May 2015
The Big Picture:
Re-estimating the Mayor’s 2016 Executive Budget and
Financial Plan Through 2019
PDF version available here.
The Big Picture:
Re-estimating the Mayor’s 2016 Executive Budget and
Financial Plan Through 2019
PDF version available here.
Surplus & Gap Projections. IBO projects the city will end the current fiscal year with a surplus of just over $3 billion, nearly identical to the amount expected by the de Blasio Administration. We forecast a comparatively modest surplus of $685 million in 2016 and then relatively small annual shortfalls of about $450 million in fiscal years 2017 through 2019. Our projected gap of $448 million in fiscal year 2017 is less than a third of the shortfall projected by the Mayor and is less than 1 percent of our estimate of city-generated revenues—a considerably smaller share compared with shortfalls under some recent financial plan projections.
Our surplus and gap estimates are derived from IBO’s latest economic and tax revenue forecast along with our re-estimate of spending under the framework of the Executive Budget for 2016 and financial plan released last week. Tables summarizing our economic, tax, and spending projections are attached to this brief report.
|
Total Revenue and Expenditure Projections
Dollars in millions |
||||||
|
|
2015 |
2016 |
2017 |
2018 |
2019 |
Average Change |
|
Total Revenue |
$79,782 |
$79,507 |
$82,038 |
$84,526 |
$87,530 |
2.3% |
|
Total Taxes |
50,399 |
51,951 |
54,249 |
56,661 |
59,367 |
4.2% |
|
Total Expenditures |
79,782 |
78,823 |
82,486 |
84,972 |
87,988 |
2.5% |
|
IBO Surplus/(Gap) Projections |
$-- |
$685
|
($448) |
($445) |
($457) |
|
|
Adjusted for Prepayments & Transfers: |
|
|
|
|
|
|
|
Total Expenditures |
$78,583 |
$82,200 |
$82,687 |
$85,170 |
$87,988 |
2.9% |
|
City-Funded Expenditures |
$56,230 |
$60,162 |
$60,600 |
$63,100 |
$65,690 |
4.0% |
|
NOTES: IBO projects a surplus of $3.04 billion for 2015, $3
million above the de Blasio Administration’s forecast. The
surplus is used to prepay some 2016 expenditures, leaving 2015
with a balanced budget. Figures may not add due to rounding.
New York City Independent Budget Office |
||||||
Economic & Tax Revenue Forecast. Our estimate of a $685 million surplus for 2016, as well as substantially smaller shortfalls than projected by the de Blasio Administration for the ensuing years of the financial plan, is largely a reflection of IBO’s forecast of higher tax revenues. IBO’s projection for tax revenues is driven by our economic forecast, which has dimmed slightly since our forecast in March but still remains brighter than the de Blasio Administration’s forecast.
A key component of our economic forecast is the outlook for local job creation. Following record employment growth of 120,700 in calendar year 2014, we expect annual growth to slow to 88,200 this year and 75,100 next year, and continue to slacken over the following two years. Much as in the recent past, the industry sectors generating many of the new jobs in 2015 through 2019 will be education and health care services, professional and business services, leisure and hospitality, and trade. With a large share of the job growth centered in low- or medium-wage industries, and an unusually small share in the high-paying securities industry, wage growth will continue to be relatively modest compared with previous expansions.
Another factor underlying our forecast is the expectation of rising interest rates, which would likely curtail residential and commercial real estate sales. Additionally, the considerable amount of new office space becoming available at Hudson Yards, the World Trade Center, and other locations could dampen sales of commercial buildings.
Based on these and other factors, IBO projects that tax revenues will grow from $50.4 billion this fiscal year to $59.4 billion in 2019, an average annual growth rate of 4.2 percent. Consistent with our somewhat brighter economic forecast than the de Blasio Administration’s, IBO’s projections for tax collections are higher than the Mayor’s. The difference grows from a modest $206 million in the current year to $688 million in 2016. The difference widens considerably in the following years, growing from $1.3 billion in 2017 to nearly $2.5 billion in 2019.
Spending Estimates. IBO’s estimates for total spending are also a bit higher than projected by the Mayor. We project spending will total $79.8 billion this year and grow at an annual average rate of 2.5 percent to reach nearly $88 billion in 2019.
There are a number of areas for which we project spending will be higher than estimated by the de Blasio Administration. Looking just at 2016, we estimate that city expenditures on education, driven by charter school expansion that has been planned but not yet included in the Mayor’s projections and by lower-than-expected reimbursements from Medicaid for certain special education services, will cost $102 million more than the Mayor’s projection. We also expect that police and correction department overtime will together cost $65 million more than budgeted, and the city will spend $53 million more than currently allocated for homeless services.
As in the past, overall spending growth will be led by just a few big ticket items. We project expenditures on health insurance and other fringe benefits for city employees will rise at an annual average rate of 6.6 percent and reach $6.5 billion by 2019 (not including staff in the education department and the city university system, as well as contributions to the retiree health fund). Debt service on funds the city borrows for its capital projects is expected to rise an average of 6.3 percent anually (after adjusting for prepayments) and total $7.6 billion in 2019.
Capital Plan. In conjunction with the executive budget, the Mayor issued the Ten-Year Capital Strategy for 2016-2025. The strategy outlines a total of $83.8 billion in capital spending over the 10 years, $16 billion more than under the preliminary strategy released in February. More than 90 percent of the funds for the 10-year plan, or $75.5 billion, would come from the city. The plan also anticipates $5 billion in federal funds, $3 billion from the state, and a small amount of private funding.
The strategy incorporates a $30.4 billion investment in sewers, highways, bridges and other city infrastructure; $23.4 billion in school construction, expansion, and renovation; and $8.4 billion in housing construction and renovation. The remaining funds go to a variety of purposes such as economic development, park repairs, jail improvements,and public hospital upgrades.
Fiscal Pressures. Given the relatively small budget shortfalls projected by IBO for 2017-2019 and the sizable reserves contained in the Mayor’s financial plan—including general reserves of $1 billion annually and $2.6 billion in the Retiree Health Benefits Trust—the city’s fiscal outlook remains solid. But this outlook presumes no economic downturn through 2019. If that forecast holds the city will have gone an unprecedented 10 years without a recession.
The economy is not the only risk to our budget estimates. There is also pressure to increase spending for purposes such as hiring more police officers and expanding library hours. The fiscal stress faced by New York’s public hospitals, housing authority, and the Metropolitan Transportation Authority could also lead to additional city expenditures.
Over the next few weeks IBO will publish findings from our analysis of specific programs in the Mayor’s budget plan as well as provide a more detailed explanation of our economic and revenue forecast.
|
IBO Expenditure Projections
Dollars in millions |
||||||
|
|
2015 |
2016 |
2017 |
2018 |
2019 |
Average Change |
|
Health & Social Services |
|
|
|
|
|
|
|
Social Services |
|
|
|
|
|
|
|
Medicaid |
$6,601
|
$6,570
|
$6,572
|
$6,573
|
$6,573
|
-0.1% |
|
All Other Social Services |
3,309
|
3,295
|
3,311
|
3,337
|
3,329
|
0.2% |
|
HHC |
217
|
163
|
214
|
236
|
242
|
2.7% |
|
Health |
1,525
|
1,479
|
1,473
|
1,477
|
1,480
|
-0.7% |
|
Children Services |
2,782
|
2,846
|
2,859
|
2,864
|
2,873
|
0.8% |
|
Homeless |
1,160
|
1,147
|
1,145
|
1,150
|
1,149
|
-0.2% |
|
Other Related Services |
727
|
635
|
626
|
625
|
625
|
-3.7% |
|
Subtotal |
$16,321
|
$16,135
|
$16,201
|
$16,263
|
$16,271
|
-0.1% |
|
Education |
|
|
|
|
|
|
|
DOE (excluding labor reserve) |
$20,830
|
$21,674
|
$22,580
|
$23,478
|
$24,287
|
3.9% |
|
CUNY |
914
|
891
|
895
|
901
|
910
|
-0.1% |
|
Subtotal |
$21,743
|
$22,566
|
$23,475
|
$24,379
|
$25,197
|
3.8% |
|
Uniformed Services |
|
|
|
|
|
|
|
Police |
$5,029
|
$4,931
|
$4,931
|
$4,975
|
$5,019
|
0.0% |
|
Fire |
1,995
|
1,959
|
1,942
|
1,917
|
1,920
|
-1.0% |
|
Correction |
1,142
|
1,231
|
1,213
|
1,212
|
1,216
|
1.6% |
|
Sanitation |
1,496
|
1,542
|
1,588
|
1,593
|
1,601
|
1.7% |
|
Subtotal |
$9,662
|
$9,664
|
$9,673
|
$9,699
|
$9,757
|
0.2% |
|
All Other Agencies |
$10,121
|
$9,682
|
$9,420
|
$9,099
|
$9,005
|
-2.9% |
|
Other Expenditures |
|
|
|
|
|
|
|
Fringe Benefits
|
$5,026
|
$5,274
|
$5,654
|
$6,090
|
$6,479
|
6.6%** |
|
Debt Service |
6,889
|
3,420
|
6,746
|
7,098
|
7,632
|
6.3%* |
|
Pensions |
8,495
|
8,631
|
8,594
|
8,601
|
8,699
|
0.6% |
|
Judgments and Claims |
695
|
710
|
746
|
782
|
817
|
4.1% |
|
Retiree Health Benefits Trust |
280
|
-
|
-
|
-
|
-
|
n/a |
|
General Reserve |
50
|
1,000
|
1,000
|
1,000
|
1,000
|
n/a |
|
Capital Stabilization Reserve |
-
|
500
|
-
|
-
|
-
|
n/a |
|
Labor Reserve: |
|
|
|
|
|
|
|
Education |
11
|
-
|
-
|
-
|
-
|
n/a |
|
All Other Agencies |
731
|
1,241
|
840
|
1,685
|
2,724
|
n/a |
|
Expenditure Adjustments |
(243) |
-
|
137
|
277
|
406
|
n/a |
|
TOTAL EXPENDITURES |
$79,782
|
$78,823
|
$82,486
|
$84,972
|
$87,988
|
2.5% |
|
NOTES: *Represents the annual average change after adjusting for
prepayments.
New York City Independent Budget Office |
||||||
|
Pricing Differences Between IBO and the de Blasio
Administration
Items that Affect the Gap
Dollars in millions |
|||||
|
|
2015 |
2016 |
2017 |
2018 |
2019 |
|
Gaps as Estimated by the Mayor |
$—
|
$—
|
($1,572) |
($1,967) |
($2,881) |
|
Revenue |
|
|
|
|
|
|
Taxes |
|
|
|
|
|
|
Property |
$1
|
$116
|
$321
|
$675
|
$1,053
|
|
Personal Income |
242
|
124
|
218
|
231
|
422
|
|
General Sales |
(29) |
52
|
77
|
57
|
60
|
|
General Corporation |
(83) |
86
|
206
|
307
|
337
|
|
Unincorporated Business |
15
|
67
|
149
|
242
|
328
|
|
Banking Corporation |
(7) |
3
|
(1) |
-
|
-
|
|
Real Property Transfer |
39
|
64
|
92
|
87
|
83
|
|
Mortgage Recording |
13
|
56
|
60
|
59
|
63
|
|
Utility |
3
|
28
|
32
|
33
|
36
|
|
Hotel Occupancy |
9
|
81
|
109
|
122
|
136
|
|
Commercial Rent |
4
|
15
|
5
|
4
|
(16) |
|
Cigarette |
(1) |
(2) |
(3) |
(5) |
(6) |
|
Subtotal |
$206
|
$688
|
$1,264
|
$1,812
|
$2,497
|
|
STaR Reimbursement |
0
|
(1) |
(1) |
(0) |
0
|
|
TOTAL REVENUE |
$206
|
$687
|
$1,263
|
$1,812
|
$2,497
|
|
Expenditures |
|
|
|
|
|
|
Debt Service |
-
|
75
|
75
|
75
|
75
|
|
Fringe Benefits: |
|
|
|
|
|
|
Health Insurance—Education |
(8) |
99
|
54
|
2
|
89
|
|
Health Insurance—City University |
(14) |
24
|
26
|
24
|
25
|
|
Health Insurance—All Other Agencies |
(89) |
18
|
(31) |
(61) |
52
|
|
Education |
(46) |
(102) |
(122) |
(141) |
(161) |
|
Police |
(50) |
(50) |
(50) |
(50) |
(50) |
|
Board of Elections |
-
|
-
|
(25) |
(25) |
(25) |
|
Correction |
-
|
(15) |
(15) |
(15) |
(15) |
|
Homeless Services |
-
|
(53) |
(46) |
(46) |
(46) |
|
Small Business Services |
4
|
(1) |
(5) |
(13) |
(17) |
|
Campaign Finance Board |
-
|
-
|
-
|
(40) |
-
|
|
TOTAL EXPENDITURES |
(203) |
(5) |
(139) |
(290) |
(73) |
|
TOTAL IBO PRICING DIFFERENCES |
$3
|
$682
|
$1,124
|
$1,522
|
$2,424
|
|
IBO Prepayment Adjustment 2015/2016 |
(3) |
3
|
-
|
-
|
-
|
|
IBO SURPLUS/(GAP) PROJECTIONS |
$— |
$685
|
($448) |
($445) |
($457) |
|
NOTES: Negative pricing differences (in parentheses) widen the
gaps, while positive pricing differences narrow the gaps.
Figures may not add due to rounding.
New York City Independent Budget Office |
|||||
|
IBO Revenue Projections
Dollars in millions |
||||||
|
|
2015 |
2016 |
2017 |
2018 |
2019 |
Average Change |
|
Tax Revenue |
|
|
|
|
|
|
|
Property |
$21,271
|
$22,356
|
$23,587
|
$24,947
|
$26,389
|
5.5% |
|
Personal Income
|
10,309
|
10,433
|
10,632
|
10,878
|
11,406
|
2.6% |
|
General Sales |
6,727
|
7,090
|
7,397
|
7,674
|
7,946
|
4.3% |
|
General Corporation |
3,153
|
4,151
|
4,429
|
4,634
|
4,802
|
11.1% |
|
Unincorporated Business |
1,984
|
2,121
|
2,289
|
2,475
|
2,654
|
7.5% |
|
Banking Corporation |
846
|
80
|
5
|
-
|
-
|
n/a |
|
Real Property Transfer |
1,664
|
1,577
|
1,657
|
1,701
|
1,743
|
1.2% |
|
Mortgage Recording |
1,106
|
1,040
|
1,072
|
1,098
|
1,127
|
0.5% |
|
Utility |
401
|
426
|
441
|
456
|
469
|
4.0% |
|
Hotel Occupancy |
576
|
620
|
661
|
687
|
707
|
5.3% |
|
Commercial Rent |
744
|
785
|
810
|
844
|
859
|
3.7% |
|
Cigarette |
48
|
46
|
44
|
41
|
39
|
-5.0% |
|
Other Taxes and Audits |
1,570
|
1,228
|
1,226
|
1,226
|
1,226
|
-6.0% |
|
Total Taxes
|
$50,399
|
$51,951
|
$54,249
|
$56,661
|
$59,367
|
4.2% |
|
Other Revenue |
|
|
|
|
|
|
|
STaR Reimbursement |
$860
|
$764
|
$796
|
$800
|
$804
|
-1.7% |
|
Miscellaneous Revenue |
6,185
|
4,770
|
4,921
|
5,011
|
5,075
|
-4.8% |
|
Unrestricted Intergovernmental Aid |
-
|
-
|
-
|
-
|
-
|
n/a |
|
Disallowances |
(15) |
(15) |
(15) |
(15) |
(15) |
n/a |
|
Total Other Revenue |
$7,030
|
$5,518
|
$5,702
|
$5,795
|
$5,865
|
-4.4% |
|
TOTAL CITY-FUNDED REVENUE |
$57,429
|
$57,469
|
$59,951
|
$62,457
|
$65,232
|
3.2% |
|
State Categorical Grants |
$12,524
|
$12,984
|
$13,353
|
$13,759
|
$14,090
|
3.0% |
|
Federal Categorical Grants |
8,376
|
7,611
|
7,312
|
6,881
|
6,780
|
-5.1% |
|
Other Categorical Aid |
893
|
869
|
877
|
882
|
879
|
-0.4% |
|
Interfund Revenue |
559
|
575
|
546
|
548
|
548
|
-0.5% |
|
TOTAL REVENUE |
$79,782
|
$79,507
|
$82,038
|
$84,526
|
$87,530
|
2.3% |
|
NOTE: Figures may not add due to rounding.
New York City Independent Budget Office |
||||||
|
IBO Versus Mayor’s Office of Management and Budget Economic
Forecasts |
||||||
|
|
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
|
National Economy |
|
|
|
|
|
|
|
Real GDP Growth |
|
|
|
|
|
|
|
IBO |
2.4 |
2.6 |
3.3 |
2.8 |
2.4 |
1.9 |
|
OMB |
2.4 |
3.0 |
2.6 |
2.7 |
2.5 |
2.9 |
|
Inflation Rate |
|
|
|
|
|
|
|
IBO |
1.6 |
0.6 |
2.6 |
2.7 |
2.7 |
2.5 |
|
OMB |
1.6 |
-0.3 |
2.5 |
2.2 |
2.3 |
2.3 |
|
Personal Income Growth |
|
|
|
|
|
|
|
IBO |
4.0 |
6.0 |
6.8 |
6.5 |
5.6 |
4.3 |
|
OMB |
4.0 |
3.9 |
4.8 |
5.4 |
4.9 |
5.1 |
|
Unemployment Rate |
|
|
|
|
|
|
|
IBO |
6.1 |
5.4 |
5.1 |
4.9 |
4.9 |
4.9 |
|
OMB |
6.2 |
5.5 |
5.3 |
5.2 |
5.3 |
5.3 |
|
10-Year Treasury Bond Rate |
|
|
|
|
|
|
|
IBO |
2.5 |
2.5 |
3.6 |
4.5 |
4.5 |
4.4 |
|
OMB |
2.5 |
2.5 |
3.3 |
3.9 |
4.0 |
4.0 |
|
Federal Funds Rate |
|
|
|
|
|
|
|
IBO |
0.1 |
0.3 |
1.9 |
3.4 |
4.0 |
3.9 |
|
OMB |
0.1 |
0.4 |
1.6 |
3.3 |
3.8 |
3.8 |
|
NYC Economy |
|
|
|
|
|
|
|
Nonfarm New Jobs (thousands) |
|
|
|
|
|
|
|
IBO |
120.7 |
88.2 |
75.1 |
60.0 |
50.0 |
45.5 |
|
OMB |
121.0 |
67.0 |
62.0 |
56.0 |
49.0 |
47.0 |
|
Nonfarm Employment Growth |
|
|
|
|
|
|
|
IBO |
3.0 |
2.1 |
1.8 |
1.4 |
1.2 |
1.0 |
|
OMB |
3.0 |
1.6 |
1.5 |
1.3 |
1.2 |
1.1 |
|
Inflation Rate (CPI-U-NY) |
|
|
|
|
|
|
|
IBO |
1.3 |
0.9 |
3.1 |
3.1 |
3.2 |
3.0 |
|
OMB |
1.3 |
0.3 |
2.6 |
2.4 |
2.5 |
2.4 |
|
Personal Income ($ billions) |
|
|
|
|
|
|
|
IBO |
510.6 |
535.2 |
564.5 |
596.4 |
627.8 |
653.7 |
|
OMB |
505.1 |
519.4 |
538.5 |
562.7 |
586.1 |
610.1 |
|
Personal Income Growth |
|
|
|
|
|
|
|
IBO |
5.9 |
4.8 |
5.5 |
5.7 |
5.3 |
4.1 |
|
OMB |
4.9 |
2.8 |
3.7 |
4.5 |
4.2 |
4.1 |
|
Manhattan Office Rents ($/sq.ft) |
|
|
|
|
|
|
|
IBO |
73.7 |
77.4 |
80.1 |
82.3 |
84.0 |
85.6 |
|
OMB |
73.7 |
77.2 |
82.0 |
83.6 |
86.8 |
88.6 |
|
SOURCE: Mayor’s Office of Management and Budget
NOTES: Rates reflect year-over-year percentage changes except
for unemployment, 10-Year Treasury Bond Rate, Federal Funds
Rate, and Manhattan Office Rents. The local price index for
urban consumers (CPI-U-NY) covers the New York/Northern New
Jersey region. Personal income is nominal. For 2014, New York
City personal income and growth rates are estimated, pending
Bureau of Economic Analysis release.
New York City Independent Budget Office |
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