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<\/p>\nMarch 11, 2026<\/p>\n
\t\t\t\t\t\t\t\tOpening: A Clearer Picture of the City\u2019s Fiscal Challenge<\/p>\n
Speaker Menin, Chair Lee, and members of the Finance Committee and City Council, thank you for the opportunity to testify on the Mayor\u2019s Preliminary Budget and Financial Plan. I am pleased to be joined today by Executive Deputy Comptroller for Budget and Finance Francesco Brindisi and Deputy Comptroller for Budget Krista Olson.<\/p>\n
Councilmembers, I had the pleasure of sitting where you are for eight years, and of continuing to follow the budget closely in the four years since. I can tell you that in all that time I\u2014and we\u2014have never seen a fiscal challenge as big as the one we face now.<\/p>\n
We know that in part because Mayor Mamdani and his administration have provided the most honest and transparent accounting of the budget we have seen in years.<\/p>\n
The mayor\u2019s budget proposal accurately acknowledges billions in costs that in years past were routinely underbudgeted, his budget funds known fiscal cliffs in recurring programs, and it includes a variety of other obligations that were previously left out under the prior administration.<\/p>\n
Thanks to this transparency we have the clearest view yet of where New York City stands fiscally. And here is what we see:<\/p>\n
New York City is spending more money than it takes in.<\/p>\n
So now we are confronted with a choice: Do we begin addressing this imbalance now and put the City on a stronger, more sustainable fiscal path, or do we kick the can into next year and leave ourselves vulnerable at a moment of deep economic uncertainty?<\/p>\n
Why the Budget Gap Is Growing<\/p>\n
I want to take a moment to address a simple question: If the economy is strong, why is our budget so out of whack? New York City\u2019s economy grew by a healthy pace last year, with real wage income rising nearly 3%. Wall Street bonuses are higher this season than any year in history. And every major source of City tax revenue, apart from corporate taxes, is rising\u2014personal income taxes, real property-related taxes, and the sales tax.<\/p>\n
Unfortunately, our expenses are growing even faster\u2014which we now see clearly thanks to the mayor\u2019s transparency.<\/p>\n
For example, rental assistance costs, mainly our housing voucher program, CityFHEPS\u2014an essential lifeline for tens of thousands of families\u2014have been growing at 4% per month and are projected by my office to reach $2.6 billion next year. For perspective, that is larger than the entire annual expense budget of HPD.<\/p>\n
The cost of special education due process cases, also known as Carter cases, is expected to reach $1.5 billion next year\u2026 tripling since FY2019.<\/p>\n
Our education budget overall now totals $36.9 billion\u2014up 31.5 percent since 2020\u2014even as school enrollment has fallen by 100,000 students during that time.<\/p>\n
These are just a few examples of rapidly growing expenses.<\/p>\n
Because the Mayor\u2019s preliminary budget now reflects these costs, it projects total spending of $127 billion in FY2027\u2014an increase of $5.5 billion over last year.<\/p>\n
How the Administration Balances the Budget<\/p>\n
To balance the budget despite this rapid growth in expenses, the administration relies on a variety of measures, including four that I want to highlight:<\/p>\n
Optimistic revenue projections
\nDrawing down reserves
\nReducing prepaid expenses
\nRaising the property tax levy close to the constitutional limit<\/p>\n
Each of these steps deserves careful scrutiny, because each comes with its own set of fiscal risks.<\/p>\n
Optimistic Revenue Projections<\/p>\n
First, the mayor\u2019s revenue projection: His plan increases the baseline tax estimate by $4.1 billion in FY 2027 compared to the November plan. Even the mayor himself has called this projection \u201caggressive.\u201d In fact the new revenue estimates my office has released today come in $1.8 billion lower over FY2026 and FY2027.<\/p>\n
How does OMB get to such a high revenue estimate?<\/p>\n
By assuming the bull market that fueled the financial industry in 2024 and 2025 continues into 2026, in what OMB refers to as another \u201cexceptional year\u201d. In that scenario, the securities industry would add 8,200 jobs over the next two years, triple what my office projects, with total financial industry wages growing nearly twice as fast.<\/p>\n
Drawing Down Reserves<\/p>\n
Then there\u2019s the draining of reserves.<\/p>\n
The mayor\u2019s plan takes $2.6 billion from reserves over FY26 & 27, drawing from the Revenue Stabilization Fund, the City\u2019s rainy-day fund, the Retiree Health Benefits Trust, as well as the in-budget reserves for next year.<\/p>\n
These reserves exist to protect the City during economic downturns, or against federal cuts and unexpected shocks.<\/p>\n
Drawing them down now when revenues are at record levels reduces our ability to respond when the next crisis arrives.<\/p>\n
The Decline in Prepaid Expenses<\/p>\n
The mayor\u2019s plan also draws down prepaid expenses\u2014a step that has received little attention but warrants a closer look.<\/p>\n
For decades, rolling over prepaid expenses has been an important fiscal tool, allowing the City to carry an operating surplus forward to the following fiscal year.<\/p>\n
In FY25, the City carried forward $3.8 billion in prepaid expenses. Under the Mayor\u2019s plan, that drops to just $238 million for FY26\u2014a 94% decline.<\/p>\n
While the mayor\u2019s proposal is technically in balance for FY26, when we account for both the reduced operating surplus and the rainy-day fund draw down, the plan indicates that operating expenses this year exceed revenues by $4.5 billion.<\/p>\n
<\/p>\n
The Proposed Property Tax Increase<\/p>\n
And then there is the mayor\u2019s proposal to raise property taxes.<\/p>\n
Our current property tax system is profoundly unequal, with a brownstone owner in Park Slope paying a much lower rate than a brownstone owner in East New York, among many other inequities and inconsistencies across the city.<\/p>\n
Raising property tax rates would simply compound the harm done by an already unfair system, while simultaneously exacerbating our housing affordability crisis. For this reason alone, I strongly oppose raising them.<\/p>\n
But there\u2019s another concern that you might not be aware of:<\/p>\n
Raising rates 9.5% as the mayor has proposed brings us just short of the constitutional limit for our property taxes\u2014which would mean we would have little room to maneuver should we face an economic crisis in the future.<\/p>\n
Economic Risks Facing the City<\/p>\n
And just what are the chances of an economic crisis ahead for New York City?<\/p>\n
While both the U.S. and New York City economies showed some resilience in 2025, the recovery has been uneven.<\/p>\n
Outside of the single sector of healthcare\u2014specifically home health aides\u2014New York City\u2019s private-sector employment actually declined over the past year by 38,000 jobs.<\/p>\n
And looking ahead, the uncertainties are growing.<\/p>\n
The most immediate risks to the economy right now are geopolitical. The recent strikes on Iran and the expanding conflict have already rattled financial markets and driven up oil prices. If disruptions to energy supply or global shipping intensify, the resulting inflation and market volatility could weaken economic growth.<\/p>\n
Other risks are emerging as well. Rapid advances in artificial intelligence may become labor-substituting, reducing demand for some of the core occupations that anchor New York City\u2019s economy.<\/p>\n
At the same time, if AI-driven gains in productivity and profitability arrive more slowly\u2014or prove more limited\u2014than markets currently anticipate, the downside risk to asset prices could be significant.<\/p>\n
Additional uncertainties include a potential resurgence of inflation, continued volatility around tariffs, and the prospect of more widespread deportations under the Trump administration\u2019s policies.<\/p>\n
All of these economic risks could challenge the optimistic assumptions built into the mayor\u2019s financial plan. And if the economy underperforms those projections, the City will have far less in reserves to absorb the shock.<\/p>\n
Taken together, the strategies used to balance this budget \u2014 aggressive revenue assumptions, drawing down reserves, reducing prepaid expenses, and raising the property tax levy close to its limit \u2014 shift fiscal risk into the future.<\/p>\n
If the economy performs exactly as the mayor has projected, the plan will hold. But if revenues fall short, the City could face sudden budget gaps at a time when our reserves and fiscal flexibility have already been reduced.<\/p>\n
That is the risk before us.<\/p>\n
The Path Forward<\/p>\n
It will take the efforts of every player in local government\u2014all of us\u2014to achieve a budget that avoids these risks.<\/p>\n
We will need more help from Albany, in the form of more equal funding formulas and, potentially, new revenue streams.<\/p>\n
We will need to find a way to slow the growth of rapidly rising City expenses.<\/p>\n
We will need to find greater efficiencies and savings in every City agency.<\/p>\n
And given that the current budget plan relies heavily on the assumption that New York City\u2019s economy overall, and specifically our financial sector, will continue to thrive here, we must also do more to slow the departure of jobs to Texas and other parts of the nation.<\/p>\n
None of this will be easy. Every step we need to take will be politically challenging.<\/p>\n
But the alternative is to pass a budget in June that pushes risk into the year ahead\u2014at a moment when both our fiscal outlook and our economic competitiveness face growing uncertainty.<\/p>\n
Conclusion<\/p>\n
Despite the challenges of this moment, I am confident we will get through this.<\/p>\n
New York City has the most dynamic and diverse economy in America.<\/p>\n
We have the most talented and creative workforce anywhere in the nation.<\/p>\n
And we are a global capital of everything from finance to fashion, from technology to the arts.<\/p>\n
If we do the hard work now to build a smarter and more sustainable budget, I have no doubt that our city will emerge from this moment stronger and more resilient.<\/p>\n
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