New York City has lost more than 24,000 people to the coronavirus — a devastating toll that could rise substantially as a second wave hits. But the city has also borne an economic cost that continues to grow and threatens its future.
Mayor Bill de Blasio on Monday painted a bleak picture of municipal finances, blaming the pandemic for a nearly $4 billion budget gap projected for the next fiscal year.
Earlier in the year, the problem was a drastic drop in tax revenue, as most economic activity came to a halt. Revenues are still down, but the city is facing the additional burden of billions of dollars in virus-related costs.
Mr. de Blasio, a Democrat in his second and final term, said the city needs another major federal stimulus package to prevent huge layoffs and cuts to city services.
“If there is no stimulus, we’re going to have to make extremely difficult choices,” Mr. de Blasio said.
Billions of additional dollars have been spent on ventilators, schools and testing
The city has spent $5.2 billion responding to the pandemic, including paying for ventilators, emergency food assistance, reopening schools and virus testing.
The expenses include $742 million on personal protective equipment; $890 million on hotels for the homeless, medical personnel and people with the virus; $500 million for medical staffing; $149 million for ventilators and $100 million for testing centers, according to a recent report by the city comptroller.
About $2.8 billion of the pandemic costs were covered 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 the mayor released on Monday. The expenses include:
$113 million for a program to provide food to struggling New Yorkers, which has distributed more than 140 million meals since March
$160 million for reopening schools with additional teachers and staffers and providing cleaning supplies and air purifiers
A huge budget gap could prompt cuts to municipal services
The city already made drastic cuts earlier this year to trash pickups and traffic enforcement, cuts that many New Yorkers believe are hurting quality of life
Mr. de Blasio said the city was facing a $3.8 billion budget gap next year that could mean more painful reductions in services.
The mayor said the deficit could grow worse if the state, which is facing its own budget crisis, makes funding cuts to local governments.
Mr. de Blasio did not say exactly which services might be cut, but it is likely every department, from sanitation to parks, would face cuts. He said he hoped to avoid this scenario.
“We do not want to reduce services exactly when we’re trying to come back and when people are in such dire need,” the mayor said.
Municipal layoffs are still possible
Mr. de Blasio has announced labor agreements that allowed him to avoid laying off 22,000 workers, but budget experts say the move is only a temporary fix.
He has touted $722 million in labor savings that are actually a deferral of money owed to city workers for things such as retroactive pay and retiree benefits.
The agreements with some of the city’s largest unions, including the Uniformed Sanitationmen’s Association and the United Federation of Teachers, pushed contractual payments to the next fiscal year.
The strategy carries risks: Without permanent labor savings, the city will be vulnerable if the budget outlook worsens or a federal stimulus is less than expected.
“Those are not labor savings, those are payment deferrals or kicking can down the road,” said Maria Doulis, vice president of strategy, operations and communications at the Citizens Budget Commission. “In every other fiscal crisis, labor has been able to come to the table to find savings. It’s a critical missing piece of the puzzle.”
Revenue is better than expected, but that could change
When the pandemic struck in March, New York City had record low unemployment and a record number of jobs. Then the city soon lost 900,000 jobs.
Things have slowly improved since then. The unemployment rate, at 20 percent in June, has fallen to slightly more than 13 percent last month.
Tax revenues fell, but not nearly at the rate that was expected: The city received $748 million more than forecast in personal income and business tax revenue and $610 million in bond refinance savings, according to the city comptroller and the Office of Management and Budget.
The city still needs to find additional savings, said Andrew Rein, president of the Citizens Budget Commission, suggesting that the mayor must look to eliminate inefficiencies, negotiate permanent labor savings and stick to a more rigorous hiring freeze.
James Parrott, an economist with the Center for New York City Affairs at the New School, said that revenue projections were not as dire as predicted because Wall Street and higher- paying jobs have remained relatively consistent throughout the pandemic. He said it made sense for the city to try to avoid layoffs: Employees such as building inspectors are going to be critical to any economic recovery.
“A lot of people are negative about Bill de Blasio these days, but on the budget-handling front he hasn’t done such a bad job,” Mr. Parrott said, then added: “But he’s also been lucky because the revenues keep coming in.”
Mayor de Blasio hopes a Biden administration will help
The mayor has said repeatedly that the city’s future is dependent on receiving a federal stimulus, and he expects that President-elect Joseph R. Biden Jr. will improve the city’s outlook.
Without a federal stimulus, Mr. de Blasio said he might have to consider layoffs again. Other concerns have emerged: Business leaders wrote a letter to Mr. de Blasio earlier this year complaining about a rise in shootings and street homelessness. They fear that these problems could drive more residents out of the city and hurt its tax base.
While Congress has stalled on delivering a second stimulus package, Mr. Biden’s team has been pushing for a quick deal.
The city’s economic recovery is at risk, Mr. de Blasio said, just as it is experiencing an uptick in infections serious enough to close public schools.
“As we face the danger of a second wave of Covid, again, there couldn’t be a more important time for a new federal stimulus,” Mr. de Blasio said on Monday. “And it is going to be the difference maker.”