New Report: Fiscal Health Lessons for New York City

The city’s financial statements paint a more sobering picture than its budgets

New York, NY – Mayor Eric Adams released the largest executive budget in city history last week, coming in at $106.7 billion. While the proposed budget is technically balanced, it only offers a small snapshot of New York’s fiscal health, which ranks last out of America’s 75 largest cities. In a new Manhattan Institute report, economist Olivia Gonzalez argues that the city’s financial statements tell a more complete story, detailing the severity of New York’s fiscal situation and revealing opportunities for improvement.

Analyzing New York City’s seven most recent financial statements – or Annual Comprehensive Financial Reports – Gonzalez demonstrates that the city’s fiscal problems precede the pandemic, including chronic issues like unfunded retirement benefits and operational budget gaps. In fact, pandemic-related federal aid papered over the need for systematic changes to correct decades of poor financial management. The report concludes with recommendations for how policymakers can put the city on the right track and minimize risks of higher tax burdens and deteriorating public services. These include:

• Prioritize smart spending: Today’s economic headwinds make it the wrong time to increase spending, so NYC should focus on fulfilling promises it has already made and on identifying ways to reduce costs without cutting services.
• Pension reform: While working to improve funding for current pensions and Other Post-Employment Benefits, the city should move future public employees to more efficient options, such as defined-contribution plans.
• Tax Reform: Simplify the tax system by broadening the base, lowering rates where possible, and reforming inequitable taxes, especially property taxes.
• Bolster the rainy-day fund: Creating this fund was a step in the right direction, and ensuring it generates reliable reserves begins with strengthening deposit and withdrawal rules.
• Re-empower the Financial Control Board: The FCB’s budget oversight powers helped the city emerge from fiscal despair in the 1970’s, and can do so again by holding New York City officials accountable.

Read the full report here.