Politics
Scott Stringer: The case for strengthening the budget cushion
A lot has happened in New York City over the last year. In February 2015, who would have imagined that the Mets would make it to the World Series and the Jets would again fail to make the playoffs? (OK – as a Jets fan, even I can admit that the latter isn’t all that surprising.)
The lesson of 2015 for New York City is that some things will surprise us while others will stay the same. And our city’s finances are no different.
The good news is that our economy is doing well. In 2015, New York City recorded its sixth consecutive year of economic growth, outpacing the national economy for the fourth time during that period. And, for the first time in seven years, the city generated an operating surplus by taking in more money than it spent. With nearly 3.7 million private-sector payroll jobs in the city – 443,000 above the previous peak in August 2008 – unemployment fell to 5 percent, another positive indicator.
Yet even as we have come a long way since the Great Recession, we are still fighting to regain our footing in other key indicators, such as the slow growth in wages. Wage stagnation has remained stubbornly persistent throughout this recovery. However, plans by Mayor Bill de Blasio and Gov. Cuomo to raise the minimum wage will provide working families a real boost and put them on the pathway to the middle class.
And, once again, there are warning signs on the horizon. Over the last six months, we’ve seen the Dow Jones Industrial Average drop more than 1,100 points, oil and commodity prices come crashing down and a slowdown in China’s economy significantly increase the risk of a global economic slump.
Thankfully, New York City has been preparing for a situation just like this. In August, my office released an analysis of how much the city has accumulated in its budgetary cushion using a new measure that we call PARR – the prior-year accumulated resources and reserves. By this new measure, my office found that our cushion, while increasing recently, is still $1 billion to $6 billion short of where we need to be to weather the next big economic downturn.
Given that we can’t control the national economy, and our tools to influence the local economy are admittedly limited, the onus falls on the city to make sure that we are well-positioned to weather a potential economic downturn.
This year, I’ve renewed my call for the administration to implement a PEG – a program to eliminate the gap. The current financial plan includes an additional Citywide Savings Program, but the proposed program doesn’t go far enough, and unlike PEGs, it is voluntary with no specific agency savings target. In fact, agencies account for just 30 percent of the savings in this new plan.
In contrast, an analysis by my office found that if we had implemented a traditional annual PEG in FY 2016, the city would have saved $1 billion that year – and another $10 billion by FY 2019.
The city has acknowledged that a PEG with specific savings targets may be needed to augment its current savings program. This money could be used to strengthen our budget cushion, and give New York City a strong foundation to ensure that we can protect our most vulnerable citizens in these uncertain times.
Scott Stringer is the New York City comptroller.