Mayor Eric Adams’ $101 billion budget may be more conservative than his predecessor’s spending, but the faltering economy, as well as the stock market, threatens a bigger deficit.
To keep the city in the black – without raising taxes and fees – the mayor will need to cover expenses, especially operating expenses, while negotiating new contracts with municipal agencies.
The problem, in a nutshell: The collapse of the pension fund and the expected low tax revenue could force the city to dip into its $8 billion savings pot, and even that may not be enough, as EJ McMahon of the Empire Center explains.
Criticizing the stock market: The period from January 1 to June 30 was the worst year in more than 50 years. With pension payments down, the city must put more of its operating budget into benefits for current and future retirees – $4 billion more than planned from next year to 2026, McMahon predicts.
And it will only get worse if the market continues to sink.
A fair market lowers city taxes based on capital gains. Adams budget planners he said add 17% to estimated quarterly tax payments, but by June 15, those payments had dropped significantly. 31% since the same month last year, City Manager Brad Lander says. Lander also predicts the growth of tax receipts will slow as the economy stagnates and Wall Street’s bonuses begin to decline.
The scary fact: “Unless the stock market rebounds and the economy grows very strongly,” Adams’ $8 billion fund “could go up in smoke faster than the mayor expects,” warns McMahon. The city can be dangerously captured.
No doubt the progressives’ answer will be to demand higher taxes on wealthy New Yorkers – which will only lead to more of them fleeing to other states.
And Mr. Hizzoner has another concern: Due to the rise in inflation, municipal corporations will need to raise more money than the 0.5% increase every two years and 1% annually after that if the mayor plans to issue new labor contracts. Some city prices will also rise faster than expected.
Adams has a big challenge on his hands to spend in line with the money even if he loses political support from the job. I wish him the best – he will need it.