5 things to watch in the upcoming NYC budget

The City Council is in tough negotiations over this year's budget.

New York City’s budget is due this week, capping off weeks of public hearings and negotiations that will determine how taxpayer money is spent and what programs and services will be prioritized.

With the starting point of $107 billion, the city’s spending plan for the upcoming fiscal year — which begins on July 1 — is poised to be its biggest yet. But unlike last year, budget talks between Mayor Eric Adams and the City Council have been unusually heated, centered around the mayor’s decision to make multiple rounds of cuts to city agencies.

Adams is urging fiscal responsibility amid a migrant crisis and signs of a slowing recovery from the pandemic. Meanwhile, councilmembers point to better-than-expected revenues and argue that the mayor’s cuts need to be strategic or else they will harm the city's most vulnerable residents at a time when costs and rents have soared.

With that struggle in mind, here are five key elements to keep an eye on with this year’s budget.

The budget might come late – which could affect the city’s bond rating.

A late budget won’t spell disaster for the city; it will simply mean that last year’s budget will continue to take effect until an accord is reached.

But it could affect the city’s bond rating – an indicator of its creditworthiness and how much it costs the city to borrow to finance construction projects. Earlier this year, Fitch Ratings upgraded the city’s bond rating by one level to AA, which indicates a stable outlook.

“Lateness would be a risk,” said Louisa Chafee, the director of the city’s Independent Budget Office, which analyzes the city’s spending.

So far, both the mayor and City Council Speaker Adrienne Adams say they want to avoid a late budget.

“We don't want this to be delayed,” the mayor told reporters on Monday, adding that he is being briefed on the negotiations several times a day.

Speaker Adams said the goal is to reach a budget deal “sooner than later.”

“If I had a crystal ball, I certainly would use it – particularly during these negotiations,” she told reporters on Thursday. “These negotiations are tough, they’re very different than last year.”

The fight over affordable housing funding may be just beginning.

The mayor’s decision last week to veto a package of housing bills signaled the deep policy divisions between his administration and the left-leaning Council over how best to tackle the city’s affordable housing crisis.

The legislation sought to expand eligibility requirements for rental assistance. But the mayor, who disagreed with the Council’s cost estimates, said the city could not afford to finance those measures. Councilmembers argued that failure to help the poorest residents find permanent housing would lead to higher city shelter costs down the road.

The fight will not likely be decided in the upcoming budget, but may ultimately wind up in court. In the meantime, the two parties are negotiating over other housing-related programs aimed at helping low-income renters, including one that provides free legal services to those facing eviction.

Libraries and programs for seniors are two of the spending priorities on the chopping block.

Few service cuts are as unpopular as those to city libraries and senior citizens. However, both are said to be in danger of losing funding.

In April, the mayor backed down on some of the planned cuts to libraries, but a $36 million hole remains. Library leaders, who oversee more than 200 branches, have warned that the failure to fill the gap would mean the end of Sunday services for some libraries and reduction in Saturday hours. The cuts could also imperil free programming for children and English-language learners, they say.

Adams’ administration is also proposing cuts that will affect services provided to senior New Yorkers, like the city’s home-delivered meal program. The move comes amid reports that the population of New Yorkers over 65 is expected to drastically increase in the near future. More of these seniors will be living in poverty and will be foreign-born or people of color, which will pose new challenges for the city.

The city's meal program could also be cut by $5 million, followed by another $7 million reduction during that same time period, and a reduction of $5.6 million each of the next three years, according to Councilmember Crystal Hudson, who chairs the committee on aging.

“They’ve made the neighborhoods that everyone wants to live in hip and cool and attractive,” Hudson said at a March budget hearing. “And in turn, what we continue to say to them is, ‘We don’t value you, we don’t care about you. Good luck!’”

No one can agree on what the asylum-seeker crisis will cost – or how much money the city actually has.

Both the Adams administration and Council have delivered conflicting narratives about the ongoing migrant crisis's financial toll.

Adams’ top budget officials maintain that the influx of asylum-seekers will cost the city over $4 billion in the next two years – and potentially lead to even more cuts in the near future. The Council has cast doubt on those projections, while also pointing to an extra $1.8 billion in tax revenue coming in over the next two years that could help avoid drastic cuts.

So far, the city has received roughly $135 million in federal funding and $1 billion in state aid.

Both parties agree that Washington needs to provide more aid in the future. Jacques Jiha, the mayor's budget director, said at a May budget hearing that the toll could last for years if the city continues without substantial federal assistance from the White House.

The forecast budget gaps in upcoming years are large, reflecting an uncertain economic future and the drying up of federal pandemic aid.

The city’s long-term outlook continues to worry many fiscal experts. While the city continues to add jobs, office buildings remain half-empty as employers continue to embrace remote work, leaving the future of commercial districts in doubt.

“This is a radically different economy,” said Andrew Rein, the president of the Citizens Budget Commission, a fiscal watchdog group. “New York has done well over time but that doesn’t mean that there won’t be a period of dislocation.”

With growing costs and slowing revenue growth, the Citizens Budget Commission has projected that the city may face deficits in 2025 of more than $7.5 billion, higher than the city’s estimate of $4 billion.

In addition to the economy, the city’s budget gaps are driven by the anticipated loss of billions in federal pandemic aid in the coming two years. At stake are popular programs like pre-K and summer school.

“How do you fund those going forward? Or do you decide you can't afford to?” said George Sweeting, a fiscal policy expert at the New School’s Center for New York City Affairs.

As tense as this year’s budget talks have been, those harder choices lie ahead for fiscal year 2025.

”Presumably, for the people in the negotiations, that's in the back of their minds,” Sweeting said.