Actions in the New York State Fiscal Year 2019 Enacted Budget

The State Budget includes many initiatives that affect the City, but four will have a clear impact on the City budget.¹

1. Legislation enacted with the State budget requires the City to fund half of the $836 million Metropolitan Transportation Authority (MTA) Subway Action Plan (SAP), or $418 million. The City must make six equal monthly installments between July 2018 and December 2018; if the City does not, the State Comptroller is authorized to redirect up to $418 million in funds flowing to the City.² As the SAP is 61 percent operating expenditures and 39 percent capital expenditures, the City will need to fund $254 million in operating spending and $164 million in capital spending.³

2. State formula-based education aid to New York City for State fiscal year 2019 is $10.55 billion, which is an increase of $338 million from the prior year and $90 million greater than Governor Andrew Cuomo’s Executive Budget proposal.⁴ Nonetheless, the City is facing a $121 million shortfall in education funding because the City’s Preliminary Budget forecast these revenues at $10.67 billion.⁵

3. Authorization for the Close to Home program, which places certain youth involved with the juvenile justice system under the custody of the Administration for Children’s Services and in facilities in New York City rather than in state facilities, was extended for five years.⁶ However, the State’s reimbursement for program costs was terminated.⁷ If the City continues the program, as is expected, an additional $30.5 million in City funds will be needed next year.⁸

4. The State budget also calls on the City to match the State’s funding and provide $50 million toward the completion of the Hudson River Park.⁹ Presumably these expenses will be for capital work at the Park and therefore will be reflected in the City’s capital budget.

Table 1: Anticipated State Budget Impact on the New York City FY 2019 Executive Budget

(dollars in millions)

^{Sources: Metropolitan Transportation Authority, 2018 Final Proposed Budget, November Financial Plan 2018-2021, Volume 1 (November 2017); New York State Education Department, Fiscal Analysis & Research Unit, "2018-2019 Enacted School Aid Files" (April 2, 2018), and "2018-2019 Executive School Aid Files" (January 17, 2018); City of New York, Office of Management and Budget, February 2018 Financial Plan: Revenue (February 1, 2018);  New York State Division of the Budget, FY 2019 New York State Enacted Article VII Bills, Revenue (REV) (A9509-C/S7509-C), Part VV and Part NNN; Education, Labor, Family Assistance (ELFA) (A9506-B/S7506-B), Part G; and  Transportation, Economic Development and Environmental Conservation (TED) (A9508-C/S7508-C), Part UU (March 2018); and Office of the New York City Comptroller, Comments on New York City’s Preliminary Budget for Fiscal Year 2019 and Financial Plan for Fiscal Years 2018-2022 (March 5, 2018).} 

Actions from Prior State Budgets Affecting New York City Budget

Two policies enacted in prior State budgets have yet to be fully reflected in the City’s financial plan. 

First, the State’s Raise the Age initiative was passed in 2017 as part of the State’s Fiscal Year 2018 Adopted Budget.¹⁰ New York State will no longer automatically prosecute all 16- and 17-years olds as adults, but rather as adolescent offenders. The law is being implemented in two phases; it takes effect on October 1, 2018 for 16-year olds and October 1, 2019 for 17-year olds. Additionally, the City is required to move adolescent offenders from Rikers Island into “newly created specialized secure juvenile detention facilities for older youth” by October 2018. The City has estimated that Raise the Age will cost about $200 million annually; the State provided $100 million to support Raise the Age statewide, but it is unclear what portion of the funding will come to New York City.¹¹

Second, the City has not fully recognized the fiscal impact of the State’s intercept of $600 million in sales tax revenue following the refunding of STARC bonds in 2016.¹² To date, the State has intercepted $450 million ($50 million in fiscal year 2016, $200 million in fiscal year 2017, and $200 million in fiscal year 2018); the remaining $150 million will be intercepted by the State in City fiscal year 2019, but the City has not recognized this financial impact to date.¹³

Conclusion

The New York State Fiscal Year 2019 Enacted Budget places additional burdens on the City’s fiscal resources.  Combined with the impact of policies enacted in prior State budgets, the City is expected to fund nearly $1.0 billion more in operating and capital expenditures in City fiscal year 2019.  The City will need to cover additional needs, such as an anticipated $107 million revenue shortfall from new taxi medallion sales that will not materialize and costs for overtime and special education services that are expected to exceed budgeted levels.¹⁴ Furthermore, the City’s budget should retain flexibility to address City Council priorities, such as the $212 million Fair Fares initiative to provide half-cost MetroCards to New Yorkers below the federal poverty line.¹⁵ While there are likely to be additional resources in the City’s Fiscal Year 2019 Executive Budget—the City Council and fiscal monitors forecast that tax revenue in fiscal years 2018 and 2019 will be between $750 million to $1.4 billion more than the Fiscal Year 2019 Preliminary Financial Plan—that will not be sufficient to cover all of these needs.¹⁶ The City will need to exercise restraint in other areas, as well.