Despite a stronger economic outlook for the city, concerns remain from uncertainty caused by federal policy decisions that create inflationary pressures and potential weakness in the labor market

City Hall, NY – Ahead of the New York City Council’s hearings on the Fiscal Year 2026 (FY26) Preliminary Budget, the Council released its March 2025 Economic and Tax Revenue Forecast that projects continued momentum in economic activity that has slightly improved the City’s tax revenue outlook, even as uncertainty from the federal policy landscape has created inflationary pressures. The forecast estimates $3 billion in greater tax revenues for Fiscal Years (FY) 2025 and 2026 than the Mayor’s Office of Management and Budget’s (OMB). The increase reflects a slightly higher inflation outlook and stronger than expected personal income and business tax collections.

The City’s tax revenue growth rate is projected to rise to an average of 4.5% annually from FY25 to FY28, up from 3.7% in November’s forecast but less than the annual average rate of 5.5% between 2010 and 2019. This stronger revenue outlook means the Council anticipates the budget to remain balanced, and possibly run a surplus, in Fiscal Year 2026, but risks to the budget will grow in the outer years due to the potential loss of federal funding, corrections for underbudgeting, and inflationary pressure on the City’s Expense Budget.

Please see the Council’s full report here.

“The Council’s new economic and tax revenue forecast projects continued positive growth and an estimated $3 billion more in revenue than OMB has forecasted for Fiscal Years 2025 and 2026,” said Speaker Adrienne Adams and Finance Committee Chair Justin Brannan. “While our national and local economies remain strong, inflation and reckless decisions from Washington may greatly impact our city budget and the lives of New Yorkers. We will need to focus on targeted investments in the services, priorities, and programs that meet the needs of our communities in these uncertain times. Ensuring all New Yorkers have what they need to thrive remains our top priority, and the Council will continue to focus on protecting New Yorkers from any threats that undermine our fiscal health and stability.”

The national economic outlook continues to remain strong despite slower than historic GDP growth, with raised inflationary pressures. Following three rounds of rate reductions that lowered the policy rate a full percentage point since September, the Federal Reserve paused its rate reduction cycle in January as a result of higher inflation readings. Economic growth is expected to moderate due to increased uncertainty with the federal policy landscape and the cooling impacts of lasting high interest rates on economic activity. The potential impact of tariffs increases uncertainty for consumers and businesses, creating inflationary pressures and potential weakness in the labor market.

The Council’s economic outlook for New York City largely remains the same as its November forecast, reflecting a strong city economy. There is potential volatility in income tax collections that will require budget caution, and uneven job growth continues in the social services, and home healthcare sectors that pay low average wages.

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