In early August, State Comptroller Thomas DiNapoli released a 43-page analysis of New York City’s economic and fiscal trends. His perceptive report should be read by every local official facing an operating budget deficit.
Here’s an overview of DiNapoli’s findings:
Two months after Gov. Cuomo ordered the shutdown of the New York City economy, 940,000 workers lost their jobs. The city’s unemployment rate, which hit an all-time low in February of 3.4%, had skyrocketed to 20.4 percent by June.
The hardest hit: bars, restaurants and hotels. That sector lost 304,000 jobs by the end of April.
Retail lost over 90,000 jobs.
Those sector losses explain why the highest unemployment is among minorities and young people living in the Bronx. Unemployment in that borough has hit 24.7 percent.
The DiNapoli report goes on to describe the shutdown’s devastating impact on the city’s fiscal condition.
In June, the city estimated that its two-year revenue loss will be at least $9.6 billion—and that’s a low-ball number.
Those estimates do not factor in money that may not arrive from Albany. If the state does not benefit from a new COVID-19 relief bill, the city could lose up to $3 billion in aid.
Urging the mayor to face fiscal realities, DiNapoli concludes his report with these words: “Given the size of the budget risks outlined in this report … the Office of the State Comptroller urges the city to prepare additional actions to balance the budget.”
What actions has Mayor de Blasio taken to balance the city’s budget? So far, it has been mostly fiscal sleight of hand.
He has raided trust fund reserves to the tune of $1.3 billion. The total drawn down could hit $4.1 billion.
The city has also reduced its reserve for collective-bargaining agreements by $1.6 billion. (This is a dubious reduction, considering de Blasio’s history of giving away the store to non-police unions.)
Since de Blasio took office, the city workforce — the largest of any municipality in the nation — has grown by 24,000 bureaucrats for a total of 325,000.
The mayor’s latest plan assumes the number of employees will drop by a paltry 3,656. Most of those, no doubt, will be police and school principals retiring because they are disgusted with the mayor’s inept crisis leadership.
Instead of cutting out the lard in the city’s bureaucracies to balance his budget de Blasio wants to raise taxes on the wealthy.
Prior to the pandemic, 1 percent of the city’s 4 million households—that’s 40,000—paid 50 percent of the city’s income tax.
However, since March, scores of residents living in the city’s wealthiest neighborhoods have fled to their weekend homes in Long Island, upstate, Connecticut and even Vermont.
Gov. Cuomo, realizing the city is losing revenue, has been urging them to come back.
But Cuomo has conceded that his pleas have been falling on deaf ears. Many have said to him that if they stay in their vacation homes, “I pay a lower income tax, because [I] don’t pay the New York City surcharge.”
The governor rightly dismissed raising taxes on the rich because he knows that even if a few thousand of the city’s wealthiest households pull up stakes, the city’s tax collections will crumble.
De Blasio rejected the governor’s position saying: “To the point about the folks out in the Hamptons, I have to be very clear about this. We do not make decisions based on the wealthy few …. That’s not how it works around here anymore.”
The delusional mayor went on to say that the wealthy can afford to pay more in taxes and that many of them would be happy to do so.
During de Blasio’s reign, expenditures have increased by over $20 billion —3 times the rate of inflation. And the mayor’s spending spree was funded by tax revenues from the top 1 percent.
De Blasio is incapable of grasping that the city is dependent on revenues from the wealthy because middle-class jobs have declined significantly in recent decades, and lower-income folks if they are lucky enough to be employed, pay little in local taxes.
De Blasio and regional officials better heed DiNapoli’s warnings and find ways to do more with less.
But if they fail to right-size government and raise taxes on the well-off, they will alienate the very people who have the financial resources to pack up and quit New York.