Pandemic’s Fiscal Toll on New York Metropolis: 5 Takeaways

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New York City has lost more than 24,000 people to the coronavirus – a devastating number that could increase significantly in a second wave. But the city has also borne economic costs that continue to grow and threaten its future.

Mayor Bill de Blasio painted a bleak picture of municipal finances on Monday, blaming the pandemic for a budget gap of nearly $ 4 billion forecast for the next fiscal year.

At the beginning of the year the problem was a sharp drop in tax revenues as most economic activity stalled. Revenues are still declining, but the city is facing the added burden of billions in virus-related costs.

Mr de Blasio, a Democrat in his second and final term, said the city needed another major federal stimulus package to prevent large layoffs and cuts in city services.

“If there is no incentive, we will have to make extremely difficult decisions,” said de Blasio.

The city has spent $ 5.2 billion responding to the pandemic, including paying for ventilators, food aid, reopening schools, and virus testing.

The spending includes $ 742 million on personal protective equipment. $ 890 million for hotels for the homeless, medical workers, and people with the virus; $ 500 million for medical personnel; $ 149 million for ventilators and $ 100 million for test centers, according to a recent report from City Calculator.

About $ 2.8 billion of the pandemic costs were borne by the federal government, but the city is responsible for much of the balance.

The city increased its spending by about $ 767 million in the $ 92 billion budget released by the mayor on Monday. The cost includes:

  • $ 113 million for a struggling New Yorkers food program that has distributed more than 140 million meals since March

  • $ 160 million to reopen schools with additional teachers and staff, and provide cleaning supplies and air purifiers

The city made drastic cuts to garbage collection and traffic monitoring earlier this year, which many New Yorkers believe are affecting the quality of life

Mr de Blasio said the city faces a budget gap of $ 3.8 billion for the next year that could mean more painful cuts to services.

The mayor said the deficit could worsen if the state, facing its own budgetary crisis, puts financial cuts on local governments.

Mr de Blasio did not say exactly which services could be cut, but it is likely that every department, from sanitation to the park, will face cuts. He said he hoped to avoid this scenario.

“We do not want to reduce services exactly when we are trying to come back and when people are in such dire need,” said the mayor.

Mr de Blasio has announced working arrangements that will allow him to avoid laying off 22,000 workers, but budget experts say the move is just a temporary fix.

He has touted $ 722 million in labor savings, which is actually a shift in money owed city workers for things like retrospective pay and retirement benefits.

Agreements with some of the city’s largest unions, including the Uniformed Sanitationmen’s Association and the United Federation of Teachers, have postponed contractual payments until the next fiscal year.

The strategy harbors risks: without permanent labor savings, the city is vulnerable if the budgetary prospects deteriorate or the federal government’s incentives are less than expected.

“It’s not labor savings, it’s deferred payments or kicking can,” said Maria Doulis, vice president of strategy, operations and communications for the Citizens Budget Commission. “In every other financial crisis, the workforce could come to the table to make savings. It’s a critical missing piece of the puzzle. “

When the pandemic broke out in March, New York City had record low unemployment and a record number of jobs. Then the city soon lost 900,000 jobs.

Since then, things have slowly improved. The unemployment rate fell from 20 percent in June to just over 13 percent last month.

Tax revenues fell, but not nearly as expected: the city received $ 748 million more than projected in personal and business tax revenues and $ 610 million According to the city administrator and the office for administration and budget.

The city has yet to find additional savings, said Andrew Rein, president of the participatory budgeting commission, suggesting the mayor must try to eliminate inefficiencies, negotiate permanent labor savings and adhere to a stricter hiring freeze.

James Parrott, an economist at the New School’s Center for New York City Affairs, said sales projections weren’t as bad as predicted as Wall Street and higher-paying jobs remained relatively constant throughout the pandemic. He said it made sense for the city to avoid layoffs: employees such as building inspectors would be vital to an economic recovery.

“A lot of people are negative about Bill de Blasio these days, but he didn’t do such a bad job on budget management,” Parrott said, adding, “But he’s also been lucky because the income is on.” come in. “

The mayor has said repeatedly that the city’s future depends on a federal incentive, and he expects President-elect Joseph R. Biden Jr. to improve the city’s prospects.

Without a federal incentive, Mr de Blasio said he may need to reconsider layoffs. Other concerns have surfaced: Business leaders wrote a letter to Mr de Blasio earlier this year complaining of an increase in street shootings and homelessness. They fear these issues could drive more residents out of the city and affect their tax base.

While Congress stalled in delivering a second stimulus package, Mr Biden’s team has pushed for a quick deal.

The city’s economic recovery is at risk, de Blasio said, as is the rise in infections, which are so severe that public schools are closing.

“Given the threat of a second wave of Covid, there couldn’t be a more important time for a new federal incentive,” de Blasio said on Monday. “And it will make all the difference.”

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