Each year, the city budgeting process consumes countless hours of bureaucratic maneuvering, as officials from the administration clash with the City Council over spending priorities. 

There are some annual traditions observers know to watch for. The council often fiercely questions the high budget of the police department before approving it. The administration proposes to fund libraries and cultural institutions below their needs, before the council steps in with discretionary funding to patch the gaps. 

Yet the discussions over the 2024 fiscal year plan are shaping up to be complex. The city is facing unknown billions in costs in the coming years from new labor contracts, serving asylum seekers and filling holes left by dwindling federal and state funding everywhere from education to housing. 

At the same time, Mayor Eric Adams is trying to position himself as a cost-efficient manager of taxpayer dollars as he faces a council that is increasingly critical of slowdowns in city services tied to vacant positions across agencies.

“I think it will be more challenging, and potentially more contentious, than last year,” said Ana Champeny, the vice president for research at the nonprofit Citizens Budget Commission. “The mayor is saying, ‘We have big budget gaps, we have economic uncertainty, we need to be cautious  and rein in spending.’ On the other hand, the council has a lot of spending proposals in many different areas.”

The two camps are even starting negotiations with different ideas about the city’s immediate economic future. While neither has forecasted a recession this year, the council believes tax revenue will remain high, leading them to call for expanding spending on a range of key city services and filling the positions that make those services run. 

The administration has taken what Jacques Jiha, the budget director, called the “cautious” path in testimony during the first council budget hearing on Monday, discussing a preliminary budget plan that would cut hundreds of millions of dollars from agencies that provide social services, education and health care by removing unfilled positions. 

“We are in a very difficult situation,” Jiha said. “In an era of limited and diminishing resources, we will have to make difficult decisions to balance the budget as required by law.”

The numbers in the budget plan, and the competing analyses of spending needs, are stark across the board. 

Adams’ preliminary budget of $102.7 billion, unveiled in January, relies heavily on eliminating more than 4,000 vacant positions from city agencies. Despite the cuts, the administration expects to see considerable funding gaps in the coming years, hitting a $6.5 billion hole by the 2027 fiscal year. (The city’s financial calendar starts in June and runs to the end of May of the year given as the “fiscal year.”)

Yet the out-year gap estimates are worse outside the administration, with City Comptroller Brad Lander’s office estimating the 2027 shortfall at $11.7 billion — a number, he said, that could be higher if the city sees larger and larger influxes of people migrating to the U.S. to claim asylum. 

The preliminary plan is missing some recent developments, which will be filled in by the administration’s upcoming “executive,” second-draft budget. 

For one, the city has labor contracts to renew. If the agreement recently reached with DC37, the largest public union, is replicated for all 300,000 public-sector employees, it will add an estimated $17 billion to city spending needs over the coming four years. 

Further, Gov. Kathy Hochul’s budget plans to increase the city’s funding contribution to the MTA by $500 million. The city will also have billions more to pay to keep various education programs alive as pandemic-era federal funding runs out, Elizabeth Brown, the communications director for the Independent Budget Office, a city agency, said at Monday’s hearing.

Then, there’s the ongoing arrivals of asylum seekers, costing the city $364 per household per day — more than $1 billion over this year and next, not including construction costs for new migrant housing facilities, according to the IBO. The city seems likely to shoulder much of the burden, with the state so far limiting its planned reimbursements to $1 billion through next year, and federal aid for asylum seekers currently limited to a national total of $800 million.

Council members pressed Jiha on whether the city could cut costs by reducing the number of emergency contracts for addressing migrant needs, but Jiha said the city could not hire or act quickly enough on its own to respond. 

“This is not a joke. This is real,” he said. “You cannot handle this kind of increase with the capacity we currently have in the city.”

The council has taken a rosier view of the city’s economic future, estimating $2.4 billion more in tax revenue over the next year compared to the administration’s outlook. 

Councilman Justin Brannan, chair of the finance committee, said Adams’ plan amounted to “unnecessary austerity,” and suggested that the budget department “seems to operate out of an abundance of pessimism.”

The parties made no real headway Monday on how to piece together the budget puzzle. Some of the spending estimates were notably mismatched. Points of agreement on fundamental problems gave way to differing ideas on where to look for solutions.

On spending, the administration said that it had spent $776 million on overtime for uniformed agencies, including $442 million on police, as of December, out of an annual overtime budget of $911 million. 

According to the IBO, the city is on track to spend $825 million on police overtime alone for this fiscal year — $369 million more than is currently budgeted. Champeny said that her own overtime estimates were similar to the IBO’s. 

Another central theme of Monday’s hearing was reducing the strain from asylum seekers on the shelter system. 

All agreed that more permanent housing placements were needed. Lander suggested during the hearing that the administration was being “pound-wise and penny-foolish” in allowing the city’s housing agency to eliminate unfilled positions, since city reports show that the agency is falling behind, by its own metrics, in quickly getting people vouchers and housing placements. 

But Jiha said without a surge in housing availability, the city has no way to quickly find homes for people. 

“You could provide as many vouchers as possible to people,” he said. “They’re going to just compete with people who have had vouchers for a year, or two years.”

Brannan, speaking later to the IBO, wondered if the city had put enough money in its capital funding plan to meet the stated goal of 500,000 new homes in the next decade. In response, Brown said staffing shortages may also throw a stumbling block in front of that project as well.

“I don’t know that the capital budget is the biggest obstacle,” Brown said. “The more immediate concern might be what’s happening with staffing.”

Champeny said she wants to see the city take a cautious approach, given that an economic downturn will have an outsize effect on New York City due to the local economy’s overreliance on the finance and commercial real estate industries. 

“The gaps are big as it is,” she said. “They are probably larger in real life than they are on paper, given the fiscal cliffs and the chronic under-budgeting of some expenditures.”

Champeny said there is likely going to be more money available to the city than in the administration’s estimates — just not as much as in the council’s estimates. She wants to see the council propose as many cuts as it is proposing in terms of spending. 

“You can’t just take a slice out of it,” Champeny said of the budget. “You have to deal with the whole pie.”