New York City is on track to end its current fiscal year with a “sizable” budget surplus of more than $2 billion, countering gloomier projections from Mayor Eric Adams and City Comptroller Brad Lander, according to a new analysis by the Independent Budget Office, a nonpartisan budget watchdog group.
The IBO’s forecast, which was released on Monday, predicts there will be slower economic growth in the coming months, but not a recession, which is defined as a significant decline in economic activity.
Adams has said the city is facing an “economic tsunami” and ordered budget cuts and hiring freezes.
Following revisions last month, the city budget shows $104 billion in spending for the current fiscal year. Of that sum, $1 billion is attributed to projected costs related to the more than 31,000 asylum seekers from the Texas border that have been arriving to the city since the spring. The mayor warned at an unrelated press conference on Monday that spiraling costs from the crisis will force the city to exact cuts to unspecified city programs and services.
“I’m not going to sugarcoat it,” he told reporters on Monday. “Every service we provide is going to be impacted by the influx of migrants.”
Adams has ramped up calls for federal and state aid as the city faces a potential surge in migrants. The rate of asylum seekers arriving daily on buses had slowed after the Biden administration imposed a federal policy that blocked their arrival amid the public health emergency created by the COVID-19 pandemic. That rule is set to expire on Wednesday.
I’m not going to sugarcoat it. Every service we provide is going to be impacted by the influx of migrants.
“This is a national problem,” Adams said, citing various cities that have been providing housing and other services for migrants.
New York City is legally required to provide shelter to anyone who seeks it.
He added, “This is unfair to all of our cities to have to go through this without any help from the national government and the state government.”
Speaking to reporters on Monday, Gov. Kathy Hochul defended the state’s response, saying that she has been partnering with the city to provide resources, including the deploying of upwards of 800 members of the National Guard. She said she was working with other governors to seek federal assistance.
Referring to the upcoming expiration of the federal policy on migrants, she said, “We’re working closely with The White House to try and do something to stem that flow because that is going to be an untenable situation.”
However, the IBO estimated that the cost of the ongoing migrant crisis will be far less than the $1 billion estimate provided by Adams. Rather, the group’s analysis projects the city will spend $374 million on the migrant crisis by the end of the fiscal year, which ends on June 30. The city will spend an additional $628 million in 2024, according to the IBO.
“Our best estimate is that the city will require some more funds but not necessarily $1 billion,” said Elizabeth Brown, the IBO’s communications director.
Our best estimate is that the city will require some more funds but not necessarily $1 billion.
Even City Hall officials were not clear on the costs incurred to respond to the crisis. At a City Council hearing Monday, high-ranking officials were unable to provide a breakdown of costs linked to the crisis, specifically how much was left to operate the now-defunct “Humanitarian Emergency Relief and Recovery Center” on Randall’s Island.
The IBO’s $2 billion budget surplus forecast is driven by both its economic outlook as well as higher-than-expected city tax revenues during roughly the first two quarters of the current fiscal year beginning in July. Personal and business income tax as well as sales tax were both stronger than expected, according to the IBO.
In a report issued last week, Lander’s office projected a surplus of $256 million for the current fiscal year.
The IBO’s prediction that there will not be a recession is not shared by some experts who have been worried about increasing interest rates by the Federal Reserve. The move is intended to tame inflation but may spur employers to slow hiring and spending.
But amid signs that inflation may be cooling, the Fed’s latest rate hike was smaller than previous ones.
Nonetheless, the IBO did project that the city would see slower economic growth in the coming months.
“To be sure, IBO’s fiscal outlook is not one of rosy optimism or even one of calm seas,” the report said. “It is, however, somewhat brighter than that put forth by the Adams administration.”
The mayor’s office did not immediately respond to a request for comment on the IBO’s projections. City budget officials are expected to release an updated fiscal forecast in January.
Chau Lam contributed reporting.