Underbudgeting in New York City occurs when the municipal budget fails to fully account for the known, recurring costs of essential services, which artificially shrinks reported budget gaps and obscures the city's true fiscal condition. This page covers CBC's work on identifying underfunded programs, the impact of underbudgeting on future budget gaps, the use of uniformed overtime and housing vouchers as common examples, the importance of accurate revenue and expenditure forecasting, and strategies for strengthening fiscal reserves.
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 Mamdani Administration should end the City’s practice of underbudgeting for known spending, which distorts the fiscal picture and undermines smart choices.
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 present reasonable revenue forecasts that reflect current economic uncertainty without intentionally low-balling estimates to keep dollars off the table.
The next administration should present a full and realistic accounting of revenues and expenses to ensure a sustainable budget.
The administration should implement a savings plan that streamlines operations, reduces duplication, and phases out lower-impact programs to align spending and revenues.
The City should realign its own funds to improve affordability, serve the neediest New Yorkers, and maintain competitiveness in the face of federal policy changes.
Key Data
In June 2026, the CBCNY reported that the mayor reversed a chronic underbudgeting trend that had grown to nearly $8 billion annually by proposing a budget with transparent spending obligations.
The largest corrected underbudgeting areas identified in June 2026 were $1.6 billion for City-funded FHEPS housing vouchers, $989 million for homeless shelters, $550 million for due process special education cases, and $337 million for public assistance.
A March 2025 analysis showed the City's underbudgeting habit grew from an average post-adoption addition of $783 million annually between fiscal years 2015 and 2021 to $1.5 billion in fiscal years 2022 and 2023, eventually reaching $4.1 billion in fiscal year 2024.
In January 2025, the CBCNY explained that underbudgeting masks the true fiscal picture, showing that reported out-year gaps of $4.2 billion to $5.1 billion actually ranged from $8 billion to $9 billion when underbudgeting was accounted for.
Highlighting the predictable consequences of underbudgeting, the CBCNY noted in January 2025 that the City had to add $2.5 billion in spending to the fiscal year 2025 budget in the middle of the year to cover current programs.
New York City's fiscal year 2027 executive budget corrects nearly $8 billion in annual underbudgeting by increasing spending allocations for housing vouchers, homeless shelters, and special education cases. Despite these improvements, the budget relies heavily on one-time resources and short-term savings, leaving significant long-term fiscal gaps that require more sustainable, recurring spending reductions.
Recommendations related to Underbudgeting
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 in CityFHEPS housing vouchers, 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
$8 billion
— The amount of annual underbudgeting that the fiscal year 2027 executive budget reverses.
$1.6 billion
— The amount of funding added to correct underbudgeting for City-funded FHEPS housing vouchers.
$989 million
— The amount of funding added to correct underbudgeting for homeless shelters.
$550 million
— The amount of funding added to correct underbudgeting for due process special education cases.
$221 million
— The increase in the uniformed overtime budget, which remains $550 million below fiscal year 2025 spending.
$550 million
— The amount by which the uniformed overtime budget remains below fiscal year 2025 spending despite recent increases.
The City's fiscal year 2027 preliminary budget attempts to address past underbudgeting issues but relies on risky strategies like depleting reserve funds and optimistic revenue projections. To ensure long-term stability, the administration should prioritize finding structural savings and avoid tax increases that could harm the local economy.
Recommendations related to Underbudgeting
The City should redouble its efforts to find more substantial savings by the Executive Budget and commit to an affordable, efficient government.
The Administration should not raise taxes, which will make the City less attractive for New Yorkers who fund our schools, police, and sanitation.
The City should eliminate spending that does not improve New Yorkers’ lives and make government more efficient and effective.
The Mayor should partner with municipal unions to redesign work processes and broaden responsibilities, then share the gains.
The Mayor should ensure that every one of the people’s $127 billion is used well, before asking them to dig into their pockets.
Key Data
$1.2 billion
— The amount pulled from the Rainy Day Fund and the Retiree Health Benefits Trust to balance the City budget.
$6.7 billion
— The projected budget gap in fiscal year 2028.
$100 million
— The reduced level of in-year reserves, leaving the City with virtually no budget cushion.
$6.6 billion
— The amount by which tax revenues are estimated to be higher than expected over two years.
60 percent
— The portion of City tax revenues generated by economically sensitive taxes.
$127 billion
— The total amount of the City's preliminary budget that the Mayor must ensure is used well.
The New York City budget continues to underfund at least $4 billion in annual planned spending for future years, including significant shortfalls for CityFHEPS and homeless shelters. Ending the practice of underbudgeting for known expenses is essential to provide a clear fiscal picture and support informed decision-making.
Recommendations related to Underbudgeting
The Mamdani Administration should end the City’s practice of underbudgeting for known spending, which distorts the fiscal picture and undermines smart choices.
Key Data
$4 billion
— Annual planned spending that the budget continues to underfund in future years.
$1 billion
— Amount of annual planned spending underfunded for CityFHEPS.
$600 million
— Amount of annual planned spending underfunded for homeless shelters.
New York City's budget gap is significantly obscured by the practice of chronic underbudgeting for known expenses, with projections understating fiscal year 2027 spending by $4.5 billion according to recent estimates. To restore fiscal stability, the city must present accurate expenditure and revenue estimates while implementing a data-driven savings plan to align spending with actual revenues.
Recommendations related to Underbudgeting
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 present reasonable revenue forecasts that reflect current economic uncertainty without intentionally low-balling estimates to keep dollars off the table.
The next administration should present a full and realistic accounting of revenues and expenses to ensure a sustainable budget.
The administration should implement a savings plan that streamlines operations, reduces duplication, and phases out lower-impact programs to align spending and revenues.
The City should realign its own funds to improve affordability, serve the neediest New Yorkers, and maintain competitiveness in the face of federal policy changes.
Key Data
$4.5 billion
— The amount by which the City's projections understate fiscal year 2027 spending, according to the Citizens Budget Commission's estimate.
$5.1 billion
— The amount by which the City's projections understate fiscal year 2027 spending, according to the City Comptroller.
$5.4 billion
— The amount by which the City's projections understate fiscal year 2027 spending, according to the State Comptroller.
$2.3 billion
— The cumulative amount by which annual expenses exceeded annual revenues over the past three fiscal years.
$6.1 billion to $8.5 billion
— The estimated range of the fiscal year 2027 budget gap after accounting for underbudgeting and other factors.
New York City's fiscal year 2026 budget is short by over $3 billion to cover likely expenses, with future budget gaps projected to reach between $8 billion and $10 billion due to underbudgeted programs. These gaps are driven by the exclusion of costs for items like overtime, CityFHEPS housing vouchers, public assistance, special education, and the state's class size reduction mandate.
Recommendations related to Underbudgeting
The City should have deposited at least $2 billion into the Rainy Day Fund to help preserve services and stability during the next recession.
Key Data
$122.7 billion
— The total fiscal year 2026 spending obligation once adjusted for prepayment of fiscal year 2026 obligations and underbudgeted programs and expenses.
7.6 percent
— The City-funded spending increase from fiscal year 2025 to fiscal year 2026, once adjusted for prepayments and underbudgeted expenses.
Over $3 billion
— The amount the fiscal year 2026 budget is short to pay for likely expenses and planned programs.
$8 billion to $10 billion
— The size of future budget gaps, once adjusted for underbudgeted programs.
$610 million
— The amount that fiscal year 2025 spending obligations exceeded fiscal year 2025 revenues.
The New York City fiscal year 2026 budget agreement leaves future budget gaps of more than $9 billion after accounting for underbudgeted expenses, while failing to set aside $3 billion to protect against potential federal cuts and recessions. To ensure fiscal stability, the city must prioritize critical services, increase efficiency, and shrink low-impact programs rather than increasing spending at twice the rate of inflation.
Recommendations related to Underbudgeting
The City should put aside $3 billion to soften the first blows of federal cuts and protect against a future recession.
The City must prioritize critical services, manage them to deliver results, and protect its fiscal foundation to become more affordable, safe, and stable.
The City must stabilize the budget and secure the future by increasing efficiency and shrinking low impact programs.
Key Data
$3 billion
— Amount that should be set aside to soften the first blows of federal cuts and protect against a future recession.
$9 billion
— Future budget gaps projected after accounting for underbudgeted expenses.
$11 billion
— Amount of revenue a typical recession would sap over two years, which would swamp the City’s reserves.
New York City mayoral candidates emphasize the need to address chronic underbudgeting and fiscal instability by implementing multi-year savings targets, eliminating wasteful spending, and establishing mandatory rainy day fund deposits. These proposals aim to improve budget transparency and long-term fiscal health while managing significant costs like the $1.2 billion CityFHEPS program and the $111 billion capital plan.
Recommendations related to Underbudgeting
Candidates propose to eliminate chronic under-budgeting by strengthening reserves, cutting inefficiencies, capping debt costs, and modernizing infrastructure planning.
To address budget gaps, candidates suggest creating revenue by recovering unpaid city fines and fees, taxing vacant luxury apartments, and ending corporate property tax exemptions.
Mayoral hopefuls advocate for ending the 'budget dance' of proposing and restoring short-term cuts by setting multi-year savings targets that yield recurring, long-term savings.
To improve fiscal transparency, candidates recommend cutting wasteful, redundant, or ineffective programs and agencies while implementing public dashboards to track spending.
Candidates support implementing mandatory deposits to the Revenue Stabilization Fund when the economy is growing to ensure the city is prepared for recessions or emergencies.
Key Data
$1.2 billion
— Cost of the CityFHEPS housing voucher program in fiscal year 2025.
$111 billion
— The City's five-year capital program.
$2B+
— Unpaid city fines and fees that candidates propose recovering.
The Fiscal Year 2026 Executive Budget proposes costs of $121 billion while failing to account for future budget gaps ranging from $8 billion to $10 billion. The budget is currently at least $3 billion short of funding existing service levels, necessitating a shift toward holding spending at an affordable level and prioritizing reserves for potential economic downturns.
Recommendations related to Underbudgeting
The Mayor and City Council should break the habit of underbudgeting and adding unaffordable spending during negotiations.
The City needs to hold spending to an affordable level by prioritizing high impact programs, shrinking others, and increasing efficiency.
The City should add $1 billion to next year’s General Reserve to soften the first blows of federal cuts.
The City should add $2 billion to the Rainy Day Fund to prepare for potential economic downturns.
Key Data
$121 billion
— Fiscal year 2026 proposed costs when adjusted for expenses prepaid in the current year and expected costs not funded.
$8 billion to $10 billion
— Range of future budget gaps once underbudgeted expenses are added.
$3 billion
— Amount the fiscal year 2026 budget is short to fund existing service levels like FHEPS, overtime, and public assistance.
$1 billion
— Amount that should be added to next year’s General Reserve to soften the first blows of federal cuts.
$2 billion
— Amount that should be added to the Rainy Day Fund.
New York City's fiscal stability is threatened by a growing practice of underbudgeting that has reached $4 billion annually, obscuring the true scale of future budget gaps. To address this and prepare for potential federal funding cuts, the City must end budget gimmickry, implement spending restraints, and ensure accurate financial reporting.
Recommendations related to Underbudgeting
The City should end the budget gimmickry and present accurate, reasonable estimates of expenses and revenue, as required by the City Charter.
The City should hold the line on new spending in the Executive and Adopted Budgets to avoid exacerbating fiscal challenges.
The City should 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.
The City should buttress the General Reserve with at least another $1 billion in fiscal year 2026 to help absorb the immediate blow of federal cuts and improve fiscal resilience.
The City should 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.
Key Data
$4 billion
— The annual amount by which underbudgeting has grown, which understates future budget gaps by billions of dollars.
$1.1 billion
— The amount the City spent more on fiscal year 2024 obligations than it received.
New York City faces significant fiscal risks from potential federal budget cuts, which are exacerbated by the city's current practice of underbudgeting by $4 billion annually and spending beyond its revenue. To build resilience, the city must implement stricter fiscal discipline, including ending budget-estimating gimmicks and increasing reserves, to protect essential services for vulnerable residents.
Recommendations related to Underbudgeting
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 to be reserved for short-term emergencies.
The city should restrain spending growth by identifying actions centrally and by agencies through a “Program to Eliminate the Gap.”
The city should end the budget-estimating gimmickry to provide New Yorkers with accurate and reasonable estimates of revenue and expenses.
Key Data
$4 billion
— Annual underbudgeting that drastically understates the size of future budget gaps.
$1.1 billion
— Amount the city spent more on fiscal year 2024 obligations than it took in.
$10 billion
— Potential size of future budget gaps even without federal cuts or a recession.
$7.4 billion
— Total federal aid the city receives that supports vital services like child care and education.
New York City's budget relies on depleting surplus funds and consistently underbudgets essential services by over $4 billion annually, creating a precarious financial outlook. This practice masks the true cost of government operations and leaves the city unprepared for potential economic downturns or federal funding cuts.
Recommendations related to Underbudgeting
End the budget gimmickry and present accurate, reasonable estimates of expenses and revenue, as required by the City Charter, in the Fiscal Year 2026 Executive Budget.
Implement a Program to Eliminate the Gap (PEG) to reduce spending growth by streamlining administrative operations, increasing program efficiency, and scaling back or eliminating programs that deliver the least value to residents.
Not fund any new or expanded programs in the Executive Budget or during adoption.
Add at least $1.0 billion in funding to the fiscal year 2026 General Reserve to help respond to potential federal cuts.
Key Data
$4.0 billion
— Annual underbudgeting of current services.
$3.6 billion
— Shortfall in the fiscal year 2026 preliminary budget needed to fund existing services.
$6.1 billion
— Peak amount of rolled surplus funds reached in fiscal year 2022.
$3.0 billion
— Projected amount of rolled surplus funds at the end of fiscal year 2025.
$682.0 million
— Amount of underbudgeting for overtime.
$1.1 billion
— Amount by which expenses exceeded revenues in fiscal year 2024.
New York City's fiscal year 2026 preliminary budget relies on underbudgeting to close gaps on paper, masking a reality where the city is short nearly $4.0 billion to fund existing services. When accounting for this underbudgeting, the projected budget gaps for fiscal years 2027 through 2029 actually range from $8.0 billion to $9.0 billion rather than the reported $4.2 billion to $5.1 billion.
Recommendations related to Underbudgeting
The Administration should break its severe underbudgeting habit and provide credible spending estimates.
All leaders should focus on using accurate estimates and making the right choices for New Yorkers not only today but in the future.
The City should provide a clear picture of the City’s finances, including overtime, housing vouchers, and homeless shelters.
Key Data
$4.0 billion
— Amount the fiscal year 2026 spending plan is short to fund existing services.
$8.0 billion to $9.0 billion
— The actual range of fiscal year 2027 to fiscal year 2029 budget gaps when underbudgeting is taken into account.
$2.5 billion
— Additional spending added to fiscal year 2025 in the middle of the year due to underbudgeting.
$700 million
— Amount fiscal year 2025 remains underbudgeted, largely for overtime.
6.7 percent
— City-funded spending growth in fiscal year 2025, adjusted for underbudgeting and pre-payments.
5.0 percent
— City-funded spending growth in fiscal year 2026, adjusted for underbudgeting and pre-payments.
New York City's fiscal integrity is undermined by a persistent trend of underbudgeting essential programs like uniformed overtime and housing vouchers, which artificially shrinks reported budget gaps. To ensure fiscal stability, the City must provide accurate spending estimates and implement mandatory deposits into the Revenue Stabilization Fund to prepare for potential economic downturns.
Recommendations related to Underbudgeting
New programs and initiatives must be paid for with higher revenues or offsetting savings to avoid widening future budget gaps.
The City should make mandatory deposits to the Revenue Stabilization Fund in fiscal year 2025, totaling between $635 million and $1.7 billion depending on the tax forecast.
The City should prepare for federal changes by proactively assessing potential risks and opportunities without taking pre-emptive actions.
The City must provide accurate and reasonable estimates of future revenues and expenses to ensure spending is affordable in fiscal year 2026 and beyond.
Key Data
$2.0 billion
— Estimated amount the City currently underbudgets for spending in fiscal year 2025.
$3.6 billion
— Estimated amount the City currently underbudgets for spending in fiscal year 2026.
$5.6 billion
— Total reported budget gap for fiscal year 2027.
$6.3 billion
— Total reported budget gap for fiscal year 2028.
New York City's budget relies on underbudgeting for ongoing programs, creating a shortfall of $2.6 billion this year and $3.3 billion in future years to maintain current service levels. This practice, combined with other fiscal pressures, contributes to projected budget gaps that could exceed $9 billion annually.
Key Data
$2.6 Billion
— The amount the budget is short this year to support current services.
$3.3 Billion
— The amount the budget is short in each future year to support current services.
$758 Million
— The amount of overtime underbudgeting included in the fiscal year 2025 budget.
$468 Million
— The amount of public assistance underbudgeting included in the fiscal year 2025 budget.
$420 Million
— The amount of Carter cases tuition reimbursement underbudgeting included in the fiscal year 2025 budget.
The New York City adopted budget increases spending by $6.1 billion, yet fails to accurately account for recurring costs like overtime and special education, creating a misleading picture of future fiscal gaps. Furthermore, the city's spending obligations exceeded revenue by $1.1 billion in fiscal year 2024, while the Rainy Day Fund remains at an insufficient $2.0 billion.
Recommendations related to Underbudgeting
The City should adopt a transparent, accurate budget that fully funds planned services and identifies those that will shrink.
The City must ensure that spending added during budget adoption is offset by savings elsewhere.
The City should deposit at least $1 billion into the Rainy Day Fund over this and next year.
Key Data
$1.1 billion
— Fiscal year 2024 spending obligations that exceeded that year's revenues.
$6.1 billion
— The amount by which the fiscal year 2025 adopted budget increases City-funded spending over fiscal year 2024.
$2.0 billion
— The current balance of the Rainy Day Fund, which is described as wholly insufficient to protect against recession.
$116.1 billion
— Total All Funds fiscal year 2025 spending, adjusted for prepayments and excluding interfund agreements.
$17.8 billion
— The amount City-funded spending is slated to grow from fiscal year 2020 to fiscal year 2025.
$1.3 billion
— The amount by which the All Funds adopted budget is larger than the Mayor’s Executive proposal.
New York City's fiscal stability is threatened by the practice of underbudgeting, where current programs are not fully funded and budget gaps are artificially reduced. To improve fiscal integrity, the city must transparently account for all program costs, offset new spending with recurring savings, and bolster the Rainy Day Fund to prepare for potential economic downturns.
Recommendations related to Underbudgeting
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 deposit into the Rainy Day Fund over the current and next fiscal year.
$500 million
— Recommended deposit into the Rainy Day Fund in fiscal year 2024.
$553 million
— Recommended deposit into the Rainy Day Fund in fiscal year 2025.
$2 billion
— Current balance of the Rainy Day Fund.
$11 billion
— Estimated revenue loss from an average recession over two years.
New York City's financial plans frequently understate necessary expenditures, distorting the fiscal picture and potentially leading to future budget crises. To improve accuracy, the City Charter should be amended to require more rigorous oversight and detailed justification for revenue and expenditure estimates.
Recommendations related to Underbudgeting
The Charter should require fiscal impact statements be published earlier in the legislative process to foster thoughtful budget decisions.
The Charter’s requirement that revenue and expenditure estimates be reasonable and appropriate should be bolstered to improve fiscal accuracy.
The City should be required to provide details of the basis and specific calculations of its estimates in cases where the City or State Comptroller’s analyses identify estimates that vary significantly from the Executive.
The City Comptroller should be empowered to certify whether the financial estimates are reasonable.
An explanation should be required if an ongoing program’s budget increases or decreases more than a specified percentage from one year to the next in the four-year financial plan.
Key Data
$2.0 billion
— Estimated overtime spending at uniformed agencies by the end of fiscal year 2024.
$1.1 billion
— Uniformed agency overtime budget at adoption for fiscal year 2024.
$1.7 billion
— Uniformed agency overtime expenditure in the prior fiscal year.
$10 billion
— Cost of the Family Homelessness and Eviction Prevention Supplement (FHEPS) expansion over five years.
$730 million
— Projected savings from the FHEPS bills cited by the City Council.
New York City's budget process often relies on underbudgeting, which obscures the true size of future fiscal gaps and necessitates more transparent accounting for planned services. To improve fiscal health, the city must accurately reflect costs for programs like public assistance and overtime, while ensuring new spending is offset by recurring savings.
Recommendations related to Underbudgeting
The budget should be transparent and accurately reflect the costs of planned programs and underbudgeted costs such as overtime.
If the City chooses not to fully fund a program, it should be clear that it will be trimmed or cut.
To ensure new spending is sustainable, it should be budgeted on a recurring basis and offset with recurring spending reductions.
The City should deposit at least $500 million in the Rainy Day Fund in fiscal year 2024 and budget to deposit at least $553 million in fiscal year 2025.
The City should ultimately build its reserves to $12.7 billion.
Key Data
$2.2 billion
— Total budget shortfall in fiscal year 2025 to continue current programs.
$65 million
— Shortfall for Early Intervention services in fiscal year 2025.
$22 million
— Shortfall for Department of Sanitation litter basket service.
$2.6 billion
— Lower end of the budget shortfall for the outyears.
$2.8 billion
— Higher end of the budget shortfall for the outyears.
New York City's Fiscal Year 2025 Executive Budget relies on unrealistic spending estimates, masking future budget gaps that range from $5.5 billion to $5.7 billion between 2026 and 2028. By underbudgeting roughly $2 billion in annual services, the city risks fiscal instability and necessitates difficult future cuts to essential programs.
Recommendations related to Underbudgeting
The Mayor and City Council should base their budget negotiations and decisions on reasonable and realistic spending and revenue estimates.
City leaders should prioritize high-impact programs and shrink or end less effective ones.
Their decisions should narrow future budget gaps and break the habit of adding more unaffordable spending.
Only real, reasonable estimates will drive smart choices on spending and service priorities.
Key Data
$5.5 billion to $5.7 billion
— The range of projected budget gaps between fiscal years 2026 and 2028.
$2 billion
— The amount of annual services that are currently underbudgeted.
6.3 percent
— The increase in City-funded spending in the Fiscal Year 2025 Executive Budget.
$200 million
— The amount of FHEPS housing voucher funding that appears low or falls off a cliff in the out-years.
New York City's fiscal health is at risk due to chronic underbudgeting and the reliance on temporary funding for recurring programs, which creates a fiscal cliff of billions of dollars. To ensure stability, the city must accurately reflect the full cost of programs in its budget before adding new initiatives or expansions.
Recommendations related to Underbudgeting
The City Council should ensure that proposals to add or modify spending are affordable and do not make the City budget even more fiscally precarious.
The City must fully fund the programs it plans to deliver to ensure the spending plan accurately reflects the program plan.
The City should include the funding required to support the current level of City FHEPS vouchers in the budget before adding or expanding this or other programs.
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.
City leaders should prioritize spending based on data and efficient and quality service delivery rather than using blunt instruments like blanket hiring freezes.
Key Data
$3.6 billion
— The amount by which proposed spending in fiscal year 2025 is short to continue the current level of services.
$8.8 billion to $9.7 billion
— The projected range of future budget gaps, even without expanding City FHEPS or complying with the State class size reduction law.
$800 million
— The total amount of underbudgeting identified in the fiscal year 2025 preliminary budget.
$150 million
— The amount budgeted for City FHEPS vouchers next year, despite costs expected to exceed $800 million.
$800 million
— The expected cost of City FHEPS vouchers this year.
$1.45 billion
— The amount of in-year budgetary reserves, which is far exceeded by the $3.6 billion in underfunded ongoing programs.
New York City and State face significant fiscal challenges driven by years of unsustainable spending growth and the reliance on temporary funding sources to cover recurring expenses. To avoid a looming fiscal reckoning, both governments must align recurring expenditures with revenues by prioritizing effective programs and implementing spending restraint rather than increasing taxes or depleting reserves.
Recommendations related to Underbudgeting
Both the City and State must align recurring expenditures for all programs with revenues.
Smart spending restraint should focus on prioritizing the programs that produce the most significant effects, based on a hard-nosed look at the data, and shrinking or eliminating those that are ineffective or deliver less benefit.
Spending restraint should focus on increasing efficiency by leveraging technology and streamlining processes.
Leaders, managers and front-line workers should work together to identify and implement the best ways to improve productivity, such as ensuring uniformed employees are deployed effectively and not filling jobs that could be done by civilian employees.
School aid needs to focus on better targeting aid to high-need districts, not increasing aid to wealthy districts that already self-fund a sound basic education, and not holding districts harmless when enrollment declines.
The state must reduce Medicaid spending growth while ensuring access to needed high-quality care and a strengthened safety net.
Key Data
$33 billion
— State Operating Funds spending is slated to increase by $33 billion between fiscal years 2020 and 2025.
$15 billion
— The structural gap — recurring expenses compared to recurring revenue — is approximately $15 billion.
$11.5 billion
— City-funded spending between FY 2020 and FY 2025 is slated to increase $11.5 billion.
$3 billion
— Actual budget gaps are over $3 billion higher due to under- and un-budgeted programs.
$8 billion to $9 billion
— Outyear gaps are really closer to $8 billion to $9 billion.
40%
— Medicaid spending growth has grown nearly 40% in the last three years.
New York City faces a potential budget gap of up to $10.6 billion when accounting for fiscal cliffs and recurring underbudgeting, necessitating difficult management decisions rather than tax increases or the depletion of reserves. To address these financial challenges, the city must prioritize essential services and collaborate with labor to improve operational efficiency.
Recommendations related to Underbudgeting
New York City leaders should protect reserves for potential recessions rather than using them to avoid solving problems caused by underbudgeting ongoing programs.
The city must prioritize key services and manage them relentlessly to get results and operate effectively and efficiently.
City leaders should engage labor to agree upon changes to work rules, job titles, health insurance, and benefit structures to identify and deliver services efficiently.
The city should avoid raising taxes or siphoning reserves to address budget gaps, as these actions would weaken competitiveness and deplete savings needed for economic downturns.
Key Data
$7.1 billion
— The city's financial plan gap for fiscal year 2025.
$10.6 billion
— The potential budget gap when including fiscal cliffs and areas the city regularly underbudgets.
$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.
5.3%
— The decline in New York City's population from 2020 to 2022.
20%
— The portion of the most recent Program to Eliminate the Gap (PEG) savings that will touch current services.
$10.6 billion is the real-world, all-in budget gap that NYC could be facing once you include all spending that is currently unbudgeted or underbudgeted. In a co-production with Ben Max's podcast "Max Politics," CBC President Andrew Rein and Vice President for Research Ana Champeny about the City's decisions and unforeseen…
New York City faces significant fiscal challenges, including chronic underbudgeting of essential services like uniformed overtime and student transportation, which likely cost at least $1 billion more annually than currently budgeted. Achieving structural stability requires the City to prioritize effective services, increase government efficiency, and address these recurring budget gaps rather than relying on temporary fixes.
Recommendations related to Underbudgeting
The City should increase the budget for uniformed overtime, Carter Cases, and student transportation to the actual levels they have historically reached.
If the City cannot increase the budget to historical levels, it must develop a plan to drastically reduce spending to the level currently budgeted.
Key Data
$1 billion
— Estimated annual cost of underbudgeting for uniformed overtime, Carter Cases, and student transportation above what is currently budgeted.
$535 million
— Annual underbudgeting amount for uniformed overtime in fiscal years 2026 and 2027.
$475 million
— Annual underbudgeting amount for Carter Cases in fiscal years 2026 and 2027.
$78 million
— Annual underbudgeting amount for pupil transportation in fiscal years 2026 and 2027.
New York City faces a potential fiscal gap of up to $13.8 billion next year, driven by years of expanding programs without recurring revenue and spending that consistently exceeds budget allocations. To address this looming fiscal cliff, the city must prioritize impactful programs, improve efficiency, and implement stricter accountability measures to align spending with available resources.
Recommendations related to Underbudgeting
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.
The city should greatly improve its data on program efficiency and effectiveness, and implement 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
— Projected budget gap for next year.
$13.8 billion
— Possible budget gap for next year.
50%
— Increase in city-funded spending over the past decade.
$16 billion
— Amount added to the budget for city worker raises without identified funding.
$2.5 billion
— Value of programs funded by temporary revenue sources like federal Covid aid and tax surges.
New York City faces significant future budget gaps that are currently understated by at least $3.6 billion due to fiscal cliffs and the chronic underbudgeting of specific programs. These gaps are projected to grow from $8.7 billion next year to $11.5 billion by fiscal year 2027, highlighting the severity of the city's long-term financial challenges.
Key Data
$1.1 billion
— Amount by which future budget gaps are understated due to the chronic underbudgeting of certain programs.
$2.5 billion
— Amount by which future budget gaps are understated due to substantial fiscal cliffs where recurring programs are only temporarily funded.
$8.7 billion
— Total projected budget gap for the upcoming fiscal year after accounting for fiscal cliffs and underbudgeted programs.
$11.5 billion
— Total projected budget gap for fiscal year 2027 after accounting for fiscal cliffs and underbudgeted programs.
New York City faces growing budget gaps, rising from $7.5 billion in fiscal year 2025 to $10.7 billion in fiscal year 2027, driven by the need for realistic spending estimates and the funding of ongoing programs. To stabilize the fiscal outlook, the budget must move away from fanciful projections for items like uniformed overtime and special education while offsetting new recurring spending with savings.
Recommendations related to Underbudgeting
The City should include realistic annual spending estimates for all functions, including uniformed overtime and special education.
The budget should be based on accurate spending projections and cease its fanciful budgeting for uniformed overtime and special education, which have exceeded adopted budget levels for many years.
The City should offset all added spending for recurring activities with savings elsewhere in each year of the financial plan.
The City should reduce future fiscal cliffs by including spending for ongoing programs in the outyears.
The City should narrow future budget gaps.
Key Data
$7.5 billion
— The projected budget gap for fiscal year 2025.
$10.7 billion
— The projected budget gap for fiscal year 2027.
$400 million
— The cost to maintain the current FHEPS rental voucher program.
The New York City Police Department's fiscal year 2024 budget significantly understates necessary spending by failing to account for the full costs of collective bargaining agreements and realistic overtime projections. These omissions result in a budget that is likely $1.6 billion short of the actual funding required to cover these operational expenses.
Recommendations related to Underbudgeting
The City must ensure that budgeted overtime reflects reasonable expectations given management, policy, and historical spending trends.
The City should include the costs of ratified collective bargaining agreements in the NYPD budget rather than relying on central labor reserves.
The City should avoid unrealistic budgeting that understates spending by hundreds of millions of dollars.
Key Data
$1.6 billion
— The amount by which the fiscal year 2024 budget is likely short to fund the cost of recent collective bargaining agreements and overtime.
$817 million
— The projected total overtime spending for fiscal year 2023.
$364 million
— The amount by which fiscal year 2023 overtime spending is expected to exceed the adopted budget.
$900 million
— The estimated cost of the PBA agreement in fiscal year 2024.
$300 million
— The estimated cost to extend the PBA agreement pattern to the remaining uniformed force in fiscal year 2024.
$350 million
— The estimated shortfall in the fiscal year 2024 overtime budget.
The NYPD's fiscal year 2023 executive budget includes increased funding for overtime, yet projected spending is expected to exceed these allocations by $136 million by the end of the fiscal year. Achieving meaningful, recurring reductions in overtime costs requires the implementation of effective managerial controls and revisions to existing department policies and procedures.
Recommendations related to Underbudgeting
Meaningful recurring reductions in NYPD overtime depend on effective managerial controls and changes to NYPD policies and procedures.
Key Data
$743 million
— Estimated NYPD overtime spending by the end of fiscal year 2022.
$136 million
— Amount by which estimated overtime spending exceeds the newly modified Executive Budget.
$617 million
— NYPD expenditures for fiscal year 2022 overtime through April.
The New York Police Department's fiscal year 2021 budget saw a $322 million reduction, yet overtime expenditures significantly exceeded the planned target by 77 percent. Furthermore, the fiscal year 2022 budget reverses previous spending decreases with a $465 million increase, while planned transfers of certain units like school crossing guards remain unreflected in the budget.
Key Data
$474 million
— FY 2021 overtime expenditures, which were significantly over the planned budget.
77 percent
— The amount by which FY 2021 overtime expenditures exceeded the budget.
$322 million
— The actual fiscal year 2021 budget cut to NYPD’s City-funded expenditures.
$465 million
— The spending increase in the fiscal year 2022 budget against fiscal year 2021.
New York State has obscured its fiscal standing by delaying billions in Medicaid payments and understating program costs by over $9 billion in its four-year financial plan. To restore fiscal reality, the state must stop using payment delays to balance the budget and instead implement concrete, multiyear savings plans to address the underlying cost growth.
Recommendations related to Underbudgeting
The Mid-Year Update should identify multiyear savings targets, approaches to make programmatic changes, and programs to target.
The Fiscal Year 2021 Executive Budget should not delay payments to forestall a more serious reckoning.
The budget should include the cost of the delayed fiscal year 2019 payment and a full year of Medicaid payments for fiscal year 2020.
Fiscal year 2020 spending should not be “reduced” by delaying payment until fiscal year 2021.
A multiyear plan should include actions that would slow the rapid growth in school aid by better targeting aid to needy districts and cut wasteful economic development spending.
Key Data
$1.7 billion
— Medicaid payments delayed from fiscal year 2019 into fiscal year 2020.
$9 billion
— Cumulative four-year understatement of Medicaid costs in the State financial plan.
$3 billion to $4 billion
— Estimated State share gap in fiscal year 2020.
$2.0 billion
— Amount of fiscal year 2020 savings expected to be realized from adjusting the timing of payments.
$3.5 billion
— Amount that would be added to State Operating Funds spending in fiscal year 2020 if the budget included the delayed fiscal year 2019 payment and a full year of Medicaid payments.
New York City's uniformed overtime spending has consistently exceeded adopted budgets for nine consecutive years, with the gap reaching nearly $600 million in fiscal year 2016. This persistent underfunding, combined with high rates of absenteeism and restrictive work rules, necessitates a new labor-management committee to implement systemic reforms and control costs.
Recommendations related to Underbudgeting
The City should establish a uniformed labor-management committee as part of the next round of collective bargaining in order to reduce uniformed overtime spending.
The City should adopt a system in which routine sick leave usage is accrued and capped, similar to the system for NYC civilian employees.
The City should change certain work rules, such as eliminating overtime for travel to alternate work locations and guaranteed minimum overtime hours.
The City should institute a per employee cap on overtime hours or overtime earnings, as exists for civilian employees.
The City should consider capping or eliminating overtime earnings in calculating final average salary for pensions.
Key Data
42 percent
— Average amount by which overtime has exceeded the adopted budget in each of the past nine years.
$600 million
— Increase from the adopted budget for overtime in fiscal year 2016.
$1.4 billion
— Adopted Fiscal Year 2018 budget for overtime expenses.
62 percent
— Growth in overtime spending from fiscal years 2009 to 2016.
$19,400
— Average overtime compensation paid per uniformed employee in fiscal year 2016.
New York City's projected $4.1 billion budget gap is being masked by one-shot measures, such as a $395 million withdrawal from a retiree health insurance fund, and the exclusion of $200 million in mandated pollution-remediation expenses. Additional tax revenue should not be used to delay necessary cost-cutting measures while the city relies on uncertain assumptions like $500 million in future labor union concessions.
Recommendations related to Underbudgeting
The city should avoid using one-shot measures to balance the budget, such as the $395 million drawdown from a retiree health insurance trust fund.
The city must not allow additional tax revenue to serve as an excuse to avoid needed cost-cutting.
The budget should recognize mandated items such as the $200 million in new pollution-remediation operating expenses that were previously capitalized.
Key Data
$4.1 billion
— The currently projected budget gap for New York City.
$395 million
— The amount of the drawdown from a retiree health insurance trust fund used as a one-shot measure.
$200 million
— The cost of new pollution-remediation operating expenses that the budget failed to recognize.
$500 million
— The amount of future concessions from labor unions assumed in the mayor's plan.
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