{"id":325460,"date":"2026-08-20T01:06:26","date_gmt":"2026-08-20T01:06:26","guid":{"rendered":"https:\/\/www.newsbeep.com\/us-ny\/325460\/"},"modified":"2026-08-20T01:06:26","modified_gmt":"2026-08-20T01:06:26","slug":"new-yorks-resource-curse","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us-ny\/325460\/","title":{"rendered":"New York\u2019s Resource Curse"},"content":{"rendered":"

On January 28, 2026, less than a month into his administration, Mayor Zohran Mamdani stood in City Hall\u2019s Blue Room and declared a fiscal emergency<\/a>. New York City, he said, faced a $12 billion budget shortfall over fiscal years 2026 and 2027, a crisis he portrayed as worse than the Great Recession. He blamed<\/a> his predecessor Eric Adams\u2019s \u201cyears of staggering mismanagement\u201d for putting his administration in a hole before it started.<\/p>\n

Yet revenues were still pouring into municipal coffers, lifted by robust Wall Street bonuses and stock-market gains. The mayor\u2019s $127 billion preliminary budget<\/a> was almost $30 billion larger than Adams\u2019s first<\/a>, just four years earlier. What Mamdani called a fiscal emergency was, in reality, an attempt to persuade Albany to levy punitive tax increases on the rich\u2014not to fund his expansive campaign promises but just to sustain the existing government\u2019s growth. The projected gap reflected spending commitments that outpaced recurring revenues, leaving the city exposed even as tax collections continued to rise.<\/p>\n

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The episode uncovered one of New York\u2019s deepest structural problems. A long period of tax-revenue growth has created a municipal \u201cresource curse\u201d\u2014a condition in which abundant revenues weaken the pressure to spend wisely and govern efficiently. Like a country rich in oil or minerals that can paper over dysfunction with resource wealth, New York\u2019s surging revenues have fueled government expansion at the cost of the discipline that scarcity imposes. A long bull market, federal pandemic aid, and relentless interest-group pressure have enabled city leaders to add new programs without cutting old ones, placate unions and contractors without demanding greater productivity, and postpone trade-offs that a fiscally constrained government would have been forced to make.<\/p>\n

Mamdani\u2019s first budget suggests that he has little intention of breaking this resource curse. If revenues keep rising, he may not need to; he can preserve the status quo while using social-media videos to present his administration as a transformative socialist project. If revenues fall, however, he will face hard choices that he has so far avoided. New York Governor Kathy Hochul and City Council Speaker Julie Menin should not help him evade those trade-offs. Instead, they should use their leverage to secure the overdue reforms that the city\u2019s long-term fiscal health requires.<\/p>\n

Long before Mamdani\u2019s election, budget watchdogs had warned that New York City\u2019s apparent fiscal strength rested on underbudgeted costs, temporary revenues, and an eroding tax base. In June 2024, Manhattan Institute\u2019s E. J. McMahon testified<\/a> before the Charter Revision Commission, recommending solutions to the \u201cnow-routine, systematic under-estimation of certain expense requirements in the mayor\u2019s financial plan,\u201d as well as the city council\u2019s habit of creating multibillion-dollar obligations without appropriating the money to pay for them. By March 2025, the Citizens Budget Commission had put the fiscal 2027 shortfall at $7.8 billion<\/a>. That summer, Nicole Gelinas wrote<\/a> in City Journal that Mamdani\u2019s program rested on the fantasy that New York could keep expanding government without hard trade-offs, which higher interest rates made implausible.<\/p>\n

The resource curse hasn\u2019t been confined to city hall. Albany has used temporary revenue windfalls and high-earner tax hikes to normalize a permanently larger state government. Thanks partly to federal Covid cash, Albany\u2019s spending from all sources swelled from about $173 billion<\/a> in fiscal 2020 to an estimated $268 billion<\/a> in fiscal 2027\u2014nearly $100 billion larger in just seven years. Now that the pandemic aid has receded, the state has substituted its own revenues for temporary federal support. State operating funds spending, or that derived from state sources, increased from $104 billion<\/a> in fiscal 2020 to about $160 billion<\/a> in the just-enacted fiscal 2027 budget.<\/p>\n

At the same time, New York State and City tax burdens stand at multi-decade highs, heavier than in any other jurisdiction in the country. As McMahon has noted<\/a> recently, millionaire filers pay over 40 percent<\/a> of the state and city\u2019s personal income taxes and already face the nation\u2019s highest combined top federal, state, and city tax rate\u201451.8 percent. Years of heavier progressive taxation have made New York increasingly dependent on a tiny, mobile class of high earners with volatile income.<\/p>\n

As the state legislature has lurched leftward over the last decade, its refusal to cut<\/a> taxes and let supposedly temporary tax hikes expire\u2014including Governor Andrew Cuomo\u2019s three-year income-tax increase, enacted in 2021\u2014has also fed the resource curse. When the government transforms temporary or emergency tax raises into permanent revenue sources, it frees itself from the discipline of matching spending to revenue growth. Albany\u2019s repeated tax increases on high earners have allowed the state to expand outlays\u2014particularly on Medicaid<\/a> and public-school aid\u2014without forcing lawmakers to assess whether such growth is making the Empire State more attractive and competitive relative to rivals such as Texas and Florida.<\/p>\n

Mamdani inherited a city government already heavily dependent on the same high earners he wants to tax further. Yet doing so risks slowing the city\u2019s growth and, with it, future tax collections\u2014a danger his first budget fails to acknowledge. In February, he presented<\/a> Albany with a choice: enact his campaign\u2019s tax increases on corporations and high earners\u2014not to fund fare-free buses or universal child care, but simply to sustain the existing city government\u2014or face his alternative, a 9.5 percent property-tax hike, which would require city council approval.<\/p>\n

Yet without either of those levies, Mamdani\u2019s claimed two-year gap quickly narrowed as healthy Wall Street bonuses<\/a>, hoped-for city savings, and Hochul\u2019s state-aid package brought Gotham\u2019s shortfall down from $12 billion to $5.4 billion. His $1.77 billion in proposed cuts over fiscal years 2026 and 2027 rely heavily on optimistic assumptions, such as saving $368 million<\/a> over two years through efficiency improvements, overtime management, and the phaseout of unused programs. Apart from being vague, reining in overtime costs is especially hard to enforce.<\/p>\n

Mamdani has shown little willingness to confront the city\u2019s labor costs, which consume roughly half the municipal budget. His budget-balancing plan did not seek standard savings such as program eliminations or a hiring freeze\u2014moves that might have invited accusations of austerity. Nor did he ask Albany in February or March for relief from the state\u2019s class-size mandate, a $1.6 billion<\/a> annual full-employment program for the teachers\u2019 union trumpeted as an educational improvement. Instead, he coyly waited until June to accept a delayed<\/a> implementation period from Albany as part of its relief package, alongside a separate deal with the union to give teachers a bonus if their classes are above the cap.<\/p>\n

Hochul also blessed a re-amortization<\/a> of city pension liabilities, refinancing pre-2011 debt that was set to be paid by 2032 until 2037<\/a>. Mamdani may enjoy the lower near-term contributions, but Gotham will be on the hook for larger payments in a decade\u2019s time\u2014with interest. Facing progressive cries to tax the rich, Hochul settled for a pied-\u00e0-terre tax<\/a> on non-primary residences in the city, with initial thresholds of $1 million for condos and co-ops and $5 million for one-to-three-family homes. The measure is projected to raise $500 million, but the administrative difficulty of identifying and imposing the tax on covered properties puts that figure in some doubt.<\/p>\n

Mamdani closed his budget gap, then, less through visionary leadership than through one-time maneuvers and state assistance. In his Election Day victory speech, he declared that voters had signaled \u201ca mandate for change\u201d and \u201c\u200ba mandate for a new kind of politics.\u201d His first budget delivered not change but business as usual, suggesting that the old interest-group politics still dominates city hall. Though he didn\u2019t earn<\/a> most of organized labor\u2019s support in last year\u2019s primary, Mamdani\u2019s path of least resistance was union-friendly: demanding higher taxes (even as revenues kept growing) instead of reassessing how city government operates.<\/p>\n

Since the Great Recession, and but for a momentary panic at the start of the Covid-19 pandemic, no New York mayor has had to contend with true budget stress. Flush revenues<\/a> make for easy decisions.<\/p>\n

All told, city government spends $16 billion<\/a> more today than it would have if it merely had kept pace with inflation over the past decade, according to the Citizens Budget Commission, despite a population that has contracted by nearly a quarter million residents<\/a> since 2020. In real terms, New York City\u2019s budget has roughly doubled <\/a>over the last quarter century, as Nicole Gelinas has noted. (See \u201cWhat We Talk About When We Talk About Austerity,\u201d page 70.) Much of this new spending owes not to organic economic growth but to a booming stock market and the highest-earning taxpayers.<\/p>\n

That doubling hasn\u2019t provided a commensurate improvement in public services. It has instead benefited the interests dependent on it\u2014particularly the unionized workforce\u2014and made retrenchment politically harder. A more constrained fiscal environment would have forced city government to prioritize the highest-value and most needed programs, cutting where necessary to preserve them. Mamdani\u2019s refusal to make meaningful cuts demonstrates how city government has become a one-way ratchet.<\/p>\n

This reality is most apparent in the Department of Education. Its total budget has exploded by nearly $10 billion<\/a> since fiscal 2020, even as enrollment has shrunk by more than 100,000 students since the 2019\u201320 school year. As Manhattan Institute\u2019s Danyela Souza Egorov has shown<\/a>, it has been easier to keep underenrolled schools open and funded as though they had full enrollment, rather than close failing schools and reduce school-level budgets in proportion to enrollment declines. The end result is a school system that, all-in, spends an estimated $42,000<\/a> per pupil\u2014highest in the nation by far\u2014with results<\/a> at or below the national average.<\/p>\n

Likewise, despite repeated promises<\/a> to reform the city\u2019s arcane, irrational, and unfair property-tax system, Mamdani has yet to offer a concrete plan. Among other problems, because taxable assessed values increasingly fail to keep pace with market values, owners of highly desirable small homes pay a smaller share of their properties\u2019 value in taxes than comparable owners in working-class neighborhoods. His problem is that the 45-year-old system\u2019s biggest beneficiaries are his voters: homeowners in brownstone Brooklyn whose market values have far outpaced their capped assessments. The biggest losers are owners of large apartment buildings\u2014Mamdani\u2019s natural political foes. As a result, his voters pay far less in taxes relative to property value than homeowners in less expensive parts of the city or landlords of multifamily properties.<\/p>\n

Underneath the buoyant revenues, however, New York City\u2019s fiscal situation is ever more precarious. While major catastrophes like 9\/11 or the 2008 financial crisis tested mayors\u2019 fiscal capabilities, even a slight revenue decline, such as from a mild recession or sustained stock-market correction, would be enough to force Mamdani to make choices that he\u2019s been able to evade so far. If Mamdani treated an expected budget gap as a crisis while revenues were still growing, what will he do when tax collections start coming up short?<\/p>\n

Mamdani\u2019s fiscal straitjacket and reluctance to pursue genuine reform create political openings for Hochul and Menin. The governor, likely headed for an easy reelection win in November, holds considerable leverage over him. She must approve the tax hikes central to his affordability agenda, and she controls state funding that Mamdani will almost certainly seek, no matter how city tax revenues perform.<\/p>\n

The mayor has already shown deference to Hochul. He has held back on criticizing her, unlike his Democratic Socialists of America allies who have branded<\/a> her a shill for billionaires. In late May, DSA lawmakers voted no<\/a> on the state budget\u2019s revenue package because it didn\u2019t include taxes on high earners and corporations. Senator Jabari Brisport, a close Mamdani ally<\/a>, said, \u201cIf Governor Hochul and her billionaire funders think they have done enough to quell this brewing storm, they\u2019re wrong; we\u2019re just getting started.\u201d Yet in March, Mamdani stayed away<\/a> from Senator Bernie Sanders\u2019s \u201cTax the Rich\u201d rally to avoid intensifying pressure on Hochul.<\/p>\n

Hochul has her own political challenges. She finds herself stuck between a far-left legislature, a socialist in city hall, and a structurally imbalanced state budget. Should President Donald Trump cut off funding for the city and state, she would be hard-pressed to make up the difference.<\/p>\n

Unlike Mamdani, however, the governor recognizes that a durable tax base for the city and state depends on robust private-sector growth and high-earning individuals and corporations. In a March forum, she asked<\/a> high net-worth individuals to \u201cgo down to Palm Beach and see who you bring back home because our tax base has become eroded.\u201d In May, she stood up to the Long Island Rail Road unions\u2019 strike, revealing a willingness to buck organized labor\u2019s most unreasonable demands. Facing no electoral pressure for the remainder of Mamdani\u2019s term, Hochul will have a chance to be New York\u2019s great moderating force. While she has so far allowed state spending to expand in tandem<\/a> with revenue growth, controlling costs to contain the state\u2019s structural budget deficit will give her the most flexibility over the mayor\u2014and thus over the city and state\u2019s future.<\/p>\n

If Hochul can discipline Mamdani from Albany, Menin can do so from inside city government. The council\u2019s budget counterproposal to Mamdani, while imperfect, implicitly rejected the mayor\u2019s tax-the-rich maximalism while acknowledging the political reality that large service cuts or headcount reductions were unlikely. For the first time in the city\u2019s modern history, the council\u2019s proposal was more fiscally responsible <\/a>than the mayor\u2019s. It sought to close the budget gap through narrower, targeted relief, avoiding tax hikes and preserving a consistent business environment.<\/p>\n

Menin should signal to the city\u2019s business leaders that the mayor won\u2019t be allowed to achieve the worst of his antigrowth policies. She will also need to resist the council\u2019s usual game of spending more than the mayor and passing expensive legislation without having the means to pay for it, particularly by arresting the expansion of the City Fighting Homelessness and Eviction Prevention Supplement housing voucher. CityFHEPS has ballooned from $25 million in fiscal 2019 to nearly $2 billion<\/a> in Mamdani\u2019s executive budget, thanks to the council\u2019s legislation<\/a> expanding voucher eligibility.<\/p>\n

Going further, Menin should turn the tables on Mamdani by proposing a comprehensive property-tax reform that more nearly equalizes tax burdens across residential property types. By accelerating home assessments toward market values while reducing the tax load on large rental buildings\u2014particularly rent-stabilized properties\u2014she would force more of Mamdani\u2019s coalition to bear the costs of his agenda while providing much-needed relief to distressed rental owners. Better still, such a reform would encourage housing production by reducing the need for tax abatements, which are often necessary to make rental projects financially viable under the city\u2019s current tax structure. Importantly, Menin could propose a revenue-neutral overhaul, whereas Mamdani would likely be tempted to use reform as a vehicle for higher taxes.<\/p>\n

Menin\u2019s proposal would require Mamdani to choose whether he truly wants to overhaul a system that he claims needs one. If he opposes reform, he\u2019ll expose himself as unwilling to ask his coalition to help pay their fair share. Either way, Menin can shift the tax debate onto stronger ground.<\/p>\n

Mayor Mamdani\u2019s first budget reveals an administration more intent on avoiding trade-offs than confronting hard challenges. Breaking the city\u2019s resource curse will require city and state leaders to stop treating budget gaps as reasons to take more from the taxpayers and firms that keep New York afloat\u2014and start forcing city hall to spend within its means.\u00a0\u00a0<\/p>\n

John Ketcham<\/a> is director of cities at Manhattan Institute and a contributing editor of City Journal.<\/p>\n","protected":false},"excerpt":{"rendered":"On January 28, 2026, less than a month into his administration, Mayor Zohran Mamdani stood in City Hall\u2019s…\n","protected":false},"author":2,"featured_media":325461,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[9,11,10],"class_list":["post-325460","post","type-post","status-publish","format-standard","has-post-thumbnail","category-new-york","tag-new-york","tag-new-york-headlines","tag-new-york-news"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/posts\/325460","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/comments?post=325460"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/posts\/325460\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/media\/325461"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/media?parent=325460"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/categories?post=325460"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/tags?post=325460"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}