The Adams administration is instructing all agencies to cut their city-funded expenses by 3% this fiscal year and 4.75% next fiscal year and the out-years, according to a memo from budget director Jacques Jiha obtained by NY1 Monday.

The new Program to Eliminate the Gap, or PEG, will be implemented in Mayor Eric Adams’ November financial plan.

“We currently face new costs that will increase the city’s obligations by billions of dollars, including growing pension contributions, expiring labor contracts, and rising health care expenses,” Adams said Monday in a statement. “In response, we are asking every city agency to tighten its belt without laying off a single employee or reducing services.”

All agencies will be impacted, including the NYPD and the departments of correction and health.

The agencies are now subject to an effective hiring freeze – with exceptions, including for health crises like monkeypox and public safety – until they submit their savings plans by Sept. 30.

The city seeks to save an estimated $1 billion this fiscal year, which ends next June, and $1.6 billion each fiscal year from 2024 to 2026.

Jiha, of the Mayor’s Office of Management and Budget, said that the newest round of reductions is necessary because the stock market was down last fiscal year, because most of the city’s labor contracts have expired or will soon expire, because of new mandated needs like shelters for asylum seekers and because of an economic slowdown.

The Citizens’ Budget Commission applauded the move as “a prudent and fiscally necessary step to stabilize New York City’s budget in the long run.” CBC president Andrew Rein said that with the city’s 28,000 vacancies, it should be able to hire “critical service-providing positions” while still meeting its savings target.

In his memo to agency leaders, Jiha wrote that they can find the savings through restructuring or in areas where funding exceeds programmatic needs.

He wrote the agencies cannot reach the targets through layoffs or new fines or fees. He also said that the savings cannot negatively impact services unless they’re demonstrably underutilized.