GOP Tax Plan Puts NYC Budget At Risk, Report Warns

NEW YORK, NY — A Republican-led tax overhaul and potential federal budget cuts may spell big trouble for New York City's budget, state Comptroller Thomas DiNapoli's office said in a report published Wednesday.

The tax-reform bill Congress passed this week will grow the federal deficit by $1.5 trillion over the next 10 years. That will likely trigger federal spending cuts and other changes that "constitute the greatest risk to the city since the Great Recession," according to DiNapoli's new analysis of the city's financial plan.

The city has reserves to help fill a projected $3.2 billion budget gap in the next fiscal year. But officials will need to make adjustments to accommodate big cuts to federal funding, which represents $8.3 billion, or nearly 10 percent, of this year's $86 billion city budget.

"New York City’s economy is strong, the 2018 budget is balanced and the out-year gaps are manageable under current conditions, but difficult times may lie ahead, depending on the effects of what happens in Washington," DiNapoli said in a statement.

The tax plan's exact impact on the city's federal aid is still uncertain. But the report says next year's projected city deficit could grow by as much as $821 million, largely due to lower-than-expected business and sales tax revenues.

Mayor Bill de Blasio has acknowledged that the Republican tax bill's limits to income tax deductions for state and local taxes could pressure the city to lower its own taxes, which would likely trigger local spending cuts. But city officials have been waiting to see whether the bill would pass before bracing for its impact.

The GOP bill also repealed the requirement that every American have health insurance or else face a tax penalty. That's likely to drive up the cost of health care and insurance premiums while increasing the number of uninsured people, DiNapoli's report says.

DiNapoli's analysis echoed a report Wednesday by the city's Independent Budget Office that said the tax bill and its impact on the federal budget will create fiscal uncertainy for the city.

The need to trim the city budget could prove challenging for de Blasio, who has greatly increased spending in his first term as he rolled out landmark social programs like universal pre-kindergarten and paid sick leave for city workers.

Local economic growth has continued under de Blasio, with the city on pace to add 74,000 jobs in 2017, according to DiNapoli's analysis. But that's the smallest increase since the city started its job growth streak eight years ago, the IBO report says. It's difficult to predict how the tax bill will impact future economic growth, according to the IBO.

The city may also face higher-than-expected expenses for homeless services and overtime wages along with lower revenues from taxi medallions, DiNapoli's report says.

A spokeswoman for de Blasio, Jaclyn Rothenberg, said City Hall "will take all appropriate actions to close the budget gap."

"While we face uncertainty from Federal Government action, we are approaching this threat as we do all uncertainties; with cautious forecasts, careful revenue estimates, and by making only prudent and strategic investments," Rothenberg said in a statement.

(Lead image: New York State Comptroller Thomas DiNapoli is pictured in 2013. Photo by Mike Groll/Associated Press)