After watching Mayor de Blasio’s gloomy budget presentation last Thursday, New Yorkers could be forgiven for thinking that the local economy is entering a slump and tax revenues are falling.
Actually, it’s worse than that. The economy — for the moment, at least — is doing just fine. And despite the popular notion, tax revenues are hundreds of millions of dollars higher than the city projected three months ago. The real problem: Even in a seemingly relentless boom, taxpayers can’t keep up with Hizzoner’s spending.
The mayor is preparing the city for a downturn, in words if not in deeds. Thursday afternoon, he warned darkly of “new realities and tough choices.” Standing before a slide pasted with news headlines heralding a possible downturn, he said, “We are seeing the impact of that reality on our revenue already.”
One problem: It isn’t true. New York expects to take in $62.9 billion in tax revenue for 2020, the fiscal year that starts in July. That’s a healthy 3.6 percent increase — well above inflation — from the fiscal year that will end in June.
Compared to two years ago? In 2018, the city took in $58.4 billion in taxes — meaning two-year growth of 7.8 percent, again well above inflation.
So what’s all this talk about plummeting tax revenues — and the mayor warning of Bloombergian budget cuts of “an additional $750 million in savings that we will find in the next two months”?
The city’s personal-income tax collections are down by $935 million from 2018. That’s likely due in part to the horrific December on Wall Street and in part because wealthier taxpayers pre-paid part of their tax bill last year to avoid some of the hit to deductions from President Trump’s tax reform. Sales-tax collections are falling, too — a worrisome sign for the city’s struggling retail industry.
Overall, though, tax revenues are up, because other taxes more than make up for these shortfalls. Property taxes, for instance, are coming in at $27.9 billion this year, 6 percent higher than last year, and they’ll clock in at $29.5 billion for 2020.
As for changes between November, when the city last updated its budget, and now? For both this year and the upcoming year, tax revenues are coming in $800 million higher than the city thought just two months ago.
On paper, then, the budget is hardly in crisis. So why the sudden apocalyptic talk of cutbacks and tough choices?
It’s simple: The mayor’s payoffs to the city’s unionized workforce are catching up with him.
To his credit, the mayor himself admits this. “There has been substantial growth since [last] June” in the budget, he said, “and that is related to several things that are very specific. The two biggest are the labor agreements that we have come to with some of the biggest unions in this city and has obviously set the pattern for all unions. Those labor agreements have added about a billion dollars since the adopted budget from last year or so.”
The numbers back up the mayor’s point. In 2018, the city spent $27.2 billion on wages and salaries for government workers. In 2020, it will spend $30.2 billion. This whopping 11 percent growth over two years is what’s driving budget stress — not a blip in tax revenues. And though the mayor argues that savings in workers’ health benefits help offset that, they really don’t: Not including pensions, “fringe” benefit costs for public workers and retirees will rise to $11.5 billion in 2020, up from $10 billion in 2018.
The mayor’s public-employee spending clashes with his self-styled progressivism. It’s striking that an activist mayor with three years left in office didn’t propose any major new social-safety-net programs this budget cycle. He’ll spend just $25 million in 2020 on his “health-care for all” initiative — not even a rounding error.
His other major program isn’t his at all. Rather, he has finally, tepidly embraced City Council Speaker Corey Johnson’s year-old initiative for half-price MetroCards for the poor, at $106 million. And he is reminding everyone of another project from last year: pre-K for 3-year-olds, at another $25 million.
To be sure, it’s good that the mayor isn’t rolling out vast new government programs with no way to pay for them. But the question remains: What happens to our existing safety-net programs if and when a recession does hit? De Blasio has already demonstrated that if forced to make choices, he will choose the public-sector workforce over the broader public, even the poorer parts of the public.
Nicole Gelinas is a contributing editor of the Manhattan Institute’s City Journal.