts lack the resources to provide a sound basic education. To ensure fiscal stability and prepare for potential economic downturns, the state should reform these formulas to better account for local wealth and prioritize aid for districts with the greatest need.
Recommendations related to Economic Downturn
The state should significantly revamp the Foundation Aid formula and other education aid formulas to properly account for local wealth and actual local funding, ensuring resources are available to sustain funding through the next recession.
Policymakers should eliminate hold-harmless provisions and minimal growth rates to ensure aid is directed where it is needed most, rather than being locked into outdated allocations.
The state should use the most up-to-date data available when calculating aid to ensure that funding is accurately targeted and that the state can set aside more in reserves to withstand economic downturns.
Key Data
10 percent
— The portion of what may be needed to compensate for recession-driven revenue losses that is currently held in state reserves.
$13 billion
— The amount New York will spend more than necessary to fund a sound basic education.
$2 billion
— The amount of State aid received by 165 districts that already raise enough revenues from local resources to fund a sound basic education.
New York City lacks a formal mechanism to save money during economic growth, forcing the city to rely on problematic workarounds or service cuts during recessions. Establishing a Rainy Day Fund with specific deposit requirements and withdrawal triggers would provide a necessary fiscal cushion to protect essential services during future economic downturns.
Recommendations related to Economic Downturn
The charter commission should approve and advance to voters in November the creation of a Rainy Day Fund.
The charter commission should allow for an RDF, well structured to preserve both long- and short-term stability.
The city should implement annual deposits of 75 percent of all tax revenues in excess of 3 percent growth.
The city should ensure that economic triggers are defined in law to limit withdrawals to periods of recession or emergency.
The city should ensure that RDF funds are not all used in one year to maintain fiscal stability during a downturn.
Key Data
$1.25 billion
— Annual amount currently set aside for reserves in the financial plan.
$15 billion to $20 billion
— Projected three-year revenue shortfall from a recession comparable to the past two.
17 percent
— Target size of tax revenues for a Rainy Day Fund to mitigate a recession or emergency.
75 percent
— Recommended annual deposits of tax revenues in excess of 3 percent growth.
$9 billion
— Amount the city would have in its Rainy Day Fund if the recommended deposit policy had been in place during the current recovery.
New York City faces significant financial risk in the event of an economic downturn, with potential tax revenue shortfalls estimated at $15.4 billion based on the 2001 recession and $20.4 billion based on the 2008 recession. To mitigate such risks, the city maintains annual budget reserves of $1.25 billion.
Key Data
$15.4 Billion
— Potential tax revenue shortfall for New York City based on the 2001 recession.
$20.4 Billion
— Potential tax revenue shortfall for New York City based on the 2008 recession.
$1.25 Billion
— Annual city budget reserves maintained to help mitigate financial risks.
Establishing a Rainy Day Fund and restructuring the Retiree Health Benefits Trust would provide essential tools to manage fiscal stability during economic downturns. These measures would help mitigate the impact of potential cumulative tax revenue shortfalls of $15 billion to $20 billion that could occur during a recession.
Recommendations related to Economic Downturn
The City should create and permit the use of a Rainy Day Fund (RDF) to better prepare for economic downturns.
The Charter should be amended to exclude from its balanced budget requirements a deficit that is funded by an RDF that adheres to sound principles.
The Charter should be amended to properly structure the Retiree Health Benefits Trust (RHBT), which is currently imprudently considered a de facto Rainy Day Fund.
The City should require annual deposits of at least the current year cost of the relevant retiree health benefits plus some percentage, or the normal cost of those benefits, into the Retiree Health Benefits Trust.
The City should limit Retiree Health Benefits Trust disbursements to the current year cost of benefits.
Key Data
$15 billion to $20 billion
— Cumulative tax revenue shortfalls New York City would face over three years during a recession comparable to the prior two.
New York City faces potential tax revenue shortfalls of $15 billion to $20 billion during a recession, necessitating the establishment of a Rainy Day Fund to avoid service cuts and tax hikes. By codifying parameters for this fund, the City could secure its long-term fiscal future and better manage economic uncertainty without relying on deficient alternative mechanisms.
Recommendations related to Economic Downturn
The City and State should authorize the City to use an RDF by codifying its parameters and amending State law and the City Charter to permit it.
Legislation to establish the RDF should specify the target size, required deposits, and permitted withdrawals.
The target size of the RDF should be 17.2 percent of the pre-recession year tax revenue.
Minimum required deposits should capture more revenue in years with faster growth, while also allowing sufficient revenue to fund City services.
Withdrawals should be permitted during an economic contraction or a severe emergency.
Key Data
$15 billion to $20 billion
— Cumulative tax revenue shortfalls over three years in a recession compared to the current financial plan.
17.2 percent
— Target size of the RDF relative to pre-recession year tax revenue.
$10.8 billion
— Recommended RDF target size in fiscal year 2020.
75 percent
— Minimum deposit of annual tax revenue growth in excess of 3 percent.
$8.5 billion
— Balance the RDF would have reached during the current nine-year expansion if the deposit requirement had been in place.
New York State faces significant fiscal risk from a potential economic downturn, as its heavy reliance on volatile personal income tax revenues from high earners could lead to multi-billion dollar budget shortfalls. To mitigate these impacts, the state must constrain spending growth and increase its rainy day reserves, which are currently insufficient to cover projected deficits.
Recommendations related to Economic Downturn
Final agreement on the Adopted Budget for Fiscal Year 2020 should constrain spending growth and make additional deposits to rainy day funds.
State leaders should reduce spending growth to at most 2 percent and increase reserves.
Larger deposits are required to forestall drastic service cuts, which would be made when New Yorkers need services most, and to prevent counterproductive tax increases in the midst of a recession.
The state should amend statute 92-CC of the state finance law to allow for larger deposits into rainy day reserves.
Key Data
$2.6 billion
— Amount by which current-year personal income tax collections are lower than projected.
$22 billion and $44 billion
— Range of potential revenue shortfalls over three years in the event of a recession.
$2.5 billion
— Estimated rainy day fund balance at the end of fiscal year 2020.
$19 billion
— Annual personal income tax revenues collected from the top 1 percent of filers.
$34.1 billion
— Three-year cumulative tax revenue shortfalls resulting from a hypothetical recession beginning in fiscal year 2021.
$33.4 billion
— Remaining deficit that would need to be closed by other actions if a recession occurs.
New York City faces a potential $30 billion cumulative budget shortfall over three years if a recession occurs, necessitating immediate action to increase reserves and reduce spending. Relying on existing reserves and current savings plans is insufficient to prevent drastic service cuts and tax increases during an economic downturn.
Recommendations related to Economic Downturn
The Executive Budget for Fiscal Year 2020 should reflect constrained spending growth, greater budget reserves, and a substantial increase in recurring savings.
The City should take immediate action to reduce spending growth and increase reserves to prepare for an inevitable economic downturn.
Future savings must be substantially larger to forestall drastic service cuts and counterproductive tax increases in the midst of a recession.
Key Data
$30 billion
— Cumulative three-year budget gaps that the City could face under a recession scenario.
$15 billion and $20 billion
— Potential tax revenue shortfall below projections over three years if a recession occurs.
$750 million
— Amount of recurring savings included in the Executive Budget, which would only reduce the cumulative three-year gap by 7.5 percent.
$1.25 billion
— Annual existing budget reserves that are considered inadequate to forestall harmful service cuts and tax increases.
$5.3 billion
— Amount City tax revenues would fall below the financial plan in the first year of a hypothetical recession.
$7.1 billion to $8.9 billion
— Projected tax revenue shortfall below projections in the second year of a recession.
New York State faces a $2.3 billion revenue shortfall driven by federal tax changes and economic slowdown, necessitating immediate fiscal adjustments to ensure long-term stability. To address these gaps, the state should limit spending growth to 2 percent, repeal the expiring property tax relief credit, and bolster rainy day reserves by repurposing $2.9 billion in unused settlement funds.
Recommendations related to Economic Downturn
The State should hold spending growth to 2 percent to save $1.45 billion in fiscal year 2020.
The State should repeal the property tax relief credit set to expire after calendar year 2019 to reduce the fiscal year 2020 deficit by more than $1 billion.
The State should eliminate the appropriations connected to unused settlement funds and dedicate them to rainy day funds to double the State’s reserves.
The State should limit education aid growth to only those districts that need additional resources to fund a sound basic education.
The State should decrease State economic development programs that have not been proven effective, such as the film tax credit.
Key Data
$2.3 billion
— The shortfall in January personal income tax collections reported by Governor Cuomo.
$1.45 billion
— The amount saved in fiscal year 2020 by holding spending growth to 2 percent.
$1 billion
— The amount the fiscal year 2020 deficit would be reduced by repealing the property tax relief credit.
$2.9 billion
— The total of allocated but unused settlement funds that could be dedicated to rainy day reserves.
$2.3 billion
— The total of the State’s current rainy day reserves under the Governor’s budget proposal.
$500 million
— The potential savings from limiting education aid increases to only those districts that need additional resources.
Watch the original segment here . A day after Mayor Bill de Blasio ordered city agencies to cut from their own budgets , Errol Louis spoke with two experts — Ronnie Lowenstein, the director of the New York City Independent Budget Office, and Andrew Rein, the president of the Citizens…
New York State's current rainy day reserves are inadequate to withstand a potential recession, leaving the state vulnerable to significant budget cuts. By adopting a model similar to California's, which mandates specific deposits into a stabilization fund, the state could better prepare for future economic volatility.
Recommendations related to Economic Downturn
New York State should consider legislation to mandate deposits into a rainy day fund.
The level of reserves should be thoroughly analyzed with respect to tax revenue volatility.
A healthy level of reserves should be established to protect New Yorkers from the impacts of budget cuts to vital services that would result from an economic downturn.
Key Data
$43.9 billion
— The estimated four-year impact of a recession on a financial plan that assumed economic growth.
$9.2 billion and $12.0 billion
— The range of losses in the first two years of a prospective recession based on past recession trends.
$1.8 billion
— The current balance of New York State's rainy day reserves.
$13.5 billion
— The balance of California's rainy day fund in fiscal year 2019.
$10.7 billion
— The amount in monetary settlements from Wall Street financial entities from fiscal years 2015 to 2018 that could have been used to bolster reserves.
$6.6 billion
— The amount more in reserves New York would have achieved had it made deposits similar to California.
The federal tax overhaul passed last month may have enormous impacts in New York and could upend the relationship between the federal government and the states. CBC and the CUNY Graduate School of Journalism gathered experts to assess the impact and potential city and state responses in a special half-day…
Tax Increment Financing is a tool used to fund infrastructure projects by capturing future property tax revenue, but it carries significant risks, as evidenced by the $359 million New York City paid from its general fund to subsidize Hudson Yards' interest payments after the Great Recession. Cities must rigorously test revenue projections against potential economic downturns and other financial shocks to ensure projects remain viable and do not burden taxpayers.
Recommendations related to Economic Downturn
Governments should test revenue projections against a range of economic scenarios, including the impact of possible cost overruns, revenue shortfalls, cost spillovers, and economic downturns.
Municipalities must answer the 'but for' test to ensure that development and property value appreciation would not occur in the absence of the TIF-funded capital project.
Policymakers should implement strong transparency provisions to protect future taxpayers against the risks associated with TIF projects.
Cities should evaluate whether a project's expected return on investment is strong enough to justify diverting revenue from other uses before creating a TIF district.
Governments should ensure that TIF districts are not used to subsidize private development or companies that do not need incentives to invest in specific areas.
Key Data
$359 million
— Amount paid by New York City from its general fund to subsidize Hudson Yards' interest payments after the Great Recession.
$3 billion
— Amount of bonds for the Hudson Yards project that New York City agreed to guarantee interest payments on.
$14 million
— Amount of TIF debt the Troy Downtown Development Authority in Michigan defaulted on.
$75.4 million
— Total outstanding Pilot Increment Financing (PIF) debt in New York as of June 2017.
$10 million
— Amount that a majority of Chicago's TIF districts raised and spent over a 13-year period.
$266 million
— Capital cost overruns incurred by the Hudson Yards project.
New York's requirement for local governments to fund a significant portion of Medicaid costs creates an inequitable financial burden that disproportionately affects low-income counties and taxpayers. Eliminating this local funding requirement and shifting to full state financing would improve fiscal fairness and align financial responsibility with state-level program control.
Recommendations related to Economic Downturn
The State should assume responsibility for the local share liability over a period of four or five years.
Full state financing is the best way to achieve continued cost control in a program fully controlled by the State.
New York’s elected leaders should eliminate the local funding requirement for Medicaid to improve the way the state finances the program.
A gradual assumption of the local cost would provide a strong incentive for county governments to adhere closely to the property tax cap.
Key Data
$7.1 billion
— Projected amount New York's counties will pay for Medicaid in state fiscal year 2012.
$6.5 billion
— Amount New York's counties paid for Medicaid in fiscal year 2008.
$555
— Per capita Medicaid burden for New York City residents.
3 percent
— Statutory cap enacted in 2005 limiting annual growth in the local Medicaid share.
2 percent
— Property tax growth cap enacted in June 2011 for county governments.
13 percent
— Portion of total expenditures that New York's counties will pay for Medicaid in state fiscal year 2012.
The NYS FY2018 Executive Budget relies on a temporary income tax surcharge originally intended for the Great Recession to fund recurring expenses, rather than preserving it for future economic downturns. Furthermore, current state reserves, totaling less than 6% of operating spending, are insufficient to withstand a potential recession.
Recommendations related to Economic Downturn
Consideration should be given to restructuring the standing tax brackets and reserving for future economic downturns the option of a temporary surcharge.
Key Data
$150 million
— The increase in statutory reserves.
$2 billion
— The total amount of statutory reserves.
$3 billion
— The amount of settlement funds that have been allocated but not yet disbursed.
$500 million
— The amount available in debt management funds.
6%
— The percentage of state operating spending represented by the combined total of reserves, which would be quickly depleted in the event of a recession.
New York State's fiscal year 2017 financial plan faces declining tax revenue projections and widening out-year budget gaps that reach $8.9 billion by fiscal year 2020. These fiscal challenges are compounded by rising personnel costs and minimum wage increases, creating significant financial pressure should the economy enter a recession.
Key Data
$1.4 billion
— Total drop in All Funds tax revenue projections for fiscal year 2017 from the adopted budget.
$3.5 billion
— Fiscal year 2018 budget gap, which grew by $295 million since the first quarter update.
$8.9 billion
— Fiscal year 2020 budget gap, which grew by almost $1.4 billion since the first quarter update.
New York State faces a potential revenue shortfall of up to $59 billion, or 18.2 percent of tax revenues, over four years if a recession similar to recent downturns occurs. To mitigate this risk, the state must build its financial reserves now, as its heavy reliance on volatile personal income taxes from high earners leaves it vulnerable to significant budget gaps.
Recommendations related to Economic Downturn
The State should build its reserves now in order to counter the potential impacts of an economic downturn.
New York should prepare for the necessity of tax increases and/or spending cuts to address revenue shortfalls caused by a potential recession.
Key Data
$59 billion
— The potential cumulative revenue loss for New York State over four years if a recession of the size and scope of the 2009-2012 period were to repeat.
18.2 percent
— The percentage of tax revenues that could be lost over four years in the event of a recession similar to the 2009-2012 period.
63 percent
— The share of New York State tax revenues derived from the personal income tax in 2016.
41.5 percent
— The contribution of the top 1 percent of taxpayers to personal income tax revenues between 2002 and 2015.
$74.7 billion
— The total amount of tax revenues collected by New York State in 2016.
The 2016-17 state budget relies on continued economic growth to manage projected deficits, leaving the state vulnerable if an economic downturn occurs. To better secure the state's financial future, policymakers should have implemented structural reforms like rationalizing retiree health insurance shares and capping STAR benefits.
Recommendations related to Economic Downturn
The state should implement rationalizing retiree health insurance shares to help secure the state's financial future.
Policymakers should prioritize capping STAR benefits to improve the long-term stability of the state's financial plan.
The state should focus on extending rational funding plans for SUNY and CUNY to ensure sustainable fiscal management.
Key Data
$1.2 billion
— Projected out-year deficit for state fiscal year 2018.
$3 billion
— Projected out-year deficit for state fiscal year 2019.
$3.4 billion
— Projected out-year deficit for state fiscal year 2020.
$24.8 billion
— Total state education spending for the fiscal year.
$54 billion
— Total value of the five-year transportation capital plan.
$600 million
— Amount of public university and Medicaid expenses that were proposed to be shifted to New York City.
New York City's current savings plan is insufficient to prepare for a potential economic downturn, as it relies heavily on one-time adjustments rather than recurring operational efficiencies. To avoid drastic measures like tax hikes or layoffs during a future recession, the city must implement a more robust savings program that prioritizes long-term structural improvements.
Recommendations related to Economic Downturn
The Mayor should ask agencies to identify operational efficiencies that provide recurring savings to increase the budget cushion and guard against economic uncertainty.
The expanded Citywide Savings Program should include much more in the way of agency savings from initiatives that improve operations and provide recurring savings to prepare for a potential downturn.
The city should exercise spending restraint and build reserves regularly and well in advance of a potential downturn to avoid drastic actions like tax hikes or layoffs.
Key Data
$2.7 billion
— The amount by which the fiscal year 2017 budget proposal increased city-funded spending despite warnings of an economic slowdown.
$1.9 billion
— The total value of new savings initiatives proposed in the fiscal year 2017 Citywide Savings Program over the 2016 to 2020 period.
45 percent
— The decline in the Chinese stock market since its peak in June, which serves as an indicator of economic uncertainty.
70 percent
— The drop in the price of a barrel of oil since June 2014, contributing to global economic instability.
79th
— The number of consecutive months of economic expansion in the United States, marking the fourth-longest period of expansion since World War II.
The MTA faces a potential $1.5 billion shortfall over its financial plan if an economic downturn occurs, with single-year deficits reaching as high as $616 million. Even under favorable economic conditions, the agency projects a $182 million cash deficit in 2019, necessitating proactive adjustments to address these fiscal challenges.
Recommendations related to Economic Downturn
The MTA’s leaders should consider changes in order to meet challenges associated with a recession.
Key Data
$1.5 billion
— Potential shortfall over the financial plan based on the last three recessions.
$616 million
— Potential shortfall in a single year based on the last three recessions.
$182 million
— Projected cash deficit in 2019 if the region continues to grow as forecasted, planned fare and toll increases are implemented, and savings targets are achieved.
An economic downturn could cost the MTA as much as $1.5 billion, representing 3.9% of the agency's 2018 budget. Proactive measures are necessary to prepare for a potential recession without increasing long-term costs.
Key Data
$1.5 billion
— The potential impact of an economic downturn on the MTA.
3.9%
— The potential impact of an economic downturn as a share of the MTA's 2018 budget.
The Metropolitan Transportation Authority's financial plan relies on optimistic growth projections that could result in a $1.5 billion revenue shortfall during a recession. To mitigate these risks, the agency should implement more cautious revenue forecasting, establish an explicit rainy day fund, and increase efficiency gains to better align expenditures with available resources.
Recommendations related to Economic Downturn
More cautious economic and revenue assumptions seem appropriate.
New policies regarding reserves would be a constructive step.
Accumulation of general reserves should be permitted.
An explicit rainy day fund established covering a larger share of total expenses before releasing future reserves to reduce other long-term liabilities.
Greater restrictions on diversion of OPEB funding and a firmer commitment to PAYGO capital allocations would reduce the risks associated with reallocation of those items.
Continuing to increase planned efficiency gains beyond current targets for future years would help bring expenditures in line with the revenues available when a downturn occurs.
Key Data
$1.5 billion
— Cumulative revenue shortfall for the MTA over a four-year period in an illustrative case recession.
$616 million
— Largest revenue loss in Year Three of the illustrative case recession scenario.
$4.6 billion
— Revenue shortfall in a worst-case 2007 recession scenario over the financial plan.
$6.1 billion to $15.8 billion
— Potential cumulative four-year revenue shortfalls for the City of New York in a recession simulation.
$1.3 billion
— Annual savings achieved by the MTA since 2009 through expenditure curbing initiatives.
$20 billion
— Current unfunded OPEB liability of the MTA.
The fiscal year 2016 budget for New York City includes approximately $200 million in new spending for police and social services. While current revenue covers these costs, this spending increases fiscal risk for future years when projected budget gaps and an inevitable economic downturn may threaten the ability to fund recurring expenses.
Key Data
$200 million
— Spending added in the FY 16 adopted budget for additional police, social service providers, and other programs.
Optimistic revenue forecasting creates significant fiscal risk, as even a moderate economic downturn could result in multi-billion dollar revenue shortfalls that far exceed current city reserves. Relying on overly aggressive growth projections leaves the budget vulnerable to sudden shocks, necessitating more cautious and rigorous fiscal planning to ensure sustainability.
Recommendations related to Economic Downturn
Fiscal discipline requires tax revenue forecasts that are not only rigorous but cautious because of ‘asymmetric risk’ to provide a margin of error in the event of an economic downturn.
The City should avoid estimating tax revenue optimistically, as this can lead to spending that may not be sustainable when there is an economic downturn or merely slower growth than expected.
Policymakers should maintain adequate reserves, as current levels would not cover the likely revenue losses in the first year of an economic downturn.
Key Data
$7.2 billion
— Cumulative tax revenue growth forecast by the Office of Management and Budget for fiscal years 2015-2019.
$15.8 billion
— Cumulative tax revenue shortfall relative to the Office of Management and Budget's forecast if the 2001 recession were to begin in fiscal year 2017.
$24.1 billion
— Cumulative tax revenue shortfall relative to the Independent Budget Office's forecast if the 2001 recession were to begin in fiscal year 2017.
$6.1 billion
— Tax revenue shortfall below the Office of Management and Budget's financial plan forecast if the 1989 recession were repeated.
$12.6 billion
— Tax revenue reduction if the most recent recession were repeated.
$750 million
— The current size of the City's general reserve, which is insufficient to cover likely revenue losses in the first year of a recession.
New York City's thriving economy and increased revenues in the fiscal year 2016 budget provide an opportunity to address service needs while building reserves. To ensure fiscal stability and prepare for the next economic downturn, the city should review past spending commitments to identify inefficiencies and generate recurring savings.
Recommendations related to Economic Downturn
Additional expenditures should be accompanied by a review of past spending commitments to assess performance and reduce inefficiencies, which will help the City prepare for the next economic downturn.
New York State should utilize its $4 billion in legal settlement funds to reduce long-term debt, address unfunded pension and retiree health liabilities, and bolster the Rainy-Day Reserve Fund to prepare for future economic downturns. These funds can also be strategically deployed for pay-as-you-go capital investments in transit and one-time expenditures that yield recurring multiyear benefits.
Recommendations related to Economic Downturn
The state should reduce long-term debt, as paying off $4 billion of 30-year bonds with 4% interest would save $231 million annually for a total of $6.9 billion.
The state should increase pay-as-you-go capital investments to accelerate reaching state-of-good-repair for key assets in the transportation and transit systems without borrowing.
The state should reduce other long-term liabilities, such as unfunded pension obligations, as making the funds whole would require $2.8 billion and save about $500 million in interest expense over the next 10 years.
The state should establish a retiree health insurance trust fund to help improve the looming fiscal crunch that unfunded OPEB liabilities represent.
The state should increase the Rainy-Day Reserve Fund by adding settlement money to preserve it for when the next economic downturn hits.
The state should establish a revolving-loan fund, such as a $4 billion fund for school districts, to provide $160 million annually for one-time investments that provide multiyear benefits.
Key Data
$52.2 billion
— New York state's total long-term debt.
$231 million
— Annual savings from paying off $4 billion of 30-year bonds with 4% interest.
$174 billion
— Total capital needs across 47 state agencies and public authorities.
$2.8 billion
— Amount required to make pension funds whole.
$66.5 billion
— New York's estimated OPEB liability.
$350 million
— Amount currently in the Rainy Day Reserve Fund.
New York City's economy was more severely impacted by the 2001 and 2008 recessions than the nation as a whole, though it subsequently rebounded more robustly. Despite these downturns, the city strengthened its role as the region's economic center, with employment and income shares rising over the period.
Key Data
339,019
— The local gain in jobs from the trough of the 2003 recession.
158,664
— The net gain in jobs in New York City from 2000 to 2012.
9.8 percent
— The inflation-adjusted wage gain in New York City from 2000 to 2012.
New York State should avoid new spending or tax cuts despite recent revenue fluctuations, as economic indicators suggest a downturn and the state faces significant fiscal challenges. Any unexpected revenue should be prioritized to address existing budget gaps, labor savings targets, and reliance on fiscal gimmicks rather than funding new initiatives.
Recommendations related to Economic Downturn
New York State should immediately end talk of a surplus and avoid using it for new initiatives because the likelihood of any surplus is remote and existing fiscal problems take precedence.
Before committing to any new spending or tax reductions, New York should reduce reliance on existing fiscal gimmicks, particularly those that add to long-term costs.
Any surprise surplus should be used in ways that help lower the budget gap, such as paying down debt or reversing deferrals, rather than making the gap grow through tax cuts or spending restorations.
The Governor and the Legislature should view any unexpected revenues as a temporary blessing and keep the lid on the piggy bank sealed shut.
Key Data
$799 million
— Amount by which tax collections for the first quarter of the fiscal year exceeded original projections.
$1.2 billion
— Amount by which disbursements came in below projections for the first quarter of the fiscal year.
$351 million
— Amount by which receipts fell short during the month of July.
0.4 percent
— Estimated national economic growth in the first quarter of 2011.
12 percent
— Decline in the Dow Jones Industrial Average since the state's budget was finalized.
$377 million
— Remaining savings from labor that the Governor and unions still need to finalize.
New York's rainy day funds failed to mitigate the severe fiscal stress of the 2008 recession, during which state tax collections fell 20.3 percent and created a $10 billion budget gap. To improve fiscal resilience, the state should implement structural reforms including higher fund caps, mandatory surplus deposits, and flexible repayment rules tied to economic indicators.
Recommendations related to Economic Downturn
New York State should mandate prudent uses of surplus funds, including rainy day fund deposits, to ensure resources are available during economic downturns.
The state should raise the cap on the size of the rainy day funds to better reflect likely needs in times of recession.
New York should set uniform conditions for withdrawal from both funds, with those conditions based on declining economic indicators rather than vague budget deficit triggers.
The state should set uniform repayment rules for both funds that allow adequate time for economic and fiscal recovery before payments must begin.
Key Data
20.3 percent
— The decline in New York State’s total tax collections from the first quarter of fiscal year 2008-09 to the first quarter of fiscal year 2010-11.
$10 billion
— The budget gap for the fiscal year beginning April 1, 2011, following the economic downturn.
$473.3 million
— The total amount of the 11 loans taken from the Tax Stabilization Reserve Fund for the General Fund.
$37 million
— The general fund cash balance at the end of May 2009, which would have been negative $1.2 billion without the use of rainy day funds.
60 percent
— The portion of New York State tax collections that came from personal income tax in fiscal year 2009-10.
$2.3 billion
— The amount the State held in various other reserve funds at the beginning of fiscal year 2007.
New York's budget gaps, exacerbated by the 2008 national recession, have been temporarily masked by revenue enhancements and one-time resources that are no longer sustainable. To ensure long-term fiscal stability, the state must restructure spending commitments to align more closely with actual revenue growth rather than relying on perpetual tax increases and non-recurring funds.
Recommendations related to Economic Downturn
The state should allow temporary revenue measures to phase out to avoid perpetual reliance on non-recurring funds.
The state must begin to restructure spending commitments to address the unsustainable growth in state expenditures.
State spending growth must be more closely aligned with long-term revenue growth to ensure fiscal sustainability.
Key Data
$8.5 billion
— Reduction in base tax collections in the current fiscal year due to the national recession.
$8.4 billion
— Amount by which state-funded spending in the current fiscal year is higher than in fiscal year 2007-08.
$25.8 billion
— Projected increase in state spending by fiscal year 2013-14 without new action.
$19.4 billion
— Total revenue enhancements and temporary revenues currently benefiting the state.
$6.6 billion
— Federal funding from the American Recovery and Reinvestment Act (ARRA) received this year.
$21.2 billion
— The projected budget gap for next year without existing revenue measures.
New York City implemented multiple rounds of budget cuts totaling $3.4 billion between 2009 and 2010 to address revenue losses following the recession, relying heavily on revenue-raising measures and agency expenditure reductions. To manage future fiscal challenges and avoid further service cuts, the City must pursue structural reforms to pension fund contributions and employee health insurance premiums.
Recommendations related to Economic Downturn
The City should reduce spending for pension fund contributions and health insurance premiums for employees and retirees to avoid substantial new cuts in agency budgets.
City leaders should pursue new initiatives to reduce the “all other” budget category, which consists largely of pension fund contributions and health insurance premiums.
Public sector unions must be willing to accept changes in collective bargaining over health benefits to achieve necessary savings.
Political leaders must garner wide support to push the State Legislature to authorize changes in future pension benefits.
Key Data
$3.4 Billion
— Total value of budget balancing actions proposed in the six Programs to Eliminate the Gap (PEGs) spanning fiscal years 2009 and 2010.
$2.0 Billion
— Total amount of agency expenditure reductions achieved from the proposed budget balancing actions.
$2.4 Billion
— Projected deficit for New York City in the upcoming fiscal year.
$593 Million
— Amount of revenue-raising measures identified in the City's PEG documents.
New York State's debt burden is currently in a "danger zone," with long-term liabilities reaching $120.0 billion in 2008. To improve its financial standing and better withstand future economic downturns, the state must reduce these long-term obligations by $20.4 billion.
Recommendations related to Economic Downturn
New York must lower its long-term liabilities from the 2008 level of $120.0 billion by $20.4 billion to fall below the danger zone threshold.
If the state chooses to achieve this reduction through long-term bonds, it must lower its long-term bond debt from $71.9 billion to $51.5 billion.
Key Data
$120.0 billion
— New York's total long-term liabilities in 2008.
$20.4 billion
— The amount New York must reduce its long-term liabilities by to exit the danger zone.
$71.9 billion
— New York's total long-term bond debt in 2008.
$51.5 billion
— The target level for New York's long-term bond debt to reach the desired reduction.
$50.8 billion
— New York's unfunded other post-employment benefits (OPEB) liability.
$48.1 billion
— New York's combined unfunded pension and OPEB liability.
New York faces a severe budget crisis with a projected gap of at least $4.6 billion next year, which is expected to balloon to $18.2 billion by 2012-13. To address this, the state must prioritize aggressive spending cuts rather than relying on tax increases, borrowing, or shifting costs to local governments.
Recommendations related to Economic Downturn
New York State must implement aggressive spending reductions now to avoid more painful across-the-board cuts in the future.
The state must cut spending as the only viable solution to the current economic crisis.
Key Data
$18.2 billion
— Projected budget gap by 2012-13.
$4.6 billion
— Next year's projected budget gap.
22%
— Decline in personal income tax revenue from the previous year.
$58 billion
— Planned outstanding state-supported debt by 2013-14.
65%
— Amount more New York spends per pupil compared to the national average.
36%
— Expected growth in Medicaid spending over the next three years.
New York City faces unprecedented budget gaps reaching $9.6 billion by fiscal year 2013 due to a severe recession and the collapse of the financial services sector. To address this structural imbalance, the city must prioritize cost-cutting measures, such as pension reform and employee health insurance premium sharing, while avoiding new tax increases that could hinder economic recovery.
Recommendations related to Economic Downturn
The City should implement no new or higher taxes to avoid harming prospects for economic recovery and growth.
The City should reduce operating expenditures by changing work rules and compensation to lower the cost of producing services rather than cutting the availability of services.
The City should target capital investments to support existing facilities and lower future debt service burdens.
The City should avoid relying on inappropriate non-recurring revenues to balance the budget.
The City should implement pension reforms to achieve long-run savings.
The City should require a 25 percent contribution by current employees and a 50 percent contribution by retirees toward their health insurance premiums.
The City should implement a one-year wage freeze for civilian and uniformed employees to produce $1.2 billion in recurring savings.
Key Data
$5 billion
— Projected decrease in tax collection for the next year compared to fiscal year 2008.
$6.6 billion
— The budget gap in fiscal year 2010.
$9.6 billion
— The projected budget gap by fiscal year 2013.
$2.9 billion
— Amount City agencies have trimmed from their budgets in recurring expenditure savings since January 2008.
$106,000
— The average annual cost of municipal employee compensation.
$13 billion
— The record level of capital commitments reached in the current year.
New York faces a severe $14.0 billion budget gap during the 2009 economic downturn, necessitating the strategic use of $24.6 billion in federal stimulus funds to avoid harmful tax increases and service cuts. To ensure long-term fiscal stability, the state must implement structural reforms, including pension changes, the elimination of ineffective programs like Empire Zones, and the rejection of one-shot budget gimmicks.
Recommendations related to Economic Downturn
The state should not adopt harmful tax increases, particularly to the personal income tax and the gross receipts tax on utilities, as these would damage economic competitiveness.
New York should form a commission to examine the question of how to reform the state's tax structure to address issues of fairness, stability, and the division of responsibilities.
The state should roll back assessments on health insurance providers that were recently enacted, as these costs are passed on to consumers and make coverage less affordable.
Legislators should make the changes in the Medicaid program that the Governor proposed, specifically regarding nursing home and hospital rates, to bring costs in line with other states.
The state should not adopt the foundation aid cuts to school districts proposed in the budget, but instead restore $1.2 billion to the neediest districts.
New York should phase out unnecessary payments to the wealthiest school districts by ending the 'high tax' and 'hold harmless' aid increases.
The state should end the middle class STAR program, as it is poorly crafted and difficult to administer.
New York should eliminate programs that are ineffective or unnecessary, such as the Empire Zones program and underutilized institutions like prisons.
The state should adopt a new pension tier and other compensation changes for public employees to address the overly generous pension system.
The state should not raid public authorities or rely on other one-shots to close budget gaps, as these are not sustainable solutions.
Key Data
$787 billion
— Total federal stimulus commitment over 27 months to aid the economy.
$24.6 billion
— Estimated amount of federal stimulus money New York will receive.
$14.0 billion
— Revised budget gap for fiscal year 2009-10.
$18.7 billion
— Budget gap projected for year three of the financial plan.
$4.4 billion
— Amount of harmful budget actions that should be avoided.
$1.2 billion
— Amount of school aid cuts that should be restored to the neediest districts.
New York faces a severe fiscal crisis with a projected $14 billion budget gap next year, exacerbated by the worst recession in 70 years and significant job losses. To address this, the state should prioritize structural spending reforms and avoid excessive tax increases that could further hinder economic recovery.
Recommendations related to Economic Downturn
The budget should reduce the Governor's proposed $5 billion in new revenue measures to no more than $2 billion to avoid discouraging investment and spending.
The state should tighten Medicaid eligibility for individuals with homes worth less than $500,000 and apply a look-back period for asset transfers to save $400 million annually.
New York should control excessive utilization of personal care services and expand managed care within the Medicaid program to save $600 million annually.
The state should eliminate high tax aid in school funding formulas to save $205 million in the upcoming fiscal year.
Legislators should drop hold harmless provisions from the past two fiscal years in school aid to save about $670 million.
The Department of Correction should reduce staff and facilities to a level commensurate with the 15 percent decline in inmate population to save $280 million annually.
The Legislature should require a 50 percent contribution to retiree health premium costs to save $430 million annually.
The state should eliminate reimbursement for Medicare Part B premiums for retirees to save $200 million annually.
The Legislature should increase current employee contributions to family healthcare plans from 18 percent to 22 percent for a savings of $75 million annually.
The state should reduce the size of agency workforces to fiscal year 2006-07 levels to achieve savings of $283 million per year.
Key Data
$14 billion
— The projected budget gap for the upcoming year.
$18.6 billion
— The projected budget gap for fiscal year 2011-12.
300,000
— The number of job losses expected statewide due to the recession.
$5 billion
— The amount of new revenue measures proposed in the Governor's Executive Budget.
$400 million
— The annual savings from tightening Medicaid eligibility and applying a look-back period for asset transfers.
$670 million
— The savings from dropping hold harmless provisions in school aid from the past two fiscal years.
New York State faces a severe fiscal crisis characterized by multi-billion dollar deficits and a reliance on unsustainable borrowing to cover operating expenses. To restore stability, the state must implement a multi-year plan that prioritizes expenditure reductions, productivity improvements, and a temporary, declining tax surcharge rather than long-term debt.
Recommendations related to Economic Downturn
Bring the budget into balance over three years by reducing expenditures to what the current revenue system supports by making productivity gains and by cutting services in a way that protects the neediest New Yorkers.
Close the gap between spending and revenues in the three-year, interim period by imposing a temporary and declining tax and by avoiding borrowing.
The State should be required to balance its budget based on Generally Accepted Accounting Principles (GAAP) in order to prevent the accumulation of a deficit.
The Division of Budget should be required to prepare a four-year financial plan with quarterly updates.
All off-budget accounts should be brought on budget.
Key Data
$4.4 billion
— The deficit incurred by New York State in the fiscal year that ended March 31, 2002.
$5 billion
— The projected gap between outlays and recurring revenues in the current fiscal year.
$5.6 billion
— The amount of spending cuts proposed in the Executive Budget for fiscal year 2003-04.
$2.5 billion
— The annual deficit the State would incur under the Governor's plan.
$104 billion
— The baseline projection for total spending in fiscal year 2005-06.
$1.3 billion
— The proposed reduction in school aid for fiscal year 2003-2004.
New York City faces an unprecedented budget gap of $6.4 billion for fiscal year 2003-04, necessitating structural expenditure reductions rather than reliance on borrowing or temporary economic recovery. To address this fiscal crisis, the city must implement efficiency measures across municipal agencies, including procurement reform, staffing adjustments, and energy conservation, to achieve over $1 billion in annual savings.
Recommendations related to Economic Downturn
The City should focus on implementing expenditure reductions and revenue enhancements with recurring value rather than borrowing to close the budget gap.
A real shrinking of government is needed to respond to the underlying economic trends.
In addressing the large looming budget gaps, citizens should reasonably expect some concessions from employees, particularly in their fringe benefits.
Unless New York City changes the structure of its property tax, increases will be borne disproportionately by commercial property and will drive away jobs.
Current efforts to balance the budget should eschew borrowing and other gimmicks.
Those civilians not working a 40-hour week should be required to do so to save the City $498 million annually.
The City should replace the Mayor’s Office of Contracts with a new procurement entity that offers “one-stop” oversight.
The City should move students from more restrictive to less restrictive environments to restructure special education.
The Police Department should reschedule the police officers’ work day to increase time in law enforcement and decrease paid time for changing uniforms.
Responsibility for energy conservation in City agencies should be centralized within the Office of the Mayor.
Key Data
$6.4 billion
— Projected budget gap for fiscal year 2003-04.
$9.3 billion
— Projected budget gap in fiscal year 2005-06 under a pessimistic economic scenario.
$498 million
— Annual savings from requiring a 40-hour work week for civilian employees.
$197 million
— Annual savings from streamlining the City's procurement process.
$267 million
— Annual savings from restructuring special education services.
$251 million
— Annual savings from implementing more rational staffing at the Police Department.
New York State and City budgets for fiscal year 2002 reflect poor fiscal management, characterized by late budget passage, reliance on political strategies rather than sound planning, and a failure to address structural imbalances. With a cooling economy and slim chances of revenue surpluses, the lack of productivity improvements and continued growth in spending and debt service threaten the stability of government services and capital projects.
Recommendations related to Economic Downturn
State leaders should implement important budget reforms, such as managing the financial plan on a GAAP rather than cash basis and showing the enacted budget's impact on future years, to improve fiscal transparency.
The City should enact significant productivity improvements and invest wisely in its infrastructure to deliver more competitive services.
To better meet capital needs, the City should work to repeal the burdensome Wicks Law and set effective limits on borrowing.
State leaders should address the State’s high local taxes using better programs than STAR, which is poorly designed and fails to target reductions where they are most needed.
Key Data
124 days
— The bare-bones state budget was 124 days late.
25 years
— City headcount has increased to its highest levels in 25 years.
8 percent
— Debt service payments are growing by 8 percent per year over the next four years.
$36 billion
— The five-year $36 billion capital plan would go much farther toward meeting the City’s considerable capital needs if existing facilities were used more intensively.
New York State and City debt levels have grown rapidly, necessitating a new approach to measuring debt affordability that accounts for potential economic downturns. By establishing a danger zone threshold that incorporates a safety margin for recessions, officials can better manage borrowing to ensure long-term fiscal stability and competitiveness.
Recommendations related to Economic Downturn
New York State's elected leaders should bring the State's debt burden below the danger zone threshold identified in this report, and New York City's leaders should keep their debt below the relevant danger zone threshold.
New York City and New York State should create Debt Policy Committees to recommend long-run debt strategies and annual debt issuance limits.
The State Constitution should be amended to establish new limits on State and City debt.
New York State should develop a more aggressive strategy to lower its outstanding debt, including more pay-as-you-go capital financing and devoting more of the current operating surplus to the retirement of outstanding debt.
New York State and New York City should define the danger zone threshold allowing for the impact of a recession to provide a safety margin for an economic downturn.
Key Data
$35.8 billion
— State debt at the end of the 1999 fiscal year.
$46.8 billion
— City debt at the end of the 1999 fiscal year.
0.75 percent
— Limit on new State-supported debt as a percentage of personal income starting in fiscal year 2001.
10 percent
— City's constitutional limit for GO debt as a percentage of the five-year average of the market value of taxable real estate.
$2.1 billion
— Amount New York City could have incurred more in debt in fiscal 1998 before reaching the danger zone.
1.88 percent
— Percentage points by which New York State's real personal income fell more than the rest of the states during the 1991 recession.
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