Metropolis Comptroller Mark Levine warned Wednesday that the town faces no less than $7.3 billion in funds strain over this fiscal 12 months and the subsequent, because the Metropolis Council opened hearings on Mayor Zohran Mamdani’s preliminary funds.
In testimony earlier than the Council’s Finance Committee, Levine praised Mamdani for presenting a funds that’s extra clear than these of latest years. Nonetheless, he mentioned that clearer accounting additionally uncovered a deeper drawback: “New York City is quite simply spending more than it takes in.”
Wednesday’s listening to got here as Moody’s Scores revised New York Metropolis’s outlook to unfavourable from secure whereas affirming its Aa2 issuer score, citing “sizable and persistent projected budget gaps” that it mentioned level to an underlying structural imbalance and decreased monetary flexibility even beneath still-favorable financial circumstances.
The score company mentioned the town’s core credit score strengths stay intact, together with its huge and various financial base, sturdy revenue-generating capability and established monetary administration practices. Nevertheless it warned that the emergence of enormous, recurring gaps at a time of relative financial power underscores the seriousness of the town’s funds challenges and will depart New York extra uncovered if progress slows or an outright downturn takes maintain.
Levine’s funds warnings on Wednesday set the tone for the primary main listening to on Mamdani’s fiscal 2027 preliminary funds. His $7.3 billion deficit estimate was extra dire than the administration’s personal latest public projection of a $5.4 billion hole over this fiscal 12 months and the subsequent.
Each Levine’s workplace and the Unbiased Finances Workplace mentioned the administration had moved away from years of persistent underbudgeting by extra totally recognizing the true price of metropolis packages. However each additionally concluded that recurring spending is now rising sooner than recurring income.
Levine’s workplace mentioned the administration closed near-term funds gaps with a mixture of upper tax income assumptions, a proposed property tax improve, assumed state actions, reserve drawdowns and financial savings targets. The comptroller’s report warned that these steps improve fiscal danger by lowering the town’s flexibility if revenues weaken or the financial system slows.
Menin on funds: Property tax improve ‘should not be on table’
Speaker Julie Menin, in her opening remarks, known as the preliminary funds “one step toward a more honest budgeting practice” however mentioned the administration’s plan to steadiness it raised severe issues.
“A significant property tax increase should not be on the table,” Menin mentioned. “That is non-negotiable.”
A serious level of rivalry is the mayor’s proposed 9.5% property tax improve, from 12.283% to 13.450%. Levine argued that such a rise would worsen an already inequitable property tax system and convey the town near its constitutional levy restrict.
A report from the comptroller’s workplace additionally highlighted the decline within the metropolis’s working surplus used for prepayments. It mentioned prepayments would fall from $3.79 billion in fiscal 2025 to $238 million in fiscal 2026, a 94% drop. As soon as the town’s deliberate $980 million wet day fund drawdown is included, the report mentioned fiscal 2026 working bills would exceed revenues by $4.53 billion.
The Unbiased Finances Workplace struck an identical word in testimony delivered by Director Louisa Chafee, joined by Senior Analysis and Technique Officers Sarah Parker and Sarita Subramanian.
Chafee mentioned the administration’s first funds was “noteworthy because it reverses years of underbudgeting practices by prior administrations,” and mentioned IBO “applauds the Administration’s move to acknowledge the true cost of programs and services.”
However Chafee additionally mentioned the funds is “grounded in two optimistic revenue assumptions” — stronger progress in private and enterprise revenue taxes and new property tax income that might require Council approval. IBO projected a $535 million hole within the present 12 months and practically $6 billion in 2027, with revenues rising about 2% yearly via 2030 and expenditures rising about 4.5%.
IBO additionally mentioned the administration is utilizing $980 million from the wet day fund to steadiness fiscal 2026 and plans to exchange the cash in 2028. Chafee mentioned that “points up the need for clear rules of use of this fund.”
Rising spending pressures
Unbiased Finances Workplace Director Louisa Chafee, heart, testifies earlier than the Metropolis Council’s Finance Committee throughout a preliminary funds listening to on Wednesday, March 11, 2026, alongside Senior Analysis and Technique Officers Sarah Parker and Sarita Subramanian.Picture by Lloyd Mitchell
Each fiscal watchdogs pointed to the identical fast-growing spending pressures.
Levine mentioned CityFHEPS rental help is projected by his workplace to achieve $2.6 billion subsequent 12 months, whereas particular schooling due course of instances are anticipated to achieve $1.5 billion. He additionally mentioned the town’s schooling funds now totals $36.9 billion, up 31.5% since 2020 whilst enrollment has fallen by about 100,000 college students.
IBO likewise cited CityFHEPS and due course of particular schooling prices as main drivers of future spending. It mentioned CityFHEPS spending has grown from beneath $300 million in 2021 to nearly $1.3 billion in 2025 and is projected to rise to nearly $3.5 billion by 2030. The workplace mentioned due course of case spending rose from $807 million in 2021 to $1.2 billion in 2025, with $1.6 billion budgeted in 2027 and past.
IBO additionally highlighted state mandates as a rising burden on the town. It mentioned the town may have nearly 7,000 extra academics to adjust to the state’s class-size mandate and that the administration added $3.6 billion from 2027 via 2030 for that function, with solely $228 million anticipated from state support.
The funds struggle can also be unfolding as Mamdani seeks extra assist from Albany.
On Tuesday, the state Meeting and Senate backed components of his push for larger taxes on firms and prime earners of their one-house funds plans, although Gov. Kathy Hochul has continued to oppose broad new tax will increase.
On the shut of IBO’s testimony, Chafee mentioned the workplace nonetheless had unresolved issues. “IBO continues to have questions,” she mentioned, earlier than itemizing issues concerning the metropolis’s financial assumptions, company tax outlook, federal funding dangers, baby care plans, vacancies, labor prices and medical insurance financial savings.
A day earlier, Menin and Lee launched the Council’s March 2026 financial and tax income forecast, saying the town might determine practically $1.7 billion in potential financial savings and extra income in fiscal 2026 with out drawing down the wet day fund. Their evaluation pointed to almost $1.4 billion from debt service changes, reductions in long-unfilled vacancies and extra curiosity earnings, and estimated $386 million extra in tax income than the mayor’s Workplace of Administration and Finances projected for fiscal 2026 and 2027, excluding any improve within the total property tax price.
Moody’s downgrade ‘a sobering wake-up call’: Levine
Speaker Julie Menin and Finance Committee Chair Linda Lee lead the Metropolis Council’s preliminary funds hearingPhoto by Lloyd Mitchell
In the meantime, Levine seized on Moody’s bleaker outlook for the town’s funds in a press release later Wednesday, calling it “a sobering wake-up call” and noting that it was the primary unfavourable outlook the town has obtained for the reason that COVID disaster. “The fact that this is happening at a time of relative health in our local economy is all the more remarkable,” he mentioned.
Levine mentioned the outlook change strengthened his central warning from the listening to: that “New York City is currently spending more than it is bringing in,” and that balancing the preliminary funds by drawing down reserves solely heightens the necessity for a extra sustainable long-term plan.
He mentioned the town now must give attention to practical income projections, sustainable spending progress, honest funding from Albany and rebuilding reserves forward of doable financial dangers subsequent 12 months.
