New York City Economic Outlook 2023-2025: Budget, Revenue, and Spending Insights
Discover the latest analysis of New York City's economic health with a deep dive into the 2025 budget forecast, revenue trends, federal aid impact, and strategic spending adjustments shaping the city's financial future.
Investopedia and NY1 present biweekly insights into New York City's economic status.
The New York City Economic Tracker is a collaborative initiative between Investopedia and NY1, leveraging publicly accessible data to assess the city's economic vitality across key sectors.
For the week of May 8, 2023, our focus is on New York City's newly proposed budget, which anticipates a modest decline in city revenues for fiscal year 2024, primarily due to diminishing federal assistance.
Projected Revenue Dip in NYC for Fiscal Year 2024 Linked to Reduced Federal Support
The latest budget proposal forecasts a slight decrease in New York City's revenues for fiscal year 2024 compared to the adopted 2023 budget.
This proposal awaits approval from the New York City Council before the fiscal year begins in July 2023.
Overall, the city's revenues are expected to decline by approximately 0.37%, decreasing from $107.1 billion in fiscal year 2023 to $106.7 billion in 2024. This includes intra-city revenues and categorical grant disallowances, which serve as reserve funds to cover any misallocated grants.
The primary driver of this revenue reduction is a drop in federal aid, as pandemic-related federal support phases out.
Federal, state, and other grants, along with capital budget transfers, are projected to reduce by $2.5 billion. Specifically, federal categorical grants are expected to fall from $12.8 billion in 2023 to $10.4 billion in 2024.
Tax revenues remain relatively stable overall. Slight decreases in personal income tax are balanced by increases in general property taxes and other taxes such as sales and unincorporated business taxes.
NYC Implements Spending Cuts to Address Short-Term Budget Deficits
In response to anticipated budget shortfalls in upcoming fiscal years, Mayor Adams introduced the Program to Eliminate the Gap (PEG), targeting expense savings to close budget gaps in 2023 and 2024.
Since PEG's launch at the start of fiscal year 2023, nearly $1.7 billion in savings have been secured for 2023, with over $3 billion projected for 2024, all achieved without layoffs or reductions in city services.
Significant savings stem from the Vacancy Reduction Initiative, which reduces vacant positions across city agencies while enabling strategic hiring.
Nonetheless, substantial budget risks remain in future years, potentially impacting essential services including public safety and health. Current fiscal plans reveal budget gaps of $4.2 billion in 2025, $6 billion in 2026, and $7 billion in 2027.
Additional Financial Challenges: Migrant Assistance Costs, Fiscal Cliffs, and Recession Risks
New York City has not yet received the anticipated federal and state funding to cover the estimated $4.3 billion cost of supporting migrant asylum seekers in 2023 and 2024.
Moreover, the New York State Comptroller's office forecasts fiscal cliffs—significant drops in one-time funding for ongoing services—amounting to $1.5 billion in 2025 and nearly $2 billion in 2026 due to declining aid.
These fiscal cliffs threaten the sustainability of recurring city services.
Additionally, current budget gaps do not factor in the potential impact of an economic recession, which could further reduce tax revenues. The Citizens Budget Commission estimates recession-related risks of $4.3 billion in 2024, $6.6 billion in 2025, and $2.1 billion in 2026, based on revenue declines observed during the 2001 and 2008 recessions.
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