NYC’s Sizeable and Projected Budget Gaps Sparks Decisions of a Negative Outlook by Moody’s
Rating’s firm Moody’s has “revised the outlook of the City of New York to negative from stable and has affirmed its Aa2 issuer rating.” Decisions come amid the city’s “sizable and persistent” expected budget gaps despite its “still favorable economic conditions.” Comments released in the latest report by New York City Comptroller’s office on the city’s preliminary budget praised the Mamdani administration for including a “significantly more transparent and accurate account of city expenditures.” Despite laying bare the “stark reality that the city is spending far more than it takes in, the preliminary budget increases net spending estimates by $4.14 billion inf NY 2026 (3.5%), $5.39 billion in FY 2027 (4.4%), and an average of $8.46 billion in FY 2028 through FY 2037 (averaging 6.6%) — increases that largely reflect costs that the Comptroller’s office has “long flagged as chronically underbudgeted, particularly shelter, public assistance, rental assistance programs, and special education due process cases.” An article by Crain’s New York indicated that Comptroller Mark Levine specifically noted the city’s predominant local rental assistance program CityFHEPS, which reached $1.34 billion in FY 2025 and “so-called Carter and due process cases – where the city pays for other placements I the public school is deemed to have failed to provide adequate education – were projected to cost $1.1 billion in fiscal 2025, much of it for private schools.”
Similarly, the city’s fiscal watchdog, the Citizens Budget Commission (CBC) applauded Mayor Mamdani for the administration’s more credible accounting within the Preliminary Budget presented, however the CBC pointed out that “underbudgeting did not cause the city’s fiscal problem — it merely masked it. The cause is unaffordable spending — layering on new and expanded programs without making them affordable by shrinking spending that does not improve New Yorker’s lives or streamline government.” Both the city’s Comptroller and CBC agree that raising taxes should be a last resort. The CBC’s report points out that “raising personal and business income taxes would make New York less competitive, while raising the property tax and raiding reserves would make it more expensive and increase the city’s risk of suffering in a recession. Instead, CBC strongly recommends reducing ineffective spending and improving operational efficiency; right-sizing spending in areas where demand has changed, and maintaining the number of FHEPS housing vouchers, while further emphasizing the importance of protecting reserves by maintaining the rainy day fund and the New York City Retiree Health Benefits Trust (RHBT).