Pandemic Fiscal Award in New York: 5 takeaways

New York City has lost more than 24,000 people to the coronavirus – a devastating number of casualties that could rise significantly as the second wave hits. But the city also bore economic costs that are constantly growing and threatening its future.

Mayor Bill de Blasio painted a grim picture of municipal finances on Monday and blamed the epidemic for a nearly $ 4 billion budget gap for the next fiscal year.

At the beginning of the year, the problem was a drastic drop in tax revenues as most economic activity came to a halt. Revenues continued to decline, but the city will face billions of dollars in additional costs due to virus costs.

But Blasio, a Democrat in his second and final term, says the city needs another big federal stimulus package to prevent mass layoffs and cuts in urban services.

“If there is no stimulus, we have to make extremely difficult decisions,” Mr de Blasio said.

The city spent $ 5.2 billion on the pandemic, including paying for fans, emergency food aid, reopening schools and virus tests.

Expenditures include $ 742 million for personal protective equipment; $ 890 million in hotels for the homeless, medical staff, and those suffering from the virus; $ 500 million for medical staff; $ 149 million for fans and $ 100 million for test centers, according to a recent report from the city inspector.

About $ 2.8 billion in epidemic costs were covered by the federal government, but the city is responsible for much of the balance.

The city has increased its spending by about $ 767 million in the $ 92 billion budget released by the mayor on Monday. The costs include:

  • $ 113 million for a program to provide food for struggling New Yorkers, which has distributed more than 140 million meals since March

  • $ 160 million to reopen schools with additional teachers and staff and to provide cleaners and air purifiers

The city had already drastically reduced garbage collection and traffic compliance earlier this year, which many New Yorkers say is detrimental to their quality of life.

But Mr Blasio said the city will face a $ 3.8 billion budget gap next year, which could mean more painful service cuts.

According to the mayor, the deficit could be exacerbated if a state facing its own budget crisis makes a reduction in funding for local governments.

But Mr Blasio did not say exactly which services could be reduced, but it is likely that all departments will have to face from hygiene considerations to parks. He said he hopes to avoid this scenario.

“We don’t want to cut services exactly when we’re trying to come back and when people need it so badly,” the mayor said.

Mr De Blasio announced employment contracts that allowed him to avoid laying off 22,000 workers, but budget experts say the move is only a temporary solution.

It announced $ 722 million in labor savings, which is actually a deferral of money to be paid to urban workers because of things like retroactive pay and retirement benefits.

Agreements with the city’s largest unions, including the Unified Bathroom Association and the United Teachers Association, carried forward contractual payments to the next fiscal year.

The strategy carries risks: Without sustained labor savings, the city will be in a vulnerable position if the fiscal outlook deteriorates or if the federal stimulus is less than expected.

“These are not labor savings, they are pay deferrals or kicks on the road,” said Maria Doulis, vice president of strategy, operations and communications for the Citizens ’Budget Committee. “In every other financial crisis, the workforce was able to stand at the table to find savings. This is an important missing piece of the puzzle.

When the pandemic broke out in March, New York had a record low unemployment rate and a record number of jobs. Then the city soon lost 900,000 jobs.

Things have slowly improved since then. The unemployment rate of 20 percent in June fell to just over 13 percent last month.

Tax revenues declined, but nowhere near the expected pace: The city is projected to receive $ 748 million more in personal income and business tax revenues, and $ 610 million bond refinancing savings, according to the city inspector and the Office of Management and Budget.

The city must continue to find further savings, said Andrew Rein, chairman of the Citizens ’Budget Committee, suggesting that the mayor should work to eliminate inefficiencies, negotiate permanent labor savings and insist on a stricter freeze on recruitment.

James Parrott, an economist at New School’s New York Center for Affairs, said revenue forecasts were not as severe as predicted because Wall Street and higher-paying jobs remained relatively consistent throughout the pandemic. He said it made sense for the city to try to avoid layoffs: Employees, such as building inspectors, will be critical to the economic recovery.

“A lot of people today have a negative attitude towards Bill de Blasio, but he hasn’t done such a bad job in managing the budget,” Parrott said, then added, “But you’re in luck because the revenue is constantly coming in.”

The mayor has repeatedly said that the city’s future depends on obtaining federal incentives and expects elected president Joseph R. Biden Jr. to improve the city’s prospects.

Without federal encouragement, Mr de Blasio said he might need to reconsider the redundancies. Other concerns arose: Business leaders wrote a letter to Mr de Blasio earlier this year complaining about the increase in shootings and street homelessness. They fear that these problems could drive more residents out of the city and damage its tax base.

While Congress stalled to deliver a second stimulus package, Mr. Biden’s team sought a quick agreement.

But Mr Blasio said the city’s economic recovery is in jeopardy, as is the case with infections that are serious enough to close public educational institutions.

“As we face the threat of a second wave of Covid, again, there can be no more important time for a new federal stimulus,” Mr de Blasio said on Monday. – And that will be the difference.