Mayor Eric Adams’ $101 billion budget may be more fiscally responsible than any of his predecessor’s spending plans, but the ailing economy, and market, threaten to trigger a giant shortfall.
To keep the city in the black — without raising taxes and fees — the mayor will need to keep a tight lid on outlays, and particularly labor costs as he negotiates new contracts with municipal unions.
The problem, in a nutshell: Pension-fund losses and less-than-expected income-tax revenue could force the city to dip into its $8 billion reserve pot, and even that might not be enough, as the Empire Center’s E.J. McMahon notes.
Blame the ailing stock market: The period from Jan. 1 to June 30 marked the worst first half-year in more than 50 years. With returns on the pension funds way down, the city will have to kick in more from its operating budget to cover benefits for current and future retired workers — $4 billion more than planned from next year through 2026, McMahon predicts.
And it’ll get worse if the market keeps sinking.
A flagging market drives down city income-tax revenue based on capital gains. Adams’ budgeteers did bake in a 17% dip in quarterly estimated-tax payments, but as of June 15, those payments were down a whopping 31% from the same month last year, city Comptroller Brad Lander reports. Lander also predicts tax-receipt growth will slow as the economy stalls and Wall Street bonuses take a plunge.
The scary bottom line: “Unless the stock market rebounds and the economy grows more strongly,” Adams’ $8 billion cushion “could go up in smoke more rapidly than the mayor has anticipated,” warns McMahon. The city could get caught dangerously short.
No doubt progressives’ solution will be to demand even more tax hikes on wealthy New Yorkers — which would only drive more of them to seek refuge in other states.
And Hizzoner has yet another worry: With inflation soaring, the municipal unions will be demanding far more in raises than the 0.5% hike in each of two years and 1% annually thereafter that the mayor’s plan provides for new labor contracts. Other city costs will also rise faster than expected.
Adams has an enormous challenge on his hands to keep spending in line with revenue even at the risk of losing political support from labor. Wish him luck — he’ll need it.
