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April 9, 2020

FROM: Steven Davi

Steven N. Davi

Executive Director and General Counsel

The Parkside Group NY COVID & NYC Budget Update

Please see the below Alert from our government relations and lobbying consultant, The Parkside Group.

ALERT • New York Update

Wednesday, April 8, 2020

 

New York State

Today Governor Cuomo said that it seemed that the social distancing efforts are working but warned that a lot of risk remains and that everyone should stay vigilant. He added that the SUNY Albany President, with State DOH and Northwell Health, will be undertaking more Covid-19 testing and data research in communities of color.  In addition, he said that he will be issuing an Executive Order allowing for absentee voting for the June 2020 election. With today’s announcement that Senator Sanders will be dropping out of the race, the NYS Democratic Presidential Primary may be cancelled by the NYS Board of Elections. Also, there will be an additional $600 being sent to all those on unemployment by the State.  The Governor also announced a new outreach campaign to get people to stay home and directed that flags be flown at half-staff for coronavirus victims. 

 

New York City

Mayor de Blasio, this morning, announced greater efforts to confront the healthcare disparities that City has seen in the Covid-19 data. This will include an enhanced public awareness campaign in key zip codes, clinical phone consultations, grassroots outreach to households, and ensuring that the public and independent hospitals have the critical supplies and equipment they need throughout the crisis. In addition, Comptroller Stringer unveiled a new Covid-19 Resource Center for New Yorkers. 

 

NYC Budget Update

The de Blasio Administration has announced that the City’s Executive Budget will be released on April 23, 2020.  Prior to the State budget being adopted, the Mayor announced that he was mandating that City agencies find $1.3 billion to cut, but, he said, that amount could increase based on Covid-19 related expenditures and further evidence of revenue reductions. In addition, in March, Comptroller Stringer projected a loss of up to $6 billion in City tax revenue due to the health crisis. 

Yesterday, the Administration unveiled to the press a number of agency reductions in advance of the release of the budget. This included ending the summer youth employment program, suspending the collection of organic waste, curtailing some service in the SI Ferry, and a reduction in employee levels through vacancy elimination.  In addition, the City Council released their Charter mandated response to January’s Preliminary Budget.  Usually a statement of the various funding priorities of Council Members, the response this year was a more somber letter urging the Mayor to protect several service areas currently needed for critical Covid-19 response.

It remains to be seen if the Mayor’s Executive Budget will feature even more cuts to agencies.  It is anticipated that the City’s revenue will be down in several areas, along with more cuts and costs implemented by the recently enacted State budget.  It is also assumed that Federal Aid will backfill in some of the extra costs borne by the City in providing services related to the health crisis.

The Mayor has employed, for the first time in his tenure, a budget mechanism called the Program to Eliminate the Gap (PEG). Routinely used by his predecessors, this is a mandate for agencies to cut a certain percentage from their budgets.  In the Bloomberg era agencies responded through a mix of cuts and revenue raisers. We can assume there will not be much in the way of opportunities to raise revenue in the near term.

It is important to note, that in the context of the City’s $95 billion budget (as of January 2020), many expenditures are either mandatory or necessary.  Mandatory expenditures include Medicaid, pension costs, which are estimated to be $10 billion in Fiscal Year 2021 (and may rise as the stock market tumbles) and debt service costs ($7.5 billion next year).  Also, there are certain functions that are just necessary for the City to function, including fire, police, public health, corrections, and sanitation.  These mandated agencies will also see huge spikes in overtime and other costs related to Covid-19.

The City receives most of its operating revenue through taxes and a majority of the City’s tax sources are anticipated to be threatened. With most retail stores and other service businesses closed, sales tax ($8.4 billion) will be down dramatically. With unemployment rising, the personal income tax will be impacted ($13.7 billion).  With tourism suspended, no one is staying in hotels, so there will be no revenue from that tax for months ($638 million). The real estate market is stymied, adversely impacting the real property transfer tax ($1.3 billion) and the mortgage recording tax ($1 billion). In addition, with the way certain property taxes are assessed, it is anticipated to drop from the $26.7 billion previously expected to be collected this year.  

Another source is State aid, which has been cut by the millions over past years and this year featured NYC reductions in education and other areas. Also, the City has suspended the collection (or the issuance of violations) for many fines which was anticipated to bring in $1.2 billion*.

New York City faces a severe impact to its total tax levy due to the Covid-19 crisis.  This will result in a multitude of spending reductions and service curtailments across most areas of City government. We will continue to monitor the budget situation and give you the most up-to-date information as it becomes available.  We will also continue to work with you on your areas of interest. If you have any questions about the City budget in general, or any specific spending areas, please never hesitate to reach out.

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