ALBANY – New York City’s latest financial plan projects a surplus of nearly $3.7 billion for the fiscal year ending June 30, 2018, resulting from reductions in unneeded reserves in the current year, higher than expected tax collections and benefits from the citywide savings program, according to a report released Friday by State Comptroller Thomas P. DiNapoli.
The surplus money will be used to balance the FY 2019 budget.
“The city’s economy is strong and the out-year budget gaps appear manageable under current conditions. However, the city should increase its reserves during the financial plan period given the budget risks on the horizon, particularly the threat of federal budget cuts,” DiNapoli said.
Tax collections outpaced the city’s initial forecast by nearly $1.5 billion in FY 2018, driven by higher-than-planned personal income tax collections and lower than expected property tax refunds, delinquencies and tax abatements. Business tax collections continued to fall short of expectations, but the shortfall was offset by higher revenue from tax audits and other sources.
Personal income tax collections are projected to grow by 9.4 percent in FY 2018 (the fastest in three years), boosted by a near doubling of capital gains and the strength of the city’s economy. Revenue is forecast to rise by nearly $1.1 billion, $817 million more than initially anticipated.
The citywide savings program is expected to generate $1 billion in each of fiscal years 2018 and 2019 (a cumulative total of nearly $4.7 billion through FY 2022). However, only a small share of the savings are projected to come from efficiencies that improve agency operations. Most will come from funding shifts, debt service savings and cost reestimates.
The city estimates that actions on the state level will cost $745 million in FY 2019 ($531 million in higher operating costs and one-time capital costs of $214 million). The largest impact comes from the mandate that New York City match the state contribution ($418 million) to the Metropolitan Transportation Authority’s plan to improve subway performance.
City budget officials now project budget gaps of $3.2 billion in FY 2020, $2.9 billion in FY 2021 and $2.3 billion in FY 2022. While the gaps are still relatively small as a share of city fund revenue (averaging 4 percent annually), the gaps are larger than those projected by the city in February, largely due to higher agency spending. City agencies have identified new spending needs of about $1 billion since the fiscal year began.
DiNapoli’s report found that tax revenues are likely to exceed the city’s forecasts, at least in the near term, and recommends that the city increase its reserves given potential budget risks.
The report notes that:
- Growing federal deficits may spur cuts in entitlement and other federal programs, which would adversely affect many New York City residents and the city’s budget;
- The city has set aside resources to fund annual wage increases of 1 percent after current labor agreements end, but the actual cost will be determined through negotiation or arbitration;
- The Health and Hospitals Corp. still faces serious long-term financial and structural challenges. In the absence of effective corrective measures, the city could be called upon to increase its financial support during the financial plan period;
- The city could be called upon to provide additional resources to the New York City Housing Authority for emergency repairs; and
- The city’s financial plan assumes uninterrupted economic growth during the financial plan period, but business cycles are subject to change.