On March 5, 2018 the New York City Council began its review of the Mayor’s proposed budget for Fiscal Year 2019 with the Committee on Finance’s hearing on the Preliminary Budget for Fiscal 2019.
This report focuses on the overall budget, with an emphasis on expense spending, as well as an analysis of the Preliminary Mayor’s Management Report.
The first testimony offered to the Council was from the director of the Office of Management and Budget (OMB). While the Financial Plan for Fiscal 2018-2022 and Preliminary Budget are available and present the Administration’s proposals for new spending and estimates of expected revenues, the hearing gave the Council its first opportunity publicly to scrutinize the budget plan.
Preliminary Financial Plan Overview
The Fiscal 2019 Preliminary Budget is $1.23 billion or just 1.4 percent, greater than the budget for the current year.
Comparing the City-funded portions of the Preliminary Budget and the Fiscal 2018 Adopted Budget shows a larger $2.7 billion, or 4.3 percent, increase. The budgetary growth proposed for Fiscal 2019 is modest in comparison to the spending increases recorded during the prior four years.
The City’s budget has grown each year during the de Blasio administration, increasing by 20 percent in Fiscal 2019 when compared to Fiscal 2015. The Preliminary Financial Plan projects that the City’s budget will hit $95.2 billion by Fiscal 2022; $25.1 billion, representing an increase of 26 percent greater than Fiscal 2015.
Long-Term Budget Trends
Although the City’s overall budget has increased, the mix of City, State and federal funds that support City operations has changed. The share of funding coming from the State and federal governments has not increased at the same rate as City funds.
In Fiscal 1991, the City received more than $3.1 billion in federal categorical grants (11 percent) and $5.5 billion (20 percent) in State categorical grants.
By Fiscal 2017, federal categorical grants totaled $7.7 billion (9 percent of the budget) and State categorical grants totaled almost $14 billion (17 percent). The portion of the budget funded directly by the City has increased much more, from over $19 billion (69 percent) in Fiscal 1991 to over $62 billion (74 percent of the total) in Fiscal 2017.
Budget Funding Sources by Fiscal Year
Agency Spending
As the mix of funding sources have changed over time, so has the allocation of budget resources for City programs.
Despite the focus on education by the current administration on initiatives, like universal pre-Kindergarten, community schools, and the “Equity and Excellence” initiatives, the proportion of the City’s budget dedicated to education spending is lower than that in previous administrations.
The share of the City’s budget for Health and Social Service programs has dropped to just over one-quarter of the budget. Federal policy changes and economic improvements both contributed to the decline.
The level of spending on Public Safety shows more consistency overtime; increases across the Dinkins and Giuliani administrations reflect the Safe Streets Safe City initiative; the drop during the last four years is explained by a changed mix of priorities, not by a funding reduction.
One of the most significant drivers of the changed mix of City spending is the cost of the City’s mandated pension systems. This is largely due to considerable financial losses during the recessions of 2001 and 2008-2009, which necessitated increased employer contributions.
Total Agency Spending by Mayoral Administration
Financial Plan Overview
The Financial Plan Summary table below shows anticipated revenues and expenditures for all years of the Plan as well as the average annual percentage changes in each category of revenue and expenditure.
| Fiscal 2019 Preliminary Financial Plan Summary | Fiscal 2019 Preliminary Financial Plan Summary | Fiscal 2019 Preliminary Financial Plan Summary | Fiscal 2019 Preliminary Financial Plan Summary | Fiscal 2019 Preliminary Financial Plan Summary | Fiscal 2019 Preliminary Financial Plan Summary | Fiscal 2019 Preliminary Financial Plan Summary |
| Dollars in Millions | FY 2018 | FY 2019 | FY 2020 | FY 2021 | FY 2022 | Avg. Annual Change |
| REVENUES | ||||||
| Taxes | $57,294 | $59,999 | $62,223 | $64,582 | $65,623 | 3.5% |
| Misc. Revenues | 6,995 | 6,712 | 6,932 | 6,964 | 6,793 | (0.7%) |
| Less: Intra-City and Disallowances | (2,047) | (1,772) | (1,764) | (1,769) | (1,769) | (3.6%) |
| Subtotal, City Funds | $62,242 | $64,939 | $67,391 | $69,777 | $70,647 | 3.2% |
| State Aid | 14,776 | 14,968 | 15,463 | 15,838 | 16,251 | 2.4% |
| Federal Aid | 8,650 | 7,219 | 6,973 | 6,955 | 6,939 | (5.4%) |
| Other Categorical Grants | 1,098 | 870 | 860 | 855 | 855 | (6.1%) |
| Capital Funds (IFA) | 674 | 670 | 606 | 605 | 605 | (2.7%) |
| TOTAL REVENUES | $87,440 | $88,666 | $91,293 | $94,030 | $95,297 | 2.2% |
| SPENDING | ||||||
| Personal Services | 46,835 | 49,051 | 50,714 | 52,033 | 52,558 | 2.9% |
| Other Than Personal Services (OTPS) | 37,621 | 35,617 | 35,599 | 35,842 | 36,173 | (1.0%) |
| Debt Service | 6,412 | 7,089 | 7,664 | 8,127 | 8,815 | 8.3% |
| General Reserve | 300 | 1,000 | 1,000 | 1,000 | 1,000 | 35.1% |
| Capital Stabilization Reserve | - | 250 | 250 | 250 | 250 | |
| Less: Intra-City | (2,132) | (1,757) | (1,749) | (1,754) | (1,754) | (4.8%) |
| Spending Before Adjustments | $89,036 | $91,250 | $93,478 | $95,498 | $97,042 | 2.2% |
| Surplus Roll Adjustment (Net) | (1,596) | (2,584) | ||||
| TOTAL EXPENDITURES | $87,440 | $88,666 | $93,478 | $95,498 | $97,042 | 2.6% |
| Gap to be Closed | - | - | ($2,185) | ($1,468) | ($1,745) |
Source: OMB February 2018 Financial Plan for Fiscal Years 2018-2022
Besides bringing down reserves, the budget is balanced in large part through the Citywide Savings Program and re-estimations of expenses and revenues. The table above, “Closing the Gap”, shows the breakdown among these items.
The property tax alone is estimated to generate $268 million more in Fiscal 2018, compared to the November Plan, and revenues from audits are now expected to be $449 million greater than in the November Plan.
The Citywide Savings Plan includes an array of initiatives across city agencies that both decrease expenses and increase revenue. These initiatives range from hiring delays and efficiencies, to new programs such as the “Property Image Capture” program by the Department of Finance, which is estimated to save over $53 million a year each year after Fiscal 2018.
| Closing the Gap, City Funds | ||
| Dollars in Millions | FY 2018 | FY 2019 |
| Gap as of November 2017 Financial Plan | $0 | ($3,176) |
| REVENUE BUDGET CHANGES | ||
| Tax Revenues, net of audits | $252 | $105 |
| Audits | $449 | $335 |
| Other Revenues | $248 | $28 |
| SUBTOTAL | $949 | $468 |
| EXPENSE BUDGET CHANGES | ||
| Agency Expense Changes | $384 | $366 |
| Pensions | $3 | $54 |
| Labor Reserves | ($40) | ($75) |
| Citywide Savings Program | ($432) | ($469) |
| Takedown of General Reserve | ($900) | $0 |
| Takedown of Capital Stabilization Reserve | ($250) | $0 |
| Re-estimate of Prior Years' Expenses & receivables | ($400) | $0 |
| SUBTOTAL | ($1,635) | ($124) |
| TOTAL: Gap Before Prepayments | $2,584 | ($2,584) |
| FY 2018 Prepayment of FY2019 Expenses | ($2,584) | $2,584 |
| NEW GAP in Preliminary Financial Plan | $0 | $0 |
Revenue Budget
Revenue in Fiscal 2019 will total roughly $88.67 billion, 2.2 percent higher than Fiscal 2018. Revenues come from a handful of sources, including local taxes, miscellaneous revenues, and state and federal categorical grants.
City taxes in Fiscal 2019 will total $60.0 billion, up 3.5 percent from Fiscal 2018. Property tax is the largest share, approximately 46 percent, and the personal income tax is the second largest share, at 20 percent.
Expense Budget
The City’s Fiscal 2019 Preliminary Budget totals $88.67 billion, an increase of $3.4 billion when compared to the Fiscal 2018 Adopted Budget and $1.2 billion when compared to the Fiscal 2018 Budget as of the Preliminary Plan.
The planned spending growth is supported mostly by a City funds increase of $2.6 billion from the current Fiscal 2018 Budget. The City funds increase totals $3.4 billion from the Fiscal 2018 Adopted Budget to the Fiscal 2019 Preliminary Budget.
Personal Spending
The Fiscal 2019 Preliminary Budget for PS and OTPS totals $85.9 billion, of which approximately 58 percent is for PS and 42 percent is for OTPS. As indicated by the graph, PS spending has grown as a share of the City’s budget from approximately 56 percent in Fiscal 2016 to 58 percent in the Preliminary Budget for Fiscal 2019.
Spending growth in Fiscal 2019 is primarily driven by PS increases for salaries, wages and fringe benefits totaling approximately $2.5 billion.
Citywide Budgeted Headcount
The City’s Fiscal 2019 Personal Services (PS) Budget of $46.4 billion for Fiscal 2019 supports 303,406 positions full-time budgeted positions and 26,818 Full-Time Equivalent Personnel (FTE).
Of these totals, 83.6 percent of full time positions and 92.3 percent of Full-Time Equivalent Personnel are City funded.
Education and public safety workers make up 73 percent of the City’s workforce.
Major Employee Groups
Education
77,446 teachers
Public Safety
35,941 police officers
10,946 firefighters
9,967 correction officers
Public Works
7,634 sanitation workers
Human Services
14,714 workers
Salaries, Wages, and Fringe Benefits
While the Financial Plan includes a modest increase in budgeted headcount for Fiscal 2019, the City anticipates spending over $27 billion on salaries and wages in Fiscal 2019, an increase of 4.8 percent from Fiscal 2018.
Spending on salaries and wages will increase by an average of 1.3 percent annually through Fiscal 2022. These projections include wage adjustments from previous rounds of collective bargaining that have been implemented, as well as 1.0 percent annual wage increases for employees in the years beyond the current rounds of collective bargaining.
| Fringe Benefits in the Preliminary Plan | |||
| Dollars in Millions | FY 2018 | FY 2019 | % Change |
| Health Insurance | $5,900 | $6,830 | 16% |
| Social Security | 1,949 | 2,050 | 5% |
| Supplemental Welfare Benefits | 1,108 | 1,163 | 5% |
| Worker's Compensation | 317 | 343 | 8% |
| Annuity Contributions | 119 | 119 | 0% |
| Allowance for Uniforms | 73 | 72 | (2%) |
| Worker's Compensation - Uniformed | 37 | 41 | 12% |
| Unemployment Insurance | 36 | 36 | 2% |
| Other Fringe Benefits | 22 | 12 | (45%) |
| Faculty Welfare Benefits | 12 | 12 | 0% |
| Disability Insurance | 1 | 1 | 0% |
Pensions
Pension expenses in the Plan reflect the impact of Fiscal 2017 investment returns of 12.95 percent (net of investment fees) – higher than the assumed actuarial rate of seven percent.
This resulted in reductions in the City’s required contribution of $140 million, $280 million, $420 million, and $560 million in Fiscal 2019 through 2022, respectively.
Other than Personal Services (OTPS) Spending
The Fiscal 2019 Preliminary OTPS Budget totals $35.6 billion. Like overall PS spending for Fiscal 2019, the DOE has the largest proportion of the City’s total OTPS budget, totaling $9.7 billion, or 27 percent.
After DOE, the Department of Social Services (DSS) has the second largest OTPS budget, totaling $9 billion, or 25 percent.
The largest overall component of OTPS spending is contractual services, and the DOE and the human services agencies – the Department of Social Services, The Department of Homeless Services, and the Administration for Children’s Services – drive this spending.
Contract Budget
The Preliminary Fiscal 2019 Contract Budget is approximately $15.6 billion, representing 17 percent of the City’s total budget.
Over the last ten years, the contract budget has increased from less than 15 percent, to more than 18 percent, of the total budget.
Preliminary Financial Plan Actions
The City’s budget, reflecting shifting priorities and public service needs, has changed significantly during the past four years.
Over $33.3 billion in new need spending has been added to the City’s budget since the February 2014 Financial Plan, which introduced the Preliminary Fiscal 2015 Budget.
About 30 percent of this new spending was introduced in the Fiscal 2017 Financial Plans, (February 2016 through November 2016), which span Fiscal 2017 to Fiscal 2020, to support the DOE, DSS, DHS, and DOC. The cumulative value of all new needs and other adjustments (which includes savings) for each fiscal year introduced since the Preliminary Fiscal 2015 Budget to this Preliminary Plan are displayed in the next graph. This shows the relatively modest size of the changes introduced in the Fiscal 2019 Preliminary Budget.
Significant New Needs
Homeless Services
This accounts for 44 percent of all new needs for the upcoming fiscal year.
New needs spending in Fiscal 2019 for DHS is disproportional to the agency’s portion of the City’s overall budget. DHS’ Fiscal 2019 Preliminary Budget totals $1.82 billion and is only two percent of the total Fiscal 2019 Preliminary Budget of $88.66 billion.
Education
Spending for education continues to grow in Fiscal 2019 and the outyears. Of the $1.87 billion in new needs across the Preliminary Financial Plan, 13 percent or $242 million supports education related programming. Although this amount is small compared to DOE’s overall budget of $24 billion, it is a large portion of the total new needs introduced in the Financial Plan.
Produced by the Council Finance Division and Council Labs