A fiscal cliff occurs when a government faces projected budget gaps that threaten its ability to maintain services without relying on one-time resources, unsustainable spending, or tax increases. This page covers CBC’s work on structural budget deficits, the use of one-shot revenue measures, underbudgeting of recurring expenses, the management of rainy day fund reserves, and strategies for improving long-term fiscal stability.
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 administration should stop underbudgeting by ensuring the preliminary budget reflects the full cost of expected services and activities, including homeless services, rental assistance, uniformed overtime, and MTA subsidies.
The administration should identify the impact and cost-effectiveness of each service, preserve what works well, and cut or shrink what does not, even if popular.
The administration should launch a citywide Performance Management System to deliver the efficient high-quality services New Yorkers deserve.
The administration should implement a savings plan that streamlines operations, reduces duplication, phases out lower-impact programs, leverages technology to automate manual processes, and increases productivity in collaboration with labor unions.
The administration should shift vacant positions across agencies and units based on needs and eliminate excess vacancies to right-size headcount.
The administration should hold the line on taxes, as the city's high-income residents and businesses already pay nation-leading taxes.
The administration should increase the general reserve by $1 billion per year to strengthen the city’s ability to absorb the initial impact of unexpected cuts or delays in federal aid.
The administration should work with the City Council to pass a law setting the Rainy Day Fund's target size, requiring deposits during economic expansions and restricting withdrawals to recessions and emergencies.
The administration should pursue a collaborative relationship with labor to share the fiscal benefits of increased efficiency to fund raises that otherwise may not be affordable.
Key Data
In June 2026, the CBC reported that the City's FY 2027 Executive Budget reversed years of underbudgeting and fiscal cliffs by adding $5.1 billion in fiscal year 2026, $7.3 billion in fiscal year 2027, and $8 billion annually thereafter, which included correcting $1.6 billion for City-funded FHEPS housing vouchers and $989 million for homeless shelters.
In July 2024, the CBC reported that the FY 2025 Adopted Budget created immediate fiscal cliffs by funding several recurring programs only for fiscal year 2025, including $167 million for early childhood education expansion, $25 million for Promise NYC, and $10 million for the Shelter to Housing Action Plan.
In February 2024, the CBC reported that the City added $2.5 billion in fiscal year 2024 to fund fiscal cliff programs, which included $1.4 billion to mitigate the City-funds fiscal cliff (such as $442 million for CityFHEPS and $458 million for cash assistance).
In December 2023, the CBC explained that the City's fiscal challenges were driven by 2 distinct cliffs: a federal fiscal cliff from expiring COVID aid and a City fiscal cliff from temporary tax surges, with the City's cliff being more than twice as large as the federal one.
In April 2023, the CBC highlighted that the Department of Education faced an estimated $556 million fiscal cliff in fiscal year 2026 once federal pandemic aid fully expired, which supported ongoing programs like 3-K for All, Pre-K for All Special Education, and Community Schools.
New York City's fiscal year 2027 budget is balanced through a reliance on one-time resources and short-term savings, failing to address the underlying structural deficits. With projected budget gaps rising from $7.1 billion in fiscal year 2028 to $9.8 billion in fiscal year 2030, the city must implement more substantial, recurring spending reductions to avoid future service cuts or tax increases.
Recommendations related to Fiscal Cliff
Double Executive Order 12 saving initiatives to $2 billion in fiscal year 2027 and increase $1 billion annually thereafter.
Implement additional actions to reduce costs stemming from CityFHEPS, due process (Carter) cases, and other fast-growing areas.
Fund additional new spending and City Council initiatives with recurring savings.
Increase the fiscal year 2027 General Reserve to $500 million to protect against economic volatility and unexpected spending shocks.
Key Data
$7.1 billion
— Projected budget gap in fiscal year 2028.
$9.8 billion
— Projected budget gap in fiscal year 2030.
$12.7 billion
— Total value of gap-closing actions proposed to balance the budget.
$5.0 billion
— Value of one-shot actions that do not stabilize the budget long term.
$10.7 billion
— Reduction in pension contributions through fiscal year 2032 due to a stretch-out gimmick.
$15.6 billion
— Increase in pension contributions from fiscal years 2033 through 2037 resulting from the stretch-out.
New York City faces significant budgetary stress, making the proposed $900 million annual cost of fare-free buses fiscally irresponsible compared to the more targeted and affordable expansion of the Fair Fares NYC program. Expanding the existing program to 250 percent of the federal poverty level would cost $146 million annually, providing necessary transit support while preserving limited fiscal resources.
Recommendations related to Fiscal Cliff
Raise the Fair Fares NYC eligibility threshold to 250 percent of the FPL.
Improve low uptake and utilization of Fair Fares NYC through expanded education, outreach, and enrollment strategies.
Leverage proven strategies, such as signal priority and physically separated busways, to make the City’s streets more conducive to faster bus traffic.
Work with the MTA to further improve bus speeds.
Key Data
$900 million
— The annual cost to the City to replace the MTA’s current bus fare revenues if buses were made fare-free.
$146 million
— The projected annual cost to the City to expand Fair Fares NYC eligibility to individuals making up to 250 percent of the FPL.
722,000
— The number of additional New Yorkers who would become eligible for Fair Fares NYC under the proposed expansion to 250 percent of the FPL.
$86 million
— The cost of the Fair Fares NYC program in fiscal year 2025.
31 percent
— The percentage of the 1.23 million eligible New Yorkers currently enrolled in Fair Fares NYC.
7.0 miles per hour
— The average speed of New York City buses, which is 29.3 percent slower than the 9.9 miles per hour average among other major bus systems in the US.
The incoming administration faces a significant budget gap of $6 billion to $8 billion, exacerbated by chronic underbudgeting and the need to prepare for potential federal funding cuts and an inevitable recession. To restore fiscal stability, the city must implement disciplined management, including accurate revenue forecasting, performance-based budgeting, and strengthening the rainy day fund.
Recommendations related to Fiscal Cliff
The administration should stop underbudgeting by ensuring the preliminary budget reflects the full cost of expected services and activities, including homeless services, rental assistance, uniformed overtime, and MTA subsidies.
The administration should identify the impact and cost-effectiveness of each service, preserve what works well, and cut or shrink what does not, even if popular.
The administration should launch a citywide Performance Management System to deliver the efficient high-quality services New Yorkers deserve.
The administration should implement a savings plan that streamlines operations, reduces duplication, phases out lower-impact programs, leverages technology to automate manual processes, and increases productivity in collaboration with labor unions.
The administration should shift vacant positions across agencies and units based on needs and eliminate excess vacancies to right-size headcount.
The administration should hold the line on taxes, as the city's high-income residents and businesses already pay nation-leading taxes.
The administration should increase the general reserve by $1 billion per year to strengthen the city’s ability to absorb the initial impact of unexpected cuts or delays in federal aid.
The administration should work with the City Council to pass a law setting the Rainy Day Fund's target size, requiring deposits during economic expansions and restricting withdrawals to recessions and emergencies.
The administration should pursue a collaborative relationship with labor to share the fiscal benefits of increased efficiency to fund raises that otherwise may not be affordable.
Key Data
$6 billion to $8 billion
— Projected budget gap the incoming administration must close.
$4.5 billion
— Amount by which the City's projections understate fiscal year 2027 spending.
$2.3 billion
— Cumulative amount by which annual expenses exceeded annual revenues over the past three fiscal years.
$14.0 billion
— Amount the City would need to cover two years of tax revenue declines in a recession.
$2.0 billion
— Current balance of the City's Revenue Stabilization Fund, or rainy day fund.
$787 million
— Annual statewide cost shift reduction if the SNAP administrative error rate is lowered to the historical range of 6 percent to 8 percent.
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…
The $254 billion New York State budget increases operating funds spending by 12 percent, creating a structural imbalance of approximately $20 billion that leaves the state vulnerable to federal cuts and recession. By relying on temporary revenue and failing to build adequate reserves, the budget risks creating future fiscal cliffs, particularly within the Medicaid program.
Recommendations related to Fiscal Cliff
Lawmakers should have used other resources, such as the $2 billion for rebate checks, $2 billion of school aid for very wealthy districts, or the $2 billion transaction risk reserve, to replenish the State's Unemployment Insurance Trust Fund instead of siphoning reserves.
Lawmakers should ensure that labor supports the MTA plan by agreeing with MTA leadership to operational changes that reduce costs, increase efficiency, and preserve services.
The State should have set aside $2 billion to soften the initial blow of federal cuts rather than increasing spending.
Key Data
$254 billion
— The total size of the New York State budget.
12 percent
— The rate at which State Operating Funds spending is increasing, which is four times the rate of inflation.
$20 billion
— The approximate 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 is expected to contribute to support the capital investment plan.
New York City faces significant financial risk from potential federal budget cuts that could impact essential services like housing, health care, and education. To mitigate these threats, the city must adopt disciplined fiscal policies, including increasing reserves and ending inaccurate budget-estimating practices.
Recommendations related to Fiscal Cliff
The city should hold the line on new spending by ensuring the Executive and Adopted Budgets do not add or expand programs.
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, which should 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 the 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 supports vital services like child care vouchers and school food programs.
$1.4 billion
— Annual federal operating support that the New York City Housing Authority depends on.
$2 billion
— Federal dollars that fund more than 96,000 housing vouchers administered by the New York City Housing Authority.
$91 billion
— Amount of annual funding New York State receives from Washington, which supports Medicaid and education.
$4 billion
— Amount of annual underbudgeting that drastically understates the size of future budget gaps.
$10 billion
— Potential size of future budget gaps that may occur even without federal cuts or a recession.
New York City faces significant financial risk from potential federal funding cuts, which currently account for $7.4 billion of the fiscal year 2026 budget. To mitigate these threats, the city must exercise fiscal discipline by restraining new spending, bolstering reserves, and eliminating budget gimmicks to ensure long-term stability.
Recommendations related to Fiscal Cliff
Hold the line on new spending in the Executive and Adopted Budgets.
Buttress the General Reserve with at least another $1 billion in fiscal year 2026 to help absorb the immediate blow of federal cuts.
Strengthen the Rainy Day Fund by depositing $500 million and reserve the Fund for a short-term emergency like a recession, not for temporary mitigation of recurring federal cuts.
Implement a Program to Eliminate the Gap (PEG) to restrain spending growth, focused on streamlining administration, increasing efficiency, and shrinking programs that deliver less value to residents.
End the budget gimmickry and present accurate, reasonable estimates of expenses and revenue, as required by the City Charter.
Key Data
$7.4 billion
— Federal aid included in the City’s Fiscal Year 2026 Preliminary Budget.
$91 billion
— Amount the State receives from the federal government for public health insurance and education.
$1.4 billion
— Federal public housing operating subsidies received by NYCHA last year.
$4 billion
— Annual amount of underbudgeting that understates future budget gaps.
$1.1 billion
— Amount the City spent more on fiscal year 2024 obligations than it received.
$14 billion
— Federal funding included in the MTA's 2025-2029 Capital Plan.
New York City faces significant fiscal challenges, with reported budget gaps of $5.6 billion in fiscal year 2027 and $6.3 billion in fiscal year 2028, which exceed $8 billion annually when accounting for underbudgeted expenses. To maintain stability, the city must ensure new initiatives are fully funded through revenue or savings, bolster its $2.0 billion Revenue Stabilization Fund, and accurately estimate costs for programs like uniformed overtime and housing vouchers.
Recommendations related to Fiscal Cliff
The City should prepare for federal changes by proactively assessing potential risks and opportunities but should not take pre-emptive actions.
The City should make mandatory deposits to the Revenue Stabilization Fund in fiscal year 2025, specifically $635 million based on the current OMB tax forecast or $1.7 billion based on the City Comptroller’s tax forecast.
New programs and initiatives need to be paid for with higher revenues or offsetting savings to avoid widening future budget gaps.
The City must ensure spending is affordable in fiscal year 2026 and beyond by providing accurate and reasonable estimates of future revenues and expenses.
Key Data
$5.6 billion
— Reported budget gap for fiscal year 2027.
$6.3 billion
— Reported budget gap for fiscal year 2028.
$2.0 billion
— Amount currently held in the Revenue Stabilization Fund.
$11 billion
— Estimated revenue lost during an average two-year recession.
$9.6 billion
— Amount of federal aid in the fiscal year 2025 budget.
$3.6 billion
— Estimated underbudgeted spending for fiscal year 2026.
New York City's fiscal year 2025 budget relies on underbudgeting for essential services, creating a $2.6 billion shortfall this year that grows to $3.3 billion annually in future years. Despite claims of a surplus, the city actually spent down $1.1 billion in prior-year revenues to cover obligations, while projected budget gaps are expected to exceed $9 billion annually by 2026.
Key Data
$4.7 Billion
— The projected budget gap for fiscal year 2025 if the Program to Eliminate the Gap (PEG) savings had not been implemented.
7.3%
— The total share of the original $15.4 billion in PEG savings that were restored over five years.
$2.6 Billion
— The amount the fiscal year 2025 budget is short to support current service levels.
$3.3 Billion
— The annual amount the budget is short to support current services in each future year.
$9.3 Billion
— The projected budget gap for fiscal year 2026 when accounting for expected spending increases.
$1.1 Billion
— The amount of prior-year revenues the city spent down in fiscal year 2024 to cover its obligations.
New York City's fiscal stability is threatened by the practice of underbudgeting, which artificially reduces projected budget gaps while failing to fully fund essential services. To ensure long-term sustainability and preparedness for future economic downturns, the city must accurately reflect program costs and bolster its Rainy Day Fund reserves.
Recommendations related to Fiscal Cliff
The budget should be transparent and accurately reflect the costs of planned programs and additional expenses that are currently underbudgeted, such as overtime.
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.
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 the City should deposit into the Rainy Day Fund over fiscal years 2024 and 2025.
$500 million
— Amount the City should deposit in the Rainy Day Fund in fiscal year 2024.
$553 million
— Amount the City should budget to deposit in the Rainy Day Fund in fiscal year 2025.
$2 billion
— Current balance of the Rainy Day Fund.
$11 billion
— Estimated revenue loss over two years during an average recession.
New York City's Fiscal Year 2025 Executive Budget relies on underbudgeted estimates that obscure significant future financial gaps, potentially leading to a fiscal crisis. To avoid a looming fiscal wall, city leaders must prioritize high-impact programs and base budget decisions on realistic spending projections rather than adding unaffordable costs.
Recommendations related to Fiscal Cliff
The Mayor and City Council should base their budget negotiations and decisions on reasonable and realistic spending and revenue estimates.
Their decisions should narrow future budget gaps and break the habit of adding more unaffordable spending.
City leaders should prioritize high-impact programs and shrink or end less effective ones to avoid slamming into a looming fiscal wall.
Key Data
$5.5 billion to $5.7 billion
— Reported budget gaps between fiscal years 2026 and 2028.
$2 billion
— Annual amount of services that are underbudgeted in the out-years.
6.3 percent
— Increase in City-funded spending in Fiscal Year 2025.
$200 million
— Amount of FHEPS housing voucher funding that appears low or falls off a cliff.
New York City faces a significant fiscal cliff with projected future budget gaps between $8.8 billion and $9.7 billion, even without accounting for new program expansions. Current underfunded ongoing programs have reached $3.6 billion, a figure that far exceeds the city's $1.45 billion in in-year budgetary reserves.
Recommendations related to Fiscal Cliff
The City must fully fund the programs it plans to deliver.
Ensure that proposals to add or modify spending are affordable and do not make the City budget even more fiscally precarious.
The City must ensure the budget is transparent and completely and accurately funds the City’s current programs and the full cost of desired program expansions.
The spending plan has to accurately reflect the program plan.
The funding required to support the current level of City FHEPS vouchers should be in the budget before adding or expanding this or other programs.
Key Data
$8.8 billion to $9.7 billion
— Projected future budget gaps, even without expanding City FHEPS or complying with the State class size reduction law.
$3.6 billion
— Shortfall in the Preliminary Budget for fiscal year 2025 needed to continue the current level of services.
$3.6 billion
— Current level of underfunded ongoing programs, which far exceeds in-year budgetary reserves.
$1.45 billion
— Total in-year budgetary reserves available to address underfunded ongoing programs.
$800 million
— Expected costs to support the current level of City FHEPS vouchers this year.
$150 million
— Budgeted amount for City FHEPS vouchers next year, which is significantly lower than the expected costs.
New York City's Fiscal Year 2025 Preliminary Budget faces a $3.6 billion funding shortfall, which could grow to between $8.8 billion and $9.7 billion in subsequent years if current service levels are maintained. To address these fiscal cliffs, the city must prioritize effective programs, increase transparency, and implement spending reductions to ensure long-term stability.
Recommendations related to Fiscal Cliff
The City should implement an additional PEG in the Executive Budget and shrink or eliminate programs that the available resources cannot fully support.
To be fully transparent, the budget should include funding for all planned programs and acknowledge that under- and un-funded programs will shrink or end.
The City Council should ensure that its proposals for added or modified spending are affordable based on fully funding or reducing the current set of planned programs.
The Administration should continue with its original plan to implement a PEG in the Fiscal Year 2025 Executive Budget.
The City should prioritize and fund effective and impactful programs, shrink or eliminate less critical and effective programs, and increase efficiency.
Key Data
$3.6 billion
— The funding shortfall in the Fiscal Year 2025 Preliminary Budget needed to maintain current program levels.
$8.8 billion to $9.7 billion
— The projected budget gaps for fiscal years 2026 through 2028 if current service levels and plans are fully funded.
$2.5 billion
— The amount of new spending added to the fiscal year 2024 budget, primarily to support current programs.
$2.2 billion
— The total City-funds fiscal cliff identified in the Fiscal Year 2025 Preliminary Budget.
$675 million
— The federal-funds fiscal cliff, which is primarily for Department of Education programs.
$800 million
— The amount attributed to chronic underbudgeting, including uniformed overtime and mandated MTA subsidies.
New York City's preliminary budget faces significant challenges, with future gaps of $5 to $6 billion and a reliance on underbudgeting that creates recurring fiscal cliffs. To address these issues, the city must transparently budget for all program costs, prioritize spending, and increase efficiency rather than relying on temporary savings.
Recommendations related to Fiscal Cliff
The City should do much more to transparently budget for the projected costs of all programs, or explicitly shrink or sunset them to avoid perpetuating large fiscal cliffs.
The City should detail the sources of these savings and the underlying projections, so that New Yorkers understand what services are being provided, for how long, and to how many households, which is necessary to close the gap.
The City should further restrain spending by prioritizing programs and increasing efficiency to close outyear gaps, including the fiscal cliffs.
Key Data
$5 to $6 billion
— Future budget gaps that understate the magnitude of the City’s remaining fiscal problem.
$2.5 billion
— Mid-year addition of fiscal year 2024 spending resulting from fiscal cliffs and underbudgeting.
$800 million
— Cost of the current (non-expanded) FHEPS housing voucher program in the current year.
2.9 percent ($2.3 billion)
— Increase in adjusted fiscal year 2025 City-funded spending from fiscal year 2024.
21.5 percent ($15.0 billion)
— Increase in adjusted fiscal year 2025 City-funded spending compared to fiscal year 2020.
$1.2 billion
— January round of agency PEG savings in fiscal years 2024 and 2025.
New York City faces significant budget shortfalls, with projected gaps reaching up to $10.6 billion for fiscal year 2025 when accounting for underbudgeted items and fiscal cliffs. To address these challenges, the city must prioritize cost-effective services and improve operational efficiency rather than raising taxes or depleting financial reserves.
Recommendations related to Fiscal Cliff
New York City’s leaders should make tough choices to close budget gaps and not take the easy but unwise route of raising taxes.
City reserves should be protected for future recessions rather than used to avoid solving problems caused by unaffordable spending and underbudgeting.
The city must engage labor to implement changes to work rules, job titles, health insurance, and benefit structures to deliver services efficiently.
The city should prioritize key services, relentlessly manage them to get results, and operate effectively and efficiently to grow financially stronger.
The city's clear focus should be to maximize efficiency and minimize the impact on New Yorkers during this period of fiscal reckoning.
Key Data
$7.1 billion
— The city’s financial plan gap for fiscal year 2025.
$10.6 billion
— The potential budget gap for fiscal year 2025 when including fiscal cliffs and underbudgeted areas.
5.3%
— The decline in New York City’s population from 2020 to 2022.
$5.8 billion
— The comptroller's estimate for the fiscal year 2025 budget gap.
$12.2 billion
— The comptroller's estimate for the budget gap by fiscal year 2027.
20%
— The portion of savings from the most recent Program to Eliminate the Gap that will affect current services.
New York City faces a significant budget gap, exacerbated by the depletion of temporary federal COVID aid and the normalization of tax revenues, creating a "fiscal cliff." To address this, the City must prioritize critical services, increase efficiency, and engage labor in structural reforms rather than raising taxes or depleting reserves.
Recommendations related to Fiscal Cliff
Now is not the time to focus on expanding services but rather to prioritize those services with significant impact and to increase efficiency.
The Council should focus on the data to help make the hard choices and minimize the impact on New Yorkers.
The City will not identify and be able to deliver services efficiently without the input of labor and without agreed-upon changes to work rules, job titles, health insurance, and other benefit administration structures.
This is not the time to raise revenue.
This is also not the time to use the City’s precious reserves.
Key Data
$16 billion
— added costs through 2027 from recent collective bargaining agreements
$7.1 billion
— gap for fiscal year 2025 shown in the City's financial plan
$10.6 billion
— more accurate budget gap including fiscal cliffs and areas the City regularly underbudgets
92 percent
— of previous savings measures that would not directly affect program services
20 percent
— of the most recent savings (PEG) that will affect current programs
New York City faces a $10.6 billion budget gap for fiscal year 2025, driven by the costs of serving asylum seekers and migrants alongside pre-existing spending imbalances. To address this fiscal cliff and avoid service cuts, the city must improve operational efficiency, collaborate with labor on work rules, and secure increased financial support from federal and state governments.
Recommendations related to Fiscal Cliff
The City needs a citywide look at program impact and efficiency to identify all opportunities to reduce costs without cutting critical services.
The City should work with labor, making changes as needed to work rules and job titles, with a focus on maintaining high-quality critical services while reducing costs.
The City should do all it can to reduce asylum seeker and migrant costs by efficiently providing only the most critical services.
The federal government should share a fair portion of the costs of serving asylum seekers and migrants to reduce the need for overall savings.
New York State should provide a greater share of the costs of serving asylum seekers and migrants.
Key Data
$7.1 billion
— The widened fiscal year 2025 budget gap.
$5.1 billion
— The previously estimated fiscal year 2025 budget gap.
$2.4 billion
— The cost of the fiscal cliff excluded from the gap estimate.
$1.1 billion
— The amount of City underbudgeting of programs.
$10.6 billion
— The total fiscal year 2025 budget gap including the fiscal cliff and underbudgeting.
$150 million
— Potential savings from consolidating welfare benefit funds.
New York City faces a looming fiscal cliff with projected budget gaps reaching up to $13.8 billion, driven by years of expanded programs and reliance on non-recurring revenue. To stabilize the budget, the city must prioritize impactful programs, improve operational efficiency, and manage headcount while avoiding the addition of new spending that offsets planned savings.
Recommendations related to Fiscal Cliff
To stabilize the budget and minimize any pain from cuts, the most impactful programs should be prioritized first, allowing the city to end programs meant to be temporary and consolidate duplicative efforts.
Doing this well relies on the city greatly improving its data on program efficiency and effectiveness, and implementing a performance management and accountability process.
Agencies should implement changes to deliver services more efficiently and help the city run better.
The mayor’s office should take a hard look at staffing and performance, and make nuanced decisions to ensure city government can function well.
Strong consideration should be given to reviving the Program to Eliminate the Gap (PEG) monitoring function that the New York State Financial Control Board provided years ago.
Key Data
$9.9 billion
— Lower estimate of the budget gap for next year.
$13.8 billion
— Upper estimate of the budget gap for next year.
42 percent
— Maximum portion of the Fiscal Year 2025 budget gap attributed to migrant costs.
50%
— Increase in city-funded spending over the past decade.
$16 billion
— Amount added to the budget for worker raises without identified funding.
$2.5 billion
— Amount of programs funded by federal Covid aid and temporary tax revenue.
New York City faces significant and growing budget gaps that are currently understated, with projections reaching $8.7 billion next year and $11.5 billion by fiscal year 2027. These shortfalls are driven by substantial fiscal cliffs from temporarily funded programs and the chronic underbudgeting of essential services.
Key Data
$5.1 billion
— The reported budget gap for fiscal year 2025.
$7.9 billion
— The reported budget gap for fiscal year 2027.
$2.5 billion
— The amount by which budget gaps are understated due to substantial fiscal cliffs.
$1.1 billion
— The amount by which budget gaps are understated due to the chronic underbudgeting of certain programs.
$8.7 billion
— The total projected budget gap for the upcoming year when accounting for fiscal cliffs and underbudgeted programs.
$11.5 billion
— The total projected budget gap for fiscal year 2027 when accounting for fiscal cliffs and underbudgeted programs.
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 City faces growing budget gaps that are projected to rise from $7.5 billion in fiscal year 2025 to $10.7 billion in fiscal year 2027. To mitigate these risks, the city must avoid funding recurring programs with one-time resources and instead implement realistic spending estimates to prevent future service crises.
Recommendations related to Fiscal Cliff
The City should narrow future budget gaps to stabilize the fiscal outlook.
The City should reduce future fiscal cliffs by including spending for ongoing programs in the outyears.
The City should offset all added spending for recurring activities with savings elsewhere in each year of the financial plan.
The City should include realistic annual spending estimates for all functions, including uniformed overtime and special education.
The City should deposit at least half of any additional fiscal year 2023 resources into the Rainy Day Fund.
Key Data
$7.5 billion
— Projected budget gap for fiscal year 2025.
$10.7 billion
— Projected budget gap for fiscal year 2027.
$400 million
— Cost to maintain the current FHEPS rental voucher program.
New York City faces significant future budget shortfalls, reaching $6.8 billion in fiscal year 2025 and $10.0 billion by fiscal year 2027 when accounting for underbudgeted programs and expiring federal aid. To address these fiscal cliffs, the city must prioritize essential services, improve operational efficiency, and avoid adding new positions while existing vacancies remain unfilled.
Recommendations related to Fiscal Cliff
The City should immediately start to prioritize essential programs, increase its operational efficiency, speed up critical hiring, and shrink lower impact programs.
The City should be shifting existing vacancies to where they are needed, not adding new positions.
The City’s leaders should not pretend the City can have and do it all.
The City should make every effort it can immediately and include additional savings in the Adopted Budget.
Key Data
$10.0 billion
— Projected future shortfall by fiscal year 2027 when including fiscal cliffs.
$6.8 billion
— Projected future shortfall by fiscal year 2025 when including fiscal cliffs.
$1.0 billion
— Amount of existing City-funded programs not funded in fiscal year 2024.
$400 million
— Expected cost of City Family Homelessness and Eviction Prevention Supplement (FHEPS) vouchers.
$600 million
— Reliance on federal aid for asylum seekers in the fiscal year 2024 budget.
$900 million
— Annual savings from the agency Program to Eliminate the Gap (PEG).
New York City faces a potential $12.0 billion budget gap by fiscal year 2026, driven by the expiration of federal pandemic aid and rising costs, including unbudgeted collective bargaining agreements. To address these fiscal cliffs, the Department of Education must prioritize programs that deliver maximum impact and manage the financial consequences of declining student enrollment.
Recommendations related to Fiscal Cliff
Consider per-student spending and recognize that declining enrollment could yield flat or reduced total spending.
Diligently manage the impact of enrollment declines in individual schools with appropriate changes in funding and staffing to ensure the smoothest possible continuity and equity of services.
Identify priority programs funded by expiring federal pandemic aid and be transparent about whether the DOE plans to replace the one-time federal funds with recurring City and State resources or to shrink or end the programs.
Evaluate and modify DOE programs and initiatives to prioritize those that deliver maximum impact to the target populations.
Key Data
$12.0 billion
— The likely budget gap for the Department of Education in fiscal year 2026, considering unbudgeted collective bargaining costs, funding fiscal cliffs, and other underbudgeted programs.
$556 million
— The estimated fiscal cliff for programs currently funded by non-recurring federal pandemic aid in fiscal year 2026.
$321 million
— The estimated fiscal cliff for programs currently funded by non-recurring federal pandemic aid in fiscal year 2025.
$7.0 billion
— The total amount of federal education aid New York City received to support pandemic response and recovery.
$4.0 billion
— The remaining federal pandemic aid to be spent through fiscal year 2025.
$2.1 billion
— The estimated additional spending in fiscal year 2026 if the tentative District Council 37 pattern for employee raises were extended to all Department of Education employees.
New York City faces a potential $12.0 billion budget gap by fiscal year 2026, exacerbated by the expiration of federal COVID-19 pandemic aid that currently supports ongoing programs. To address this fiscal cliff and declining student enrollment, the City must evaluate the effectiveness of its Department of Education programs and clarify whether it intends to replace expiring federal funds with recurring resources or reduce spending.
Recommendations related to Fiscal Cliff
The City should consider spending levels per student rather than aggregate level and recognize that declining enrollment could yield flat or reduced total spending.
The City should identify priority programs funded by expiring federal COVID-19 pandemic aid and be transparent about whether the City plans to replace the one-time federal funds with recurring City and State resources or shrink or end the programs.
The City should evaluate DOE programs and initiatives to ensure that they are delivering maximum impact to the target populations and modify programs accordingly.
Key Data
$12.0 billion
— The likely City budget gap in fiscal year 2026, which could be even larger if there is a recession.
$321 million
— The Office of the State Comptroller’s estimate of the fiscal cliff in fiscal year 2025.
$556 million
— The Office of the State Comptroller’s estimate of the fiscal cliff in fiscal year 2026.
$2.7 billion
— The amount of federal COVID-19 pandemic aid spent by the Department of Education in fiscal year 2022.
$500 million
— The amount the City consistently underbudgets annually for Carter Cases that fund private school tuition for special education students, pupil transportation, and charter schools.
New York City's preliminary budget for fiscal year 2024 faces significant future financial risks, including a $1.1 billion fiscal cliff caused by the expiration of federal aid and non-recurring funds. To address these challenges, the city must prioritize long-term stability by bolstering the Rainy Day Fund and implementing productivity programs to improve service efficiency.
Recommendations related to Fiscal Cliff
The Administration’s planning for its Executive Budget should address the $1.1 billion fiscal cliff.
The Administration’s planning for its Executive Budget should deposit $1.0 billion in the Rainy Day Fund.
The Administration’s planning for its Executive Budget should initiate a productivity PEG (program to eliminate the gap) that tasks agencies with restructuring programs to improve the quality and cost-effectiveness of City services.
The City will need to cut programs—including rental vouchers and shelter security wages—or reduce spending on other programs to mitigate the fiscal cliffs created by using federal COVID and non-recurring City funds to support ongoing services.
Key Data
$1.1 billion
— The total value of the fiscal cliff created by using federal COVID and non-recurring City funds to support ongoing services.
$1.0 billion
— The amount that should be deposited into the Rainy Day Fund to better prepare for uncertainty.
$5.0 billion
— The projected budget gap for fiscal year 2026.
$6.5 billion
— The projected budget gap for fiscal year 2027.
$10.0 billion
— The potential size of budget gaps if future labor agreements, fiscal cliff funding, and migrant services are included.
$1.8 billion
— The amount maintained in the fiscal year 2023 General and Capital Stabilization Reserves.
New York City faces significant long-term budget risks, including "fiscal cliffs" where recurring programs lose funding, and underfunded expenditures like overtime and special education costs. Without securing federal aid for asylum seekers and addressing these structural gaps, the city could face budget shortfalls reaching $11.5 billion by fiscal year 2026.
Recommendations related to Fiscal Cliff
The City should deposit at least $1 billion into the Rainy Day Fund this year to prepare for a rocky economic outlook.
The City must address fiscal cliffs where recurring programs funded with City and federal funds in fiscal year 2023 are unfunded in future years.
The City needs to secure federal aid for asylum seekers to avoid creating a shortfall in the current year.
The City should account for the fact that recurring expenditures are underfunded, including Carter Cases, pupil transportation, and uniformed overtime.
The City must prepare for the fact that the cost of the next round of labor contracts will likely exceed the funds currently set aside.
Key Data
$1.1 billion
— Total fiscal cliffs expected in the next year.
$1.9 billion
— Total fiscal cliffs expected in fiscal year 2026.
$550 million
— Potential increase in spending this year for uniformed overtime.
$1.1 billion
— Potential annual increase in spending in the outyears for underfunded recurring expenditures.
$1 billion
— Assumed federal aid for asylum seekers that has not been secured yet.
$11.5 billion
— Potential wider budget gaps in fiscal year 2026.
New York City faces a significant fiscal cliff, with City-funded programs and the depletion of non-recurring COVID aid creating gaps of $865 million in fiscal year 2024 and hundreds of millions more in subsequent years. To ensure future stability and avoid service cuts or tax increases, the City must immediately restrain long-term spending and improve operational efficiency.
Recommendations related to Fiscal Cliff
The City must start taking action immediately to restrain spending over the long run to reduce future budget gaps and mitigate the fiscal cliff.
The City should hire for critical functions while eliminating many more, ultimately unneeded, positions to improve operational efficiency.
Agencies should have flexibility to shift vacant positions across and within agencies to units and titles that have critical staffing needs.
The City must improve the quality and efficiency of operations today to preserve services for New Yorkers in the face of fiscal challenges.
The City needs to implement more transformative changes to ensure future fiscal stability.
Key Data
$865 million
— The City-funded fiscal cliff in fiscal year 2024, which is projected to grow to $1 billion by fiscal year 2026.
$345 million
— The fiscal cliff represented by the depletion of non-recurring COVID aid in fiscal year 2025, which grows to $760 million in fiscal year 2026.
$800 million
— The increase in budget gaps in the first year resulting from three percent annual employee raises, which grows to $2.5 billion by the third year.
$4.3 billion
— The potential revenue shortfall in the first year of a recession with impacts equivalent to the average of the two recessions prior to the pandemic.
The Metropolitan Transportation Authority faces a structural operating deficit exceeding $2.5 billion annually, exacerbated by declining ridership and the exhaustion of federal pandemic aid. To avoid a looming fiscal cliff, the agency must implement efficiency-focused operating reforms and secure additional state revenue to cover projected budget gaps.
Recommendations related to Fiscal Cliff
The MTA should seize the opportunity and runway created by federal aid to implement efficiency-focused operating reforms and—to the extent possible—restructure its long-term debt, which would 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
$2.5 billion
— The MTA's projected annual recurring structural deficit.
$2.0 billion
— Potential annual fiscal risks from a recession, collective bargaining costs, and other factors.
63 percent
— Current subway ridership levels relative to pre-pandemic figures.
$800 million
— The amount of new aid the MTA has proposed the State provide in 2023 to balance the budget.
$1.6 billion
— The amount of new aid the MTA has proposed the State provide annually beginning in 2024 to close remaining budget gaps.
$1 billion
— The potential annual reduction in tax revenues if the economy slides into a recession.
New York City faces significant budgetary risks, including potential future gaps approaching $10 billion and recurring fiscal cliffs that could total $1.1 billion in 2024 and rise to $2.5 billion by 2026. These challenges are compounded by pension fund investment losses and the need to address economic uncertainty in the upcoming financial plan updates.
Key Data
$10 billion
— Potential future budget gaps that both City and State Comptrollers and the Citizens Budget Commission have warned about.
$4.2 billion
— Budget gap reported by the City for fiscal year 2024.
$3.7 billion
— Budget gap reported by the City for fiscal year 2025.
$4.0 billion
— Budget gap reported by the City for fiscal year 2026.
$1.1 billion
— Total cost of recurring fiscal cliffs in 2024 that are not in the baseline and lack future funding.
$2.5 billion
— Projected cost of recurring fiscal cliffs in fiscal year 2026.
New York City faces a significant fiscal cliff of at least $1 billion by fiscal year 2026 because one-time federal COVID-19 relief funds were used to support recurring programs. To address this, the City must transparently identify which programs will lose funding and either terminate them or reallocate existing resources to cover their costs.
Recommendations related to Fiscal Cliff
The City should clearly state that these programs will end when the federal aid is depleted, or that they will continue and either widen the City’s budget gap or be supported with identified revenues or other program reductions.
The City should release a list of programs that will be underfunded when the federal aid is depleted.
The list should quantify the shortfall in funding by program and clearly state whether the program will be ended.
If the City intends to continue these programs with City dollars, it should include them in baseline spending in the financial plan and either widen budget gaps or fund them with resources reallocated from existing programs.
The City should closely assess how best to allocate those funds and provide clear and transparent information about the programs being funded, including goals, benchmarks, and performance metrics.
Key Data
$1 billion
— The federal funding fiscal cliff expected in fiscal year 2026.
$1.1 billion
— The federal fiscal cliff amount identified for fiscal year 2026.
$3.7 billion
— The fiscal year 2025 budget gap without the inclusion of fiscal cliff programs.
$4.1 billion
— The fiscal year 2025 budget gap if fiscal cliff programs are continued without reallocation.
$4.0 billion
— The fiscal year 2026 budget gap without the inclusion of fiscal cliff programs.
$5.1 billion
— The fiscal year 2026 budget gap if fiscal cliff programs are continued without reallocation.
New York City's implementation of a Program to Eliminate the Gap (PEG) is a necessary step to stabilize the budget, as the city faces future gaps driven by factors like higher pension contributions and the exhaustion of federal COVID aid. To achieve these savings while managing 28,000 vacancies, the city should focus on increasing productivity and restructuring labor contracts to avoid unsustainable fiscal burdens.
Recommendations related to Fiscal Cliff
The City should change work rules and other contractual components to increase efficiency and provide PEG savings as the best way to raise employee salaries without creating an unsustainable fiscal burden.
The City should utilize its current 28,000 vacancies to hire critical service-providing positions while still meeting PEG targets.
Agencies should use the runway provided by the PEG directive to restructure programs and operations to achieve the necessary savings.
Key Data
3 percent
— The directive to identify savings for the current year.
4.75 percent
— The target for savings in future years.
28,000
— The number of current vacancies in the City.
The New York City fiscal year 2023 budget agreement increases spending by $1.15 billion, driving spending growth to nearly 8 percent while failing to adequately address future fiscal cliffs caused by expiring federal and city funds. To ensure long-term sustainability, the administration must align recurring revenues with spending and require agencies to implement recurring efficiency savings of 3 percent to 5 percent.
Recommendations related to Fiscal Cliff
The Administration should be requiring agencies to find recurring efficiency savings of 3 percent to 5 percent to be included in the November 2022 financial plan.
The City will need to take actions to bring recurring revenues and recurring spending in line.
Restructuring operations and focusing on priorities will be essential to ensure fiscal sustainability.
Key Data
$1.15 billion
— The amount by which the budget deal increases spending over the Executive Budget.
8 percent
— The projected fiscal year 2023 City-funded spending growth rate.
$4 billion
— The average annual budget gap the city faces.
3 percent to 5 percent
— The target range for recurring efficiency savings agencies should be required to find.
$4.5 billion
— The total amount available to allocate in the budget.
New York City's executive budget increases spending by $2.3 billion while failing to address a $2 billion fiscal cliff projected for fiscal year 2026. To ensure long-term stability, the city needs to implement 3 percent efficiency savings and increase rainy day reserves to over $8 billion.
Recommendations related to Fiscal Cliff
The Mayor and City Council should identify and include 3 percent efficiency savings in the Adopted Budget to address fiscal challenges.
The City should grow rainy day reserves to over $8 billion by the end of the financial plan to prepare for future economic downturns.
The City should make every effort it can immediately and include savings in the budget when adopted to avoid massive service cuts or harmful tax increases.
Key Data
$2 billion
— The fiscal cliff projected for fiscal year 2026 that remains largely unaddressed.
$8 billion
— The target amount for rainy day reserves by the end of the financial plan.
$1 billion
— The amount by which new programs in the Executive Budget would expand the gap annually.
$2.3 billion
— The increase in City-funded fiscal year 2023 spending.
3 percent
— The efficiency savings target the City should identify and include in the Adopted Budget.
New York City faces a potential $9 billion fiscal disaster by 2026 due to a combination of budget gaps, pending employee raises, and expiring temporary funding sources known as fiscal cliffs. To avoid service cuts or tax increases, the city must prioritize programs, improve operational efficiency, and deposit surplus revenue into the Rainy Day Fund rather than expanding services.
Recommendations related to Fiscal Cliff
The mayor and council must resist the temptation to use additional tax revenue to expand services.
The city should schedule $500 million annual deposits to the Rainy Day Fund, which could come from the budgeted General and Capital Stabilization Reserves.
The executive budget should address the budget’s fiscal cliffs where ongoing programs are funded with nonrecurring city and federal COVID-19 funds.
Any program prioritized to continue must be supported by recurring funding.
The city must lower costs, ideally by improving efficiency or by reducing lower impact programs.
The city should use this next round of collective bargaining contracts to further increase productivity, which would generate savings to fund raises and stabilize the budget.
Key Data
$9 billion
— The combined total of the existing $3 billion budget gap, $4 billion or more in employee raises, and $2 billion fiscal cliff, creating a recipe for fiscal disaster by 2026.
$17 billion
— The potential three-year revenue shortfall if the city experiences another recession.
$900 million
— The amount of fiscal cliffs in the budget for next year where ongoing programs are funded with nonrecurring city and federal COVID-19 funds.
$2 billion
— The amount of fiscal cliffs in the budget by fiscal year 2026 where ongoing programs are funded with nonrecurring city and federal COVID-19 funds.
$1.5 billion
— The potential annual savings if the city implemented a 3% Program to Eliminate the Gap for Productivity.
$4.3 billion
— The cost of 3% annual raises for city employees in the third year.
New York City faces significant fiscal challenges as it navigates both city-funded and federally funded fiscal cliffs, with over $650 million in recurring city programs and more than $1.3 billion in federal programs lacking long-term funding. To address these gaps, the city must develop clear plans to taper federal aid and transition recurring programs to sustainable, recurring funding sources.
Recommendations related to Fiscal Cliff
City agencies should have clear plans for how to taper federal funds over the next few years to address the fiscal cliff.
The Executive Budget should propose a plan to start to transition recurring programs to recurring funding to mitigate the impact of the fiscal cliff.
The Executive Budget should include a Program to Eliminate the Gap (PEG) focused on actions to mitigate the coming impacts of the City and federal fiscal cliffs.
Key Data
$650 million
— in recurring programs that are funded in fiscal year 2022 but lack fiscal year 2023 funding, creating a city-funded fiscal cliff.
$1.3 billion
— in recurring programs that will lose their funding when the federally funded fiscal cliff becomes a significant issue in fiscal year 2026.
$2.7 billion
— projected budget gap for fiscal year 2024.
$2.2 billion
— projected budget gap for fiscal year 2025.
$3.0 billion
— projected budget gap for fiscal year 2026.
$375 million
— in federal aid used to support the 3K program through fiscal year 2025.
New York City faces a $653 million fiscal cliff in 2023 due to the expiration of temporary funding for recurring programs, alongside a looming $1.3 billion shortfall in federal-funded programs by 2026. To ensure long-term stability, the city must implement efficiency savings, rationalize benefit levels, and commit to annual $500 million deposits into the Rainy Day Fund.
Recommendations related to Fiscal Cliff
The Administration should review federal COVID-related spending to ensure resources strategically support the City’s recovery without creating unsustainably-funded programs.
The Administration should identify additional agency and central function efficiency savings to include in the Executive Budget.
It is critically important that the Administration work with its municipal unions to identify and implement efficiency savings and rationalize benefit levels and administration during collective bargaining negotiations.
To help the City weather the inevitable future recession or severe emergency, the financial plan should include annual deposits of at least $500 million to the Rainy Day Fund.
The City should take significant additional actions in the Executive and Adopted Budgets to make government more efficient, stave off the looming fiscal cliffs, and save for the inevitable next downturn.
Key Data
$653 million
— The fiscal year 2023 fiscal cliff caused by recurring programs that were only funded for fiscal year 2022.
$1.3 billion
— The amount of programs funded with federal monies that will dry up in fiscal year 2026.
$500 million
— The recommended annual deposit amount for the City's Rainy Day Fund to help weather future recessions.
$2.7 billion
— The budget gap projected for fiscal year 2024.
$2.2 billion
— The budget gap projected for fiscal year 2025.
$3.0 billion
— The budget gap projected for fiscal year 2026.
New York City faces a significant fiscal cliff, with a federal aid-related gap estimated between $1.3 billion and $4.1 billion and a separate City-funded gap of $653 million starting in fiscal year 2023. To address these challenges, the administration must identify recurring revenue sources for programs previously funded by one-time aid or eliminate them entirely.
Recommendations related to Fiscal Cliff
The Adams Administration should reprogram federal COVID-related funds to ensure they fund only non-recurring programs to mitigate the future federal fiscal cliff.
The Adams Administration must identify recurring revenues for programs currently facing a City-funded fiscal cliff or eliminate them.
The City should either remove unspecified labor and attrition savings from the financial plan or identify specific actions to achieve them.
NYCHA and Health + Hospitals should implement reforms to achieve fiscal stability to avoid unsustainable subsidy increases.
Key Data
$1.3 billion to $4.1 billion
— The range of the future federal fiscal cliff created by using non-recurring COVID-related aid for recurring costs.
$653 million
— The size of the City-funded fiscal cliff starting in fiscal year 2023.
$41 million
— Funding for prevailing wages for homeless shelter security workers that was only provided for fiscal year 2022.
$34 million
— Funding for higher rent levels for housing vouchers that was only provided for fiscal year 2022.
$48 million
— Funding for mental health teams that was only provided for fiscal year 2022.
New York City faces a significant federal fiscal cliff starting in fiscal year 2025 as COVID-19 aid expires, threatening the funding of programs like 3-K, mental health services, and educational enhancements. To address this and other budget gaps, the incoming administration must proactively restructure the city's budget, implement a 3 to 5 percent Program to Eliminate the Gap, and negotiate productive collective bargaining agreements.
Recommendations related to Fiscal Cliff
Mayor-elect Adams should actively manage the budget gaps starting on day one.
The incoming administration should proactively take steps to restructure the City’s budget and workforce to be fiscally sustainable with recurring City revenues.
The incoming administration should support a 3 percent to 5 percent Program to Eliminate the Gap to be considered for the Preliminary Budget.
Mayor-elect Adams should work with the municipal unions to leverage the next round of collective bargaining agreements to make changes allowing the City to be more productive, use those savings to fund raises, and close budget gaps.
The City’s plan should include annual deposits to the Rainy Day Fund to prepare for the next recession.
Key Data
$1.3 billion to $4 billion
— Annual federal fiscal cliff arriving starting in fiscal year 2025 with the depletion of federal COVID-aid.
$750 million
— Amount by which the actual budget gaps are higher annually than the plan suggests due to illusionary labor and attrition savings.
$500 million
— Commitment to a deposit to the Rainy Day Fund in fiscal year 2022.
$2.9 billion
— Budget gap for next year as reduced by the November 2021 Financial Plan.
$2.7 billion
— Budget gap for fiscal year 2024 as reduced by the November 2021 Financial Plan.
$2.1 billion
— Budget gap for fiscal year 2025 as reduced by the November 2021 Financial Plan.
New York State faces a $3.5 billion fiscal cliff by fiscal year 2025 as one-time federal pandemic aid is exhausted and recurring spending continues to grow. To ensure long-term fiscal stability, the state must improve financial transparency, adopt standard accounting practices, and identify specific actions to reduce future budget gaps.
Recommendations related to Fiscal Cliff
The State should identify actions to reduce the existing out-year gaps, avoid the fiscal cliff, and bolster reserves needed to mitigate the inevitable next downturn.
The Administration should present clear, timely financial reports that display the true level and growth of State spending, and shift to budgeting and reporting using Generally Accepted Accounting Principles (GAAP).
The State should retain flexibility in how it will reduce future budget gaps, including restraining new aid growth for wealthy districts since that is preferable to other alternatives to meaningfully control spending.
The Administration should improve budgeting and financial reporting, including foregoing fiscal maneuvers, making clear how any accounting practices affect spending growth, budgeting and reporting in accordance with GAAP, and presenting timely adopted financial plans and quarterly financial plan updates.
Increasing transparency of the State’s finances is a key component to ensuring the State is on sound fiscal footing and will have the ability to serve and protect New Yorkers not only today, but in the future.
Key Data
$3.5 billion
— The projected fiscal cliff, representing the gap between available funding and planned spending in fiscal year 2025.
$12.7 billion
— The amount of American Rescue Plan (ARP) federal fiscal relief the State received in May 2021 to be disbursed over four years.
$116.4 billion
— The projected State Operating Funds (SOF) spending for fiscal year 2022.
$100.8 billion
— The actual State Operating Funds (SOF) spending for fiscal year 2021.
$21,128
— The total sources of federal aid for budget relief from fiscal year 2021 through 2025, in millions.
New York State faces a projected $3.5 billion fiscal cliff as $11.4 billion in one-time federal pandemic aid is depleted while school aid is projected to grow to nearly $40 billion by fiscal year 2025. To stabilize long-term finances, school funding should be targeted to high-need districts while reducing aid increases to wealthier districts.
Recommendations related to Fiscal Cliff
To address the greatest educational needs and stabilize the State’s finances over the long term, the State should focus funding on districts with the greatest need, and reduce aid and aid increases to wealthy districts.
Key Data
$3.5 billion
— The projected fiscal cliff facing the State once extraordinary federal aid is depleted.
$11.4 billion
— One-time federal pandemic aid to be spent over four years, the depletion of which creates a fiscal cliff.
$32 billion
— Projected school aid, including the School Tax Relief program, in fiscal year 2022.
$40 billion
— Projected school aid, including the School Tax Relief program, in fiscal year 2025.
$8 billion
— The projected school aid increase over three years, which equals the growth of the prior eight years.
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…
New York State should prioritize building sufficient rainy-day reserves and transitioning recurring programs currently funded by temporary federal aid to recurring state revenues to avoid a future fiscal cliff. Implementing a government-wide performance management system and improving budget transparency are essential steps to ensure accountability and effective use of state funds.
Recommendations related to Fiscal Cliff
The state should put more funds aside for a rainy day — the next recession or severe emergency — and reduce the future federal fiscal cliff.
The state should shift priority recurring programs from federal to recurring state revenues over time.
The state should move funds back on budget, stop manipulating the timing of spending, budget and report using Generally Accepted Accounting Principles, and publish the financial plan when the budget is adopted and other financial reports on time.
Key Data
$3.5 Billion
— Amount of recurring programs currently supported by federal aid that will be in trouble when the aid runs out in four years.
$5 Billion
— Amount of excess receipts budgeted this year that should be used to build sufficient reserves.
$1.7 Billion
— Amount of a state Medicaid payment that was delayed by three days to make spending appear lower.
$212 Billion
— Total size of the state budget for the year.
The Fiscal Year 2022 Adopted Budget utilizes federal aid to fund between $1.3 billion and $4.0 billion in recurring programs, creating a significant fiscal cliff once that temporary funding is exhausted. Furthermore, the budget leaves the next administration with annual gaps of approximately $5 billion, while failing to implement necessary structural reforms to agency spending and efficiency.
Recommendations related to Fiscal Cliff
To build the fund to provide the resources the City should have to weather a recession, the City should enact legislation that sets minimum mandatory deposits.
It is imperative that the City track federal spending in detail, including metrics for program goals and results.
The City should scrub agency operating budgets, evaluate the effectiveness in order to prioritize programs, and increase the efficiency of operations.
The next Administration must address the looming fiscal cliff created by using federal funds for recurring programs.
Key Data
$2.1 billion
— Fiscal year 2021 tax revenues that were higher than previously expected.
$15 billion
— Additional federal aid received by the City.
$500 million
— Initial deposit made into the City's new Rainy Day Fund.
$11 billion
— Estimated resources the City should have to weather a recession.
$1.3 billion and $4.0 billion
— Annual amount of recurring programs funded by federal aid, creating a fiscal cliff when the aid is depleted.
$5 billion
— Annual budget gaps projected for the City from fiscal year 2023 to fiscal year 2025.
New York City faces a potential fiscal cliff in fiscal year 2026, with projected funding gaps ranging from $1,382 million to $4,070 million as temporary federal COVID-related aid expires. This shortfall includes significant gaps in both education funding and flexible American Rescue Plan aid, necessitating careful budget planning to address the loss of these recurring and potentially recurring initiatives.
Key Data
$1,382 to $4,070 million
— The total potential fiscal gap for New York City in fiscal year 2026 across all COVID-related initiatives.
$1,101 to $3,466 million
— The potential funding gap for education-specific initiatives in fiscal year 2026.
$604.4 million
— The potential funding gap for flexible American Rescue Plan aid initiatives in fiscal year 2026.
New York City and State must use federal pandemic relief funds to stabilize finances and restructure government operations rather than funding new programs or ongoing expenses that create a fiscal cliff when aid expires. By spreading federal funds over several years and implementing efficiency measures like labor cost reductions, the government can close future budget gaps without resorting to harmful service cuts or tax increases.
Recommendations related to Fiscal Cliff
The city should over two years phase in efficiency initiatives, totaling 3 to 5% of city-funded agency spending.
The city must not use the funds to reverse the progress made shrinking the workforce.
The state should eliminate unproductive economic development programs and temporarily change financing of some capital programs.
Focusing the state’s education aid on high-need districts instead of increasing funds to wealthy ones could provide significant savings.
The 108 union-administered benefit funds could be consolidated, and employees could contribute to their health insurance like state employees and those in the private sector.
Key Data
$1.9 trillion
— The size of the federal aid package provided to the state.
$25 billion
— The amount of federal funds that will erase more than 40% of the state's pandemic-related revenue shortfall.
40%
— The portion of the state's pandemic-related revenue shortfall erased by federal funds.
$5.9 billion
— The extra funds the state could have on hand by the end of fiscal year 2023 if it adopts the budget without proposed personal income tax increases.
4%
— The projected decline in property tax revenues due to hard-hit real estate sectors.
$5 billion
— The annual budget gaps the city faces in the future.
Managing the City’s fiscal crisis well will be a critically important duty of the next Mayor and a primary determinant of how the city survives the current crisis, and ultimately thrives in the future. Managing NYC’s Fiscal Crisis: A CBC Mayoral Candidate Forum featured a 10-minute conversation with each candidate,…
New York City faces a significant fiscal crisis that threatens 22,000 layoffs unless the city implements rigorous management strategies, such as agency efficiency improvements, attrition, and health insurance savings. Rather than relying on borrowing, which risks long-term instability, the city should establish a multiyear fiscal stability plan overseen by the Financial Control Board.
Recommendations related to Fiscal Cliff
Commissioners should comb their agencies to increase efficiency of city services, or reduce spending on lower priorities.
The city should use attrition and a stricter hiring freeze to reduce the workforce by 7,000 employees a year.
The administration should reinvigorate the labor-management committee to reduce health insurance spending.
The city should produce and implement a multiyear plan that will lead to fiscal stability.
The Financial Control Board should certify and oversee the city's plan and borrowing, reestablishing a control period.
Key Data
22,000
— Number of city workers threatened with layoffs if the city does not borrow funds.
$1 billion
— Amount of labor savings committed to in the budget that have not been identified.
7,000
— Number of employees the city could reduce per year through a stricter hiring freeze.
$2 billion
— Amount by which the current city budget, adjusted for inflation, exceeds spending in 2018.
14,000
— Number of additional workers the city has compared to the highest point before the last recession.
$5 billion
— Amount the city might borrow, which would require $7 billion in repayment.
New York City should avoid borrowing to balance the fiscal year 2021 budget, as alternative options exist to address the current fiscal crisis. Any future borrowing must be a last resort, contingent upon implementing all planned savings and establishing a comprehensive plan for fiscal stability overseen by the Financial Control Board.
Recommendations related to Fiscal Cliff
New York City should not borrow now to balance the fiscal year 2021 budget, as city leaders have better options to balance this year’s budget.
Before borrowing, the City should implement all the savings included in this year’s adopted budget and more in the future.
Borrowing should only be authorized for the amount needed to address additional revenue shortfalls.
No borrowing should happen without a comprehensive and feasible plan that leads to fiscal stability.
Borrowing must be accompanied by certification, monitoring, and approval of major actions by the Financial Control Board.
The Metropolitan Transportation Authority faces a massive multi-billion dollar budget shortfall due to the pandemic, necessitating a strategy that prioritizes operational efficiencies, capital project adjustments, and potential fare and toll increases. To avoid relying on borrowing as a last resort, the authority must balance service levels with demand while seeking additional federal support to close the remaining deficit.
Recommendations related to Fiscal Cliff
The MTA should pursue greater efficiencies to lower operating expenses, which in large part requires working collaboratively with labor unions.
The MTA 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 MTA should revise fare and toll policies that seek more revenue from fares and raise tolls proportionally more than fares.
The MTA should borrow for operating expenses only as a last resort to sustain vital services during the crisis period.
Key Data
$8.4 billion to $12.6 billion
— The estimated operating budget shortfall for 2020 and 2021.
$3.8 billion
— The amount of federal aid the MTA has already received.
$3.9 billion
— The amount of additional federal aid requested by the MTA for 2020.
$4.5 billion to $8.7 billion
— The projected 2020-2021 cumulative operating budget deficit assuming $3.9 billion in new federal aid is authorized.
$64 billion
— The amount of capital commitments in the next five years.
$742 million
— The cumulative debt service savings from prioritizing capital projects in the first five years of the new plan.
1975 is the year NYC found itself on the verge of municipal bankruptcy. How did the City turn around its fortunes? We present CBC's special panel discussion, "Sages of the Ages." Five New York fiscal experts--Steve Berger, Stan Brezenoff, Gene Keilin, Dick Ravitch, and Alair Townsend-- describe how they helped…
New York City requires a properly structured rainy day fund to mitigate the impact of future fiscal crises, rather than the currently proposed legislation that lacks necessary withdrawal restrictions. The proposed bill should be amended to ensure funds are only accessible during economic recessions or severe emergencies to prevent the creation of a discretionary slush fund.
Recommendations related to Fiscal Cliff
The Legislature should amend S.8400/A.9789A to limit withdrawals to times of economic recession or severe emergency, as defined in law based on economic and fiscal indicators.
Without an amendment to include essential restrictions on the use of the RDF, the bill should be held.
New York State faces a significant fiscal imbalance with a projected $28.8 billion four-year budget gap, driven by accelerating spending in Medicaid and school aid rather than declining revenues. To address this, the state must prioritize spending restraint and avoid tax increases to maintain competitiveness and prepare for potential economic downturns.
Recommendations related to Fiscal Cliff
New York State should reconstitute the Medicaid Redesign Team to identify savings.
New York State should focus education aid on needy districts to fund fully SBE.
New York State should reduce unproductive economic development program spending.
New York State should consider reforms to retiree health benefits that were proposed repeatedly in recent Executive Budgets.
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
— The State’s mid-year budget update reports a budget gap of this amount for the next fiscal year.
$28.8 billion
— The total four-year budget gap facing the State.
$12.5 billion
— Previously unbudgeted Medicaid spending that contributes to the total four-year State budget gap.
$1.6 billion
— State school aid received by wealthy districts with sufficient local resources to provide a sound basic education in school year 2017-2018.
$4.4 billion
— The amount New York spends annually on economic development programs, with little evidence that many of these investments produce results.
$35 billion
— The potential revenue shortfall from a recession that could be added to the gaps the State identified.
New York State should utilize its $4 billion legal settlement windfall to strengthen its long-term financial position by paying down debt, funding capital investments, and addressing unfunded pension and retiree health liabilities. Rather than pursuing short-term spending, the state should prioritize these strategic allocations to avoid future fiscal instability and ensure lasting benefits for taxpayers.
Recommendations related to Fiscal Cliff
Reduce long-term debt by paying off $4 billion of 30-year bonds to save $231 million annually in debt service.
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.
Reduce other long-term liabilities by making the pension fund whole, which would require $2.8 billion and save about $500 million in interest expense over the next 10 years.
Establish a retiree health insurance trust fund to improve the looming fiscal crunch that unfunded OPEB liabilities represent.
Increase the Rainy-Day Reserve Fund by adding settlement money to help prevent drastic service cuts and tax hikes during future economic downturns.
Make one-time investments that provide multiyear benefits, such as establishing a revolving-loan fund to support worthy projects by localities.
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 in the 10-year statewide capital plan.
$118 billion
— Portion of the 10-year capital plan dedicated to state-of-good-repair projects.
$2.8 billion
— Amount required to make the pension fund whole for the borrowed amount.
$500 million
— Interest expense savings over the next 10 years from making the pension fund whole.
New York faces a severe budget gap, reaching $14.0 billion for fiscal year 2009-10 and projected to hit $18.7 billion in year three, necessitating structural spending reforms rather than reliance on temporary federal stimulus funds. To address these shortfalls, the state should avoid harmful tax increases and fiscal gimmicks while implementing long-term changes to Medicaid, pension tiers, and school aid formulas.
Recommendations related to Fiscal Cliff
Don't adopt harmful tax increases, such as increases in the personal income tax and the gross receipts tax on utilities, as these would damage economic competitiveness and put the recovery at risk.
Do form a commission to examine the question of how to reform New York’s tax structure to address issues of fairness, stability, and the division of responsibilities.
Do roll back assessments on health insurance providers that were recently enacted as part of the deficit reduction program to prevent higher costs from being passed on to consumers.
Do make the changes in the Medicaid program proposed by the Governor to bring costs more in line with other states.
Don't adopt the foundation aid cuts to school districts proposed in the budget, but instead restore $1.2 billion to the poorest districts.
Do phase out unnecessary payments to the wealthiest school districts by ending the “high tax” and “hold harmless” aid increases.
Do end middle class STAR, as the program is poorly crafted and difficult to administer.
Do eliminate programs that are ineffective or unnecessary, such as the Empire Zones program and underutilized institutions including prisons.
Adopt a new pension tier and other compensation changes for public employees to address the issue of overly generous pension systems.
Don't raid public authorities or rely on other one-shots, such as the transaction with the Battery Park City Authority, to close budget gaps.
Key Data
$787 billion
— The total amount committed by the federal government over 27 months to aid the economy.
$24.6 billion
— The estimated amount of federal stimulus money New York will receive.
$4.8 billion
— The amount of federal commitment to help the State’s operating budget in fiscal year 2009-10.
$13.7 billion
— The budget gap for fiscal year 2009-10 estimated in December.
$14.0 billion
— The revised budget gap for fiscal year 2009-10.
$300 million
— The net changes to the budget gap since the Executive Budget was released.
New York State faces persistent fiscal instability characterized by recurring budget gaps, high debt levels, and a lack of transparency in the budget process. To address these structural imbalances, reforms are needed to mandate balanced budgets, improve multi-year financial planning, and establish independent oversight of revenue projections.
Recommendations related to Fiscal Cliff
Require that the adopted budget be balanced in accord with generally accepted accounting principles.
Require a four-year financial plan with quarterly modifications.
Replace the constitutional requirement for voter approval of general obligation debt with a constitutional limit on the amount of all state debt that is set based on relevant, changing economic factors.
Create a professional, non-partisan Legislative Budget Office to provide fiscal information to both houses of the Legislature and to the public.
Require that independently prepared revenue projections be used in the adopted budget, if the Governor and Legislature do not agree on revenue projections in a timely way.
Require a “rainy day” fund larger than the current Tax Stabilization Reserve Fund.
Eliminate the use of “off-budget” accounts.
Change the budget calendar to allow more time for deliberation on the Executive Budget by the Legislature.
Strengthen the committee process of the State Legislature to allow more participation by members in budgetary decisions.
Key Data
$141
— New York's combined state and local tax burden per $1,000 of personal income in fiscal year 1999-00.
$38 billion
— New York's long-term debt in fiscal year 1999-00.
$9.3 billion
— The budget gap faced by the State in the 2003-04 fiscal year.
$1.7 billion
— Amount of HCRA spending disbursed outside the traditional budget process in fiscal year 2002-03.
$170 million
— Amount appropriated for 'member items' in 2003.
New York State faces a severe fiscal crisis with multi-billion dollar deficits that require a multi-year plan to align expenditures with recurring revenues rather than relying on short-term borrowing. The state should implement spending cuts, productivity improvements, and a temporary, phased-out tax surcharge to restore fiscal balance without imposing long-term debt burdens on future taxpayers.
Recommendations related to Fiscal Cliff
The State should 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.
The State should 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.
To improve accountability, all off-budget accounts should be brought on budget.
Key Data
$4.4 billion
— Deficit incurred by New York State in the fiscal year that ended March 31, 2002.
$9.3 billion
— The gap identified in the Executive Budget to be closed in fiscal year 2003-04.
$11 billion
— Projected gap in fiscal year 2005-06 due to baseline spending increases.
$2.9 billion
— Projected general fund deficit for fiscal year 2004-05.
$4.4 billion
— Projected general fund deficit for fiscal year 2005-06.
$26 billion
— Medicaid spending in New York in federal fiscal year 2000.
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