New York City to implement 5% cuts across the board

Responding to a migrant influx estimated to cost New York City about $12 billion over the next three fiscal years. Mayor Eric Adams directed every agency to implement a 5% cut in future spending for the next financial update.

The cuts will be accomplished through the so-called “program to eliminate the gap” (PEG) with a 5% reduction in spending being part of the November plan update for fiscal 2024 along with an additional 5% cut in January’s preliminary fiscal 2025 budget and a further 5% reduction in April’s executive budget for fiscal 2025. The city’s next fiscal year begins July 1. 

Adams said Saturday he wants to minimize disruption to city programs and services and stressed there wouldn’t be any layoffs.

“Since the large influx of asylum seekers to our city began last spring, we have warned New Yorkers that every city service could be impacted by this crisis if we did not get the support we needed,” the mayor said. “Coupling the costs of a national crisis that has fallen onto New York City with COVID funding that is running out and reduced revenue growth, our city’s financial future may be at risk if we do not act.”

Additional actions to control spending and promote budget savings will be announced in the near future, he added, noting these costs may affect every city service. 

“Our city continues to receive approximately 10,000 asylum seekers each month, and, as we laid out last month, we anticipate spending $12 billion through the end of fiscal 2025 if circumstances do not change,” he said. “While our compassion is limitless, our resources are not.”

Last week at a community Town Hall meeting, he said the migrant crisis “will destroy New York City … we have a $12 billion deficit that we’re going to have to cut — every service in this city is going to be impacted — that’s all of us. The city that we knew, we’re about to lose.”

But he said Saturday the die is not yet cast.

“If we can get the substantial support we need from our federal and state partners, we can avoid these funding reductions,” he said. “We need Washington and Albany to finally do their part by paying their fair share and coming up with a decompression strategy that reduces the pressure on New York City, so we are not forced to manage this crisis almost entirely on our own.”

The Citizens Budget Commission lauded the mayor’s actions, but noted not all of the city’s financial woes are due to migrants.

“Mayor Eric Adams is taking the right step right now, directing agencies to propose 5% budget savings — PEGs — for the November plan and to prepare for two more 5% rounds in January and April,” CBC President Andrew Rein said in a statement issued Sunday. “These are a substantial and challenging lift, but critical to closing the city’s massive budget gaps.”

The city shouldn’t have bear so much of the migrant costs alone, he said, and the federal government and state should provide more aid.

“While serving the rapid influx of migrants and asylum seekers has massively strained the city’s finances, this cost is not the sole cause of the city’s fiscal problems,” Rein said. “Less than half of the potential fiscal year 2025 $13.8 billion budget gap is attributable to the $6.1 billion the city estimates services to migrants will cost next year.”

The other half of the looming gap, he said, was caused because the savings from the four previous PEGs were wiped out — by an almost three-to-one margin — by spending on new and expanded programs, collective bargaining, pensions and the failure to address the federal and city fiscal cliffs.

“Restructuring operations to significantly reduce costs would be critical now even without the migrant crisis,” Rein said.

The city is one of the biggest issuers of municipal bonds in the nation. Its general obligation bonds are rated Aa1 by Moody’s Investors Service, AA by S&P Global Ratings and Fitch Ratings and AA-plus by Kroll Bond Rating Agency.

In the second quarter of fiscal 2023, the city had about $39.3 billion of GO bonds outstanding. Separately, the city’s Transitional Finance Authority has about $45.1 billion of debt outstanding as of the second quarter of fiscal 2023. while the Municipal Water Finance Authority has around $32.3 billion of outstanding debt.