At last Thursday’s mid-month budget update, New York mayor Eric Adams announced about $4 billion in cuts, prompted by $10.8 billion in migrant-related costs in this and the next fiscal year. Even with the cuts, New York City faces budget shortfalls of $7 billion in fiscal 2025 and more than $6 billion in both 2026 and 2027.
The city’s fiscal woes, which come on the heels of a decade-plus of abundance fueled by robust tax-receipt growth and federal Covid assistance, present challenges and opportunities for the Adams administration. In the short run, they herald a bumpier road to reelection, especially given Adams’s dramatic cuts to the police force. In the longer run, though, they will force Adams to rein in spending, giving him a chance to stop wasting money on the migrant crisis and to improve public-sector efficiency.
While Adams has announced budget cuts before, this time is different. Previous rounds of “Programs to Eliminate the Gap” (PEGs) were largely window-dressing. Agencies wrote off spending that wasn’t going to happen in the first place, such as by re-estimating program costs downward or eliminating vacant positions that stood virtually no prospect of getting filled. These maneuvers spared New Yorkers from meaningful reductions in city services over the last two years, but since then, costs have spiked, federal Covid subsidies dried up, and an anticipated post-pandemic economic bounce hasn’t materialized.
Tax revenues remain strong enough for now not to precipitate a major crisis, but serious multiyear challenges loom. Office vacancies continue to dog the city’s commercial real estate industry. Tourism is effectively unable to expand hotel capacity. Economic recovery has been sluggish, with many new jobs going to low-paid home-healthcare workers. Add to that a number of new collective-bargaining agreements with the city’s various public-sector unions, and Adams was billions in the hole before the first busload of migrants ever reached Midtown.
Distressingly, the cuts will come at the likely expense of safety and order. The number of NYPD officers will fall to 29,000 by the end of fiscal year 2025, about 4,500 below today’s staffing level. Candidate Adams in 2021 vigorously campaigned against defunding the police; these reductions represent an about-face that will make his reelection harder. Republicans will claim that Adams failed to keep his campaign promise, while primary challengers from the left will argue that the NYPD cuts show that police staffing isn’t truly indispensable for public safety. And as the mayor finds it more challenging to keep homicides and shootings from rising even higher above pre-2020 levels, he opens himself to the same public-safety criticisms that propelled him to Gracie Mansion in 2021.
Many key city services will fall by the wayside. Public libraries will close on Sundays. The city’s sanitation department will conduct fewer corner trash-bin pickups, which won’t make tourists more inclined to pay exorbitant hotel prices. During Thursday’s press conference, Adams lamented, “In all my time in government, this is probably one of the most painful exercises I’ve gone through.”
In truth, Adams’s distress proves the enduring power of the financial guardrails placed on New York City in the aftermath of the 1975 fiscal crisis, which required the City Council to enact a balanced budget by July 1 of each year according to generally accepted accounting principles. The resulting austerity was the strong medicine needed to cure Gotham’s fiscal malaise.
These measures effectively held mayors responsible for the fiscal consequences of their decisions. Until Mayor Bill de Blasio’s administration, the city’s seedbed of high-earning taxpayers yielded services that kept disorder at bay and facilitated the flow of visitors and locals to New York’s first-rate attractions. By the time of de Blasio’s election in 2013, city government had found steady sources of tax revenue that endured through most of his tenure, allowing the mayor to ignore his predecessors’ emphasis on economic opportunity and instead balloon the city workforce and quixotically seek to reduce income inequality. The downside of this prosperous period was that it allowed the city to paper over inefficiencies and outdated staffing models.
Now, in an age of fiscal scarcity, Adams must make difficult choices. To plug the migrant-spending hole that’s sinking the city’s fiscal boat, he should challenge the constitutionality of the right to shelter and pare back hotel-to-shelter contracts. He should also work with public-sector leaders to boost productivity, by, for example, integrating AI into workflows, enabling a smaller workforce to maintain the same service standards.
New York City has seen hard times before. The question today is whether its leaders will make the hard decisions needed to steer Gotham out.
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