August 1, 2012
Around Town By Neal Tepel
New York City closed a budget gap of $4.6 billion for FY 2013 and narrowed the FY 2014 budget gap to $2.5 billion using reserves and other non-recurring resources, according to a review of the city’s financial plan by New York State Comptroller Thomas P. DiNapoli.
The FY 2013 budget is balanced with more than $4 billion in nonrecurring resources. The city plans to use most of the FY 2012 surplus ($2.4 billion), along with $1 billion from the Retiree Health Benefits Trust, to balance the FY 2013 budget. These funds had been set aside during the last economic expansion to help pay the future cost of retirees’ health insurance. By FY 2014, the city will have redirected all of the funds ($3.1 billion) to help balance the budget.
The sale of taxi medallions remains the largest budget risk in the FY 2013 budget. While the city has spread out over three years the proceeds from the sale, it has also increased the amount it expects to receive from $1 billion to $1.5 billion. The FY 2013 budget counts on $635 million from the sale, even though it remains the subject of litigation.
The city has regained more than 150 percent of the private sector jobs lost during the recession, but personal income tax collections are not expected to reach their pre-recession levels until FY 2015 due to the concentration of job growth in lower-paying industries. In addition, the public sector continues to contract and compensation on Wall Street has been constrained.
The city’s unemployment rate has returned to its recessionary peak of 10 percent and is even higher among some segments of the labor market, which reveals that the recovery has not benefited everyone equally.
The city’s economy has diversified since the 1990’s but remains heavily dependent on the securities industry. The New York Stock Exchange reported that its member firms earned $7.3 billion during the first quarter of 2012, a significant rebound from the fourth quarter of 2011.