Comptroller Stringer Releases Updated Economic Analysis Forecasting Substantial Reduction in New York City’s Tax Revenues in FY20 and FY21 Amid COVID-19 Pandemic

In March 23, 2020

Stringer analysis projects losses of $4.8 billion to $6.0 billion in City tax revenues

Renews call for an immediate mandatory City agency savings program and for fiscal relief for State and Local governments in the federal stimulus bill – including direct cash assistance and paid sick leave

(New York, NY) – New York City Comptroller Scott M. Stringer today released an updated analysis of forecasted tax revenue losses for New York City in Fiscal Years (FY) 2020 and 2021 amid the ripple effects of the COVID-19 pandemic on the city’s economy. Comptroller Stringer’s analysis estimates revenue losses of between $4.8 billion and $6.0 billion total in fiscal years (FY) 2020 and 2021. The range of the estimate depends on the severity and duration of the COVID-19 pandemic, and the duration and extent of the resulting economic shutdown.

An earlier analysis by the Comptroller conservatively estimated the budget shortfall at some $3.2 billion, based on estimated declines in specific economic sectors. Today’s analysis presumes a wider downturn in the overall economy, given rapid job losses in many sectors and mandatory shutdowns of many businesses enacted within the last week.

“The COVID-19 pandemic is already putting enormous financial strain on our city’s workers as millions of New Yorkers grapple with the uncertainty of their next paycheck, paying rent, and taking care of their families. At the same time, the massive slowdown of our city’s economy is going to result in substantial losses of the tax revenue that keep this city running,” said Comptroller Stringer. “Our economic forecast highlights the significant financial pressure on our city’s coffers. We are staring down a fiscal emergency and need the federal government to step up by injecting as much funding into our city’s economy as possible — our healthcare system, infrastructure, transit network, and so much more depend on it. And our City government must act immediately to protect our fiscal position so that we can continue to provide vital services for our most vulnerable New Yorkers in the face of this emergency.”

Forecasted Revenue Losses in New York City

Comptroller Stringer’s economic analysis forecasts a very sharp decline in specific sectors from March through the end of June, particularly in hotels, restaurants, retail and the cultural sector, as earnings collapse and unemployment soars. The analysis outlines two economic scenarios for New York City in Fiscal Year 2020 (FY20) and FY21 and estimates lost tax revenue from personal incomes, sales, hotels, real property transfers, businesses incomes, and other taxes.

In a more moderate scenario, the measures taken to contain the spread of the COVID-19 virus are successful and the shutdown of the economy would essentially end by May. There would be relatively limited impacts on sectors outside hotels, restaurants and retail. This scenario predicts a tax revenue loss of $1.28 billion in FY20 and $3.5 billion in FY21 totaling $4.8 billion, which would be a 2.0 percent decline in FY20 and 5.4 percent decline in FY21.
The higher range scenario presumes the state of emergency lasting at least into June or July, with a slower recovery to normal economic activity, and larger impacts on other sectors of the economy . This scenario envisions a tax revenue loss of $1.5 billion in FY20 and $4.6 billion in FY21 totaling $6.0 billion, which would be a 2.3 percent in FY20 and a 7.0 percent decline in FY21.

The City Budget Outlook

A revenue shortfall of between $1.3 and $1.5 billion in the current fiscal year could be offset using the City’s current projected budget surplus of $2.7 billion and other available reserves. Balancing this year’s budget through use of the surplus, however, would result in a larger gap next year, since the City planned to use this year’s surplus to pre-pay FY 2021 expenditures. Next year’s gap could be as high as $4.5 billion in that case.

To avoid exhausting other reserves, including balances in the Retiree Health Benefit Trust, the Comptroller renewed his urgent call for an immediate “Program to Eliminate the Gap” (PEG) that would require City agencies to identify savings equal to 4% of their City-funds budget with certain exceptions for DOHMH, NYC H+H, and social services agencies.

Federal Stimulus Relief Urgently Needed

Amid the economic fallout of the COVID-19 pandemic, Comptroller Stringer called for direct and immediate economic relief in the federal stimulus package. Several key proposals that Comptroller Stringer outlined to support struggling families, businesses, non-profits and state and local governments included:

Direct Cash Assistance: Cash relief to hard-pressed families and individuals should not be conditioned on taxpayer status. Anyone, regardless of taxpayer or immigration status or earnings, should be able to get a check, based on family size, now.

​Small Business & Non-Profits: Congress must extend forgivable loans to small businesses and non-profits to keep employees on the payroll–even while they’re closed. This measure will allow businesses to survive and re-open once we get through this crisis and the state of emergency is over. Congress must appropriate enough funding to ensure that every small business and non-profit that has been forced by current circumstances to close is able to access funding. Congress should also provide some funding directly to States to administer the program, since the federal SBA will be hard-pressed to administer the program by itself in a timely way. Finally, these loans should come with the condition that the money be targeted to paying frontline workers – not executives or investors.
Unemployment Insurance: Unemployment insurance weekly benefits should be immediately increased, and their duration extended to at least 39 weeks. The waiting period for benefits should be eliminated.

Paid Sick Leave: There should be no limits placed on emergency paid leave. At a time when we need workers and businesses to heed urgent public health guidance to prevent the spread of COVID-19, limits on paid sick leave would only serve to undermine that goal. Instead, Congress should implement measures to make small businesses whole for costs incurred for sick leave and family leave.

State and Local Government Fiscal Stabilization: It is imperative that frontline state and local governments get the federal support they need to address this public health emergency and the economic impact of widespread business closures. Options include a higher federal share of state and local Medicaid expenditures, additional funding through the Community Development Block Grant (CDBG) program, waivers of state and local matches on other federal aid programs, and a State and Local Government Fiscal Stabilization Fund of at least $250 billion.

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PRESS CONTACT
Hazel Crampton-Hays
(917) 594-2318​ hcrampt@comptroller.nyc.gov,
Eugene Resnick
(917) 594-2333 eresnic@comptroller.nyc.gov