New York City’s Mayor Eric Adams has officially dropped his first budget for the 2023 fiscal year starting on July 1—$99.7 billion. Although there will be ongoing debates about spending, the budget is relatively modest. The big issues facing the city’s future—crime, housing costs, and reviving the office economy—aren’t easily addressed by increasing or cutting spending.
First, the numbers. It’s the largest municipal budget in the country, and larger than all but 46 states. Three categories take up around 70% of the total. The single biggest spending category is education, around 30%, followed by worker pensions and benefits (mostly health care), and social services, each around 20%.
Adams faces four big policy and political questions: crime, housing costs, reviving the city’s economy (especially the office sector) and upcoming union contract negotiations. The first three have relatively little to do with the budget, and so far the more progressive City Council seems onboard with most of Adams’ budget.
Adams is proposing more spending on anti-crime policies, a sensitive political issue. But a good portion of that would not go directly to the police department. The Mayor’s proposed increase in police department spending is $150 million, a little less than three-tenths of a percent over last year’s level. Instead, the Mayor wants to spend more on corrections officers and also on a “subway safety plan” funding homeless services and a behavioral health program sending social workers to non-violent 911 calls
Housing costs are skyrocketing in New York, a second major problem for the Mayor. Data from ApartmentList.com says rents in New York City have risen 31.7% in the past year, as city prices have more than rebounded from the initial pandemic-induced drop.
But there’s little any budget can do about housing costs in the short term. New York, like other cities, is reaping the costs of not building adequate amounts of housing for many years. In the city’s economic recovery from 2008’s Great Recession, jobs increased by 22% while housing only rose by 4%, “40% fewer units per capita than San Francisco” according to the Citizens’ Budget Commission.
The Mayor has said he will support “upzoning,” allowing more housing units to be built by private developers in different city neighborhoods. But he faces substantial opposition from neighborhood groups, especially NIMBYs (Not In My Backyard) that fight development.
The city’s main housing battle will be fought over rent increases. Over one million private apartments fall under “rent stabilization” guidelines, set by a nine-member board. Under Mayor Bill de Blasio’s appointments, the board actually froze rents three times, and otherwise approved only modest increases. But Adams’ appointees are considering rents as high as 4.5% for one year renewals, and up to 9% for two-year leases.
And the city faces several key union contract negotiations. Adams has a proud, oft-cited history of union membership and support, and he was endorsed by many of the city’s unions. With high inflation, the Mayor is in for a tough set of negotiations.
Overshadowing all budget issues is a worrisome slump in the city’s economy, especially the downtown office sector. Analysts warn that continuing low office occupancy rates could hurt the city’s property tax revenuesin coming years. And if the shift to home-based work for highly paid office workers turns out to be permanent, then the city will lose taxes, fares on mass transit, and spending on restaurants and other services.
Those longer-run threats worry some observers, including the business-oriented Citizens Budget Commission (CBC). They fear the Mayor isn’t doing enough to reduce a long-term budget gap, and instead see him funding “programs that would expand the gap by $1 billion annually.” The City Council may well push him to add even more program spending. CBC sternly warns that “the City’s leaders should not pretend the City can have and do it all.”
They’re especially concerned about longer-term revenues. The city actually has an upward bump in revenues from historically high Wall Street profits, the return of tourists, and the high prices (and associated taxes) from real estate. The CBC also fears Adams will spend more than allocated on new union contracts while not extracting productivity gains.
You can see why many observers think except for the Presidency, being Mayor of New York City is “the second toughest job in America”. And if the Federal Reserve successfully induces an economic slowdown or recession, city needs will go up while revenues fall. Adams is doing a careful balancing act with this budget, artfully disarming many of his critics while hoping for a stronger city economic rebound. He might pull it off, but he’ll need a lot of luck to go with his considerable political skill.