Briefing on Mayor Bloomberg s Preliminary FY 2011 New York City Budget

Transcription

1 Briefing on Mayor Bloomberg s Preliminary FY 2011 New York City Budget A Fiscal Policy Institute Presentation February 2010

2 The Fiscal Policy Institute (FPI) wishes to thank the New York Community Trust and the Robert Sterling Clark Foundation for their support of the budget and revenue analysis work that makes this briefing book possible. FPI also wishes to thank the Ford, Charles Steward Mott, and Charles H. Revson Foundations for their support of our fiscal and economic analysis work more generally. In addition, FPI is grateful to the many organizations, including other foundations, labor unions, faithbased organizations, human services providers and advocates, and community and good government groups that support FPI s work and/or disseminate the results of FPI s analysis. Additional information on FPI s fiscal and economic analyses and copies of FPI s publications are available at February 2010

3 Responding to the Mayor s FY 2011 NYC Budget Proposal 1. Despite Wall Street s rebound, unemployment and hardship are extremely high for most New Yorkers. At best, recovery will be very gradual. 2. The Mayor s proposed budget cuts and the state budget-related contingency cuts will worsen unemployment and hardship. 3. Increased federal fiscal aid is the highest priority, followed by progressive income tax increase which would be less harmful than budget cuts. 1

4 2 Overview Impact of changes in the city s economy and revenues to the city budget. Nature and impact of proposed cuts in FYs 2010 and Impact of NYS budget on NYC budget. A more balanced approach to balancing the FY 2011 budget. Economic supplement: NYC in the Great Recession, Wall Street recovers but Main Street experiencing prolonged unemployment and hardship

5 I. New York City Budget Outlook 3

6 4 After Gap Closing Program New York City Budget Jan Financial Plan (Millions of dollars) FY 2010 FY 2011 REVENUES Taxes $36,988 $39,016 Fees and other revenue $8,477 $7,789 Federal Categorical grants $7,943 $6,614 State categorical grants $11,476 $11,766 TOTAL REVENUES $64,884 $65,185 EXPENDITURES Personal service (wages & fringes) $36,295 $36,190 Medical Assistance $4,951 $5,644 Public Assistance $1,580 $1,563 All other OTPS $19,397 $18,835 Debt Service $5,117 $5,536 Net debt defeasances -$2,726 $0 FY 2009 budget stabilization & transfers -$2,813 $0 FY 2010 budget stabilization $2,883 -$2,883 General Reserve $200 $300 TOTAL EXPENDITURES $64,884 $65,185 Source: Mayor's Preliminary Executive Budget, FY 2011, Jan

7 Impact of the Great Recession on City tax revenues Although the national recession began in Dec. 2007, NYC s economy continued to expand until mid The September financial market meltdown changed all that. Between June 2008 and June 2009, City reduced its forecast for economically-sensitive taxes for FY 2009 by $1.5B, and for FY 2010 by $3.2B. At the adoption of the FY 2010 budget in June 2009, the City forecast a two-year (FY 08 to FY 10) decline of 28% ($6.5B) in economically-sensitive taxes. (Property taxes were forecast to increase 11.7%, or $1.5B, over that 2-year period.) 5

8 In response, the City raised $2.4B by ending temporary property tax cuts and raising taxes 6 In Dec. 2008, City ended 7% temporary property tax cut and temporary $400 homeowner property tax break. ($1.5B) At the same time, raised hotel tax from 5% to 5.875%. ($62M) In June 2009, City increased city sales tax rate from 4% to 4.5% ($518M), repealed sales tax exemption for clothing over $110 ($119M), and extended sales tax to nonutility energy ($83M). Also, enacted business tax changes that will generate a net of $159M in FY 2010 but will result in lower tax revenues in a few years.

9 Also, the government s financial bailout restored Wall Street profitability and slowed NYC job losses Wall Street profits estimated at $58B in 2009, nearly 3 times larger than the previous record (2006). The City now expects NYC to lose 203,000 private jobs instead of the 311,000 forecast in June Wall Street s rebound also contributed to substantial upward revision of tax collections--$1.7b for 2010 and $700M in

10 8 If there is already a projected surplus of $2.4B for FY 2010, why is the Mayor asking for $484M in cuts for this year? Without the Mayor s gap-closing program, large projected gaps: $4B in 2011, $4.3B in 2012 and $4.9B in However, with the roll of 2010 surplus of $2.4B into 2011, 2011 gap reduced to $1.6B. But, still a projected $1.6B gap for next year giving rise to proposed Agency (or PEG Program to Eliminate the Gap ) cuts of $484M in FY 2010 and $1.1B in FY 2011.

11 Proposed Agency PEG cuts for 2010 and 2011 (before Mayor s proposed Contingency cuts resulting from State budget cuts) ($ millions) FY 2010 FY 2011 range of cuts Uniformed Forces $ 80.4 $ % Health and Welfare $ 95.3 $ % Dept. of Education $ $ % Other Agencies $ $ % TOTAL $ $ 1,

12 Examples of PEG cuts (FY 2011 values) 10 Day care center consolidation (ACS) $11 M Foster care services (ACS) 11 Reduce child abuse investigators (ACS) 6 Reduce case mgmt. staff, HIV/AIDS services (DSS) 4 Tighten eligibility for domestic violence shelters (DSS) 2 Eliminate 737 training positions in the Parks Opportunity Program (DSS) 4 Eliminate homeless shelter beds and a drop-in center, and reduce agency staffing (DHS) 7 Eliminate 33 out-of-school-time programs (DYCD) 7 Reductions in Beacon contracts (DYCD) 3 Eliminate school schools w/ < 300 students 3 Reductions in homecare services (Aging) 10

13 New PEG proposals on top of other cuts since 2008 With new cuts, many social services hit hard by spending cuts from FY 2008 to o Over these three years, ACS expenditures fell by 10%; Homeless Services spending declined 11%; Aging spending dropped 21%; and DYCD funding fell by 25%. o Dept. of Social Services funding increased 1.5%, but within DSS, big reduction in subsidized employment and training (-25%) to help pay for increased public assistance (+24%). o Police increased 6%, Sanitation spending grew 9%, but funds for Parks reduced by 17%. 11

14 12 Governor s Executive Budget slashes NYC aid, and threatens even steeper City cuts Since the state does not have a property tax (which can be a stabilizing force in a downturn), it relies more heavily on the personal income tax (which fell sharply in the downturn). The state made several new spending commitments 2005 to 2007 without identifying revenue to fund them: capping increase in local share of Medicaid and assuming local share of Family Health Plus, adoption of Foundation Formula as response to CFE case, and increasing STAR payments. Governor s budget proposes to close a $7.4B gap with nearly $5B in spending cuts, including $1.6B in school aid, $823M in health care, $200M in human services, $200M in higher ed, $325M in local aid, and $700M in state agency cuts.

15 For the FY 2010 and 2011 budget years, the Governor s cuts cost the City budget $1.28B Mayor says state cuts require an additional 3.6% city funds reduction in uniform agencies and 7.2% reduction in all other. For FY 2011, these Contingency cuts could mean: o Laying off 3,150 police officers o Cutting 42 engine companies, laying off 1,050 firefighters o Cutting recycling pick-ups from weekly to every other week o Reducing preventive children s services by 30% o Reducing low-income day care vouchers by > 25% o Eliminating funding to 500 soup kitchens and food pantries o Closing 15 senior centers o Laying off 484 fulltime Parks personnel, 19% of the total o Laying off 537 DOT staff, 2/3 reduction in pothole repair 13

16 14 The Governor s school aid cuts would reduce NYC Dept. of Education funding by $493M in 2011 The Mayor says this would mean 8,500 fewer teachers, most through layoffs, and larger classes.

17 Closing the FY 2011 city budget gap Leaving aside the $1.28B hole created by the Governor s budget, the Mayor proposes to close the remaining 2011 gap by: o Eliminating the collective bargaining reserve $ 190M o Reducing debt service through re-financing $ 286M o Apply sales tax to aviation fuel $ 169M o State proposal to apply mortgage recording tax to co-ops $ 50M Subtotal $ 695M PEG cuts (FY 2010 and 2011 impacts) $1,600M Unless some of the Governor s cuts affecting the City budget are averted, the City will also need to identify up to $1.28B in other savings or new resources. 15

18 16 Options for a more balanced approach to gap closing Congress is considering (and the House has passed) an extension in FMAP (which provides an increased federal share of Medicaid) and in State Fiscal Stabilization Funds (which provides local education aid). Legislation passed by the House in December would have provided over $860M to NYC. Savings on contracting-in a range of professional, clerical and maintenance services now contracted out. The City now contracts out $650M worth of these services annually. The State has acted to increase contracting-in to generate savings. Improving the quality and timeliness of real property tax assessments would likely generate additional revenues. Consider other revenue options, particularly restructuring the city s personal income tax. This could be done in a way to reduce taxes for low-income households saddled last year with the city s regressive sales tax increase.

19 While NYC has generated $2.4B over the past two years from ending temporary tax cuts and raising taxes, most has come from regressive taxes Sales and property taxes account for most of the NY state and local tax burden on poor and low-income households. The city and state personal income tax (PIT), particularly with the refundable state and city Earned Income Tax Credits, are moderately progressive but still leave NY with a regressive overall combined state and local tax burden. When NYC raised taxes in 2003, it also raised the personal income tax (PIT) rate by adding two brackets at the top (for joint filers over $150,000 and over $500,000). Because it hasn t adjusted its rate structure for inflation, NYC requires tens of thousands of city residents who have no state or federal income tax liability to pay a NYC income tax. 17

20 Overall, the wealthiest one percent of households pay a much smaller share of their income in state and local taxes than do all other New Yorkers, even with the temporary income tax increase. Taxes as a percent of family income, for non-elderly taxpayers, after federal deduction offset 13% Permanent Law Through October 2009 With Impact of Temporary Income Tax Increase 10% 9.6% 10.0% 11.6% 11.0% 11.1% 10.7% 10.8% 8.4% 7% 7.2% 4% Less than $16,000 $16,000-$33,000 $33,000-$56,000 $56,000-$95,000 $95,000-$209,000 $209,000-$633,000 Over $633,000 Bottom Quintile 2nd Quintile Middle Quintile 4th Quintile Next 15% Next 4% Top 1% Source: Institute for Taxation and Economic Policy, Note: 2007 tax law updated to reflect changes in law enacted through October 2009.

21 State & Local Taxes in 2007 With Temporary PIT Surtax for Shares of family income for non-elderly taxpayers Income Lowest Second Middle Fourth Top 20% Group 20% 20% 20% 20% Next 15% Next 4% TOP 1% Income Less than $16,000 $33,000 $56,000 $95,000 $209,000 $633,000 Range $16,000 $33,000 $56,000 $95,000 $209,000 $633,000 or more Average Income in Group $9,600 $24,400 $43,800 $73,100 $133,000 $338,100 $3,065,800 Sales & Excise Taxes 7.3% 6.0% 4.7% 3.7% 2.8% 1.7% 0.9% General Sales Individuals 3.6% 3.3% 2.8% 2.3% 1.8% 1.1% 0.6% Other Sales & Excise Ind. 1.5% 0.9% 0.6% 0.4% 0.3% 0.1% 0.0% Sales & Excise on Business 2.2% 1.8% 1.4% 1.0% 0.7% 0.4% 0.2% Property Taxes 5.8% 3.8% 3.9% 3.8% 4.1% 3.3% 1.5% Property Taxes on Families 5.3% 3.3% 3.4% 3.4% 3.6% 2.6% 0.6% Other Property Taxes 0.5% 0.5% 0.5% 0.5% 0.5% 0.8% 0.9% Income Taxes 3.5% 0.3% 3.4% 4.7% 5.8% 7.2% 8.6% Personal Income Tax 3.5% 0.3% 3.4% 4.6% 5.7% 7.0% 8.3% Corporate Income Tax 0.0% 0.0% 0.0% 0.1% 0.1% 0.2% 0.4% TOTAL TAXES 9.6% 10.1% 12.0% 12.2% 12.7% 12.2% 11.0% Federal Deduction Offset 0.0% 0.1% 0.5% 1.1% 1.9% 1.1% 2.7% TOTAL AFTER OFFSET 9.6% 10.0% 11.6% 11.0% 10.7% 11.1% 8.4% Note: Table shows 2007 tax law updated to reflect changes in law enacted through October Source: Institute on Taxation & Economic Policy (ITEP), Who Pays? A Distributional Analysis of the Tax Systems in All 50 States. 19

22 20 New York City has a compressed personal income tax structure with a low threshold for the top rate. Single filers Joint Filers Net income bracket Base amount plus rate Net income bracket Base amount plus rate $12,000 or less 2.907% $21,600 or less 2.907% $12,000-$25,000 $349 plus 3.534% over $12,000 $21,600-$45,000 $628 plus 3.534% over $21,600 $25,000-$50,000 $808 plus 3.591% over $25,000 $45,000-$90,000 $1,455 plus 3.591% over $45,000 $50,000 and above $1,706 plus 3.648% over $50,000 $90,000 and above $3,071 plus 3.648% over $90,000 Note: Base amount plus rate is base rate plus 14% surcharge. Source:

23 20% NYC and NYS top personal income tax rates, Projected 18% 16% 14% 12% Combined top rate 10% 8% New York State PIT top rate 6% 4% New York City PIT top rate 2% 0% Sources: NYS Dept. of Taxation and Finance; NYC Office of Management and Budget rates are for single filers with taxable income over $50,000 for city and over $20,000 for state. New top rates for the state (for income over $500,000) are temporary, through 2011 only; the city has not projected any changes.

24 Nearly 80 percent of income growth in New York City between 2002 and 2007 has gone to the wealthiest five percent of taxpayers. 160% 140% 120% Bottom 95 percent of taxpayers Top 5 percent of taxpayers 144% 100% 80% 79% 60% 57% 59% 40% 43% 41% 29% 20% 21% 0% Share of income 2002 Share of income 2007 Share of growth in income Percent growth in total income Source: New York City Independent Budget Office.

25 NYC should reform its PIT structure to add brackets to the top and to take low-income households off the income tax rolls To avert damaging budget cuts and better fund ongoing needs, the City should raise $1 billion through PIT reform. For joint filers with incomes over $250,000, the marginal rate should be increased by 0.6% (from 3.648% to 4.248%), and for those with incomes over $500,000, the marginal rate should be raised by 1.2% (from 3.648% to 4.848%). Those with taxable incomes less than $40,000 should not have to pay a NYC income tax. Such households now pay $150 million to $200 million annually. This tax break would offset the increased sales tax imposed by NYC last year. 23

26 24 Other revenue options that should be considered Eliminate the carried interest exemption on the city s unincorporated business tax (UBT) for private equity and hedge funds. These forms of financial operations have grown dramatically. The U.S. House of Representatives recently voted to end the special federal treatment of carried interest. This could generate $100 million-plus annually. Extend the General Corporation Tax to insurance company business income. Insurance companies are the only large category of businesses currently exempt from city business taxes. The IBO estimates this could generate $200M a year. Secure payments in lieu of property taxes from private colleges and universities. The IBO estimates that the city s private universities and colleges save $300 million yearly from not having to pay property tax. A PILOT at 25% of this amount would yield $75M.

27 II. The Economic Context 25

28 The Economic Context February The recession that began in Dec has been the steepest and the longest since the Great Depression. GDP began to increase in the second half of 2009, but the recovery is extremely tentative. The federal stimulus accounts for much of the GDP growth and the outlook is for very modest job growth and continued high unemployment. The Congressional Budget Office (CBO) forecasts that unemployment will be 10% at the end of 2010 and 9.1% at the end of For the first time in 3 decades, New York City s job loss has been less than the nation s in a recession (-3.9% vs. -5.2%). Still, New York City has lost 147,000 jobs since August Also, the City and the State have seen greater total wage and personal income declines since many high-wage finance sector jobs have been lost. New York City s unemployment recently jumped to 10.6%, surpassing the nation, while unemployment in the rest of the state trails the national rate. In Dec. 2009, 415,000 New York City residents were unemployed. The city s outlook is for modest job growth beginning in the second half of 2010, and for moderate wage and income growth. The Mayor s Preliminary Executive FY 2011 Budget predicts a very gradual job recovery with the Aug peak level of 3.8 million payroll jobs not reached until 2015.

29 The current Great Recession is the longest and steepest recession since the 1930s. 1% Percent of cumulative job losses from peak employment month 0% -1% -2% -3% -4% -5% Group I ('48, '53, '57) Group II ('60, '69, '73) July 1981 July 1990 Current recession, Dec March % Number of months after peak employment month Source: U.S. Bureau of Labor Statistics total non-farm employment (seasonally adjusted).

30 Private payroll employment in New York City and in the U.S. since the start of the recession in December % 1.0% 0.0% Cumulative percent changes -1.0% -2.0% -3.0% -4.0% -5.0% U.S. private employment decline NYC private employment decline -6.0% -7.0% Number of months from December 2007 Source: FPI analysis of NYS Department of Labor and Bureau of Labor Statistics payroll employment data.

31 Cumulative absolute declines in New York City private employment in this recession and the two previous recessions. 0-50,000 Cumulative absolute declines in private employment -100, , , , , ,000 Feb Dec recession Jan Aug recession current recession Aug , Number of months from the peak employment month Source: FPI analysis of NYS Department of Labor payroll employment data.

32 New York City's unemployment rate has risen sharply, and in recent months has been even with or higher than the U.S. unemployment rate. 11% 10% Unemployment rate (seasonally adjusted) 9% 8% 7% 6% 5% U.S. New York City 4% 3% Jan Mar May 2007 Jul Sep Nov Jan Mar May 2008 Jul Sep Nov Jan Mar May 2009 Jul Sep Nov Source: NYS Department of Labor and Bureau of Labor Statistics

33 Although the rate of job loss has been less in New York City than in the nation, 2009 wage and income losses were greater in New York City actual Calendar years, annual percent changes Forecast 2009 estimate United States Real Gross Domestic Product Personal income Total wages Employment New York City Real Gross City Product Personal income Total wages Employment Source: NYC Office of Management and Budget, January 2011 Financial Plan. 31

34 Unprecedented financial bailout measures, but few signs of a broader recovery 32 The largest finance firms have benefitted from hundreds of billions of taxpayer dollars through TARP, several Federal Reserve special programs, and federal guarantees, as well as from the Fed s very low-interest rate and accommodative monetary policy. While these resources have not restored lending throughout the economy or supported a recovery in the real sector, they have made possible enormous Wall Street profits and bonuses. Mayor Bloomberg s January Financial Plan for estimates that 2009 Wall Street profits were a record $58 billion, nearly three times the previous record (2006). Although housing prices have fallen 30 percent and mortgage rates are low, there are still millions of foreclosures in the pipeline. Since housing is such a big part of the economy, turmoil there impedes recovery. Consumer spending accounts for two-thirds of GDP, but high unemployment and high consumer debt burdens will temper consumer spending and restrain the pace of recovery.

35 (in millions of U.S. dollars) Profits at Four Major Firms Headquartered in New York City Firm YTD Goldman Sachs $2,336 $12,452 Merill Lynch (41,336) 2,435 Morgan Stanley 2, JPMorgan Chase Investment Bank (3,524) 7,605 Total (40,337) 22,606 Note: JPMorgan Chase includes Bear Sterns. Profits are before taxes. Source: The Office of New York State Comptroller, The Securities Industry in New York City, Report (Nov. 2009), p

36 $80 New York Stock Exchange Member Firm Profits, $60 $58.1 $40 Billions of dollars $20 $0 $9.8 $16.3 $21.0 $10.4 $6.9 $16.7 $13.7 $9.4 $20.9 $23.1 $11.0 -$20 -$11.3 -$40 -$42.6 -$ Source: Securities Industry and Financial Markets Association, Office of Management and Budget. Figures for 2010 and 2011 are forecast.

37 The Obama stimulus pulled the economy back from the brink, but further actions are needed to produce a sustainable recovery Following the September 2008 financial meltdown, GDP fell at an annual rate of 6 % in the 4 th quarter 2008 and the 1 st quarter Nationally, 625,000 jobs were lost monthly in those six months following the meltdown. NYS lost 180,000 jobs over those six months. In response, the new president pushed through the $787 billion American Recovery and Reinvestment Act (ARRA) in February. ARRA included close to $500B in various forms of spending, and $288B in tax cuts, most geared to moderate- and middle-income families. ARRA injected considerable demand into the economy when it was in a freefall. The Council of Economic Advisers (CEA) estimates that ARRA raised GDP by 2-3 percentage points in the last 3 quarters of 2009, and that it raised employment by million jobs relative to what otherwise would have been. These estimates are within the ranges seen by the CBO. Still, widespread concern that unemployment will remain high for a long time. 35

38 U.S. and New York City employment declines between August 2008 and December Construction Manufacturing Wholesale Trade Retail Trade Transportation, Warehousing, & Utilities Information Finance & Insurance Real Estate & Leasing Professional & Technical Services Management of Companies Admin. & Support Services and Waste Mgmt. & Remed. Servs. Educational Services United States New York City Health Care Social Assistance Arts, Entertainment, & Recreation Accommodation & Food Services Other Services -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% Employment change in percent Source: FPI analysis of NYS Department of Labor payroll employment data.

39 New York City employment declines between August 2008 and December ,700-13,000-13,800-10,400-18,300-5,700-9,500-6,000-21,300-17,200-3,600-2,000-1, ,000 5,700 12,000 Construction Manufacturing Wholesale Trade Retail Trade Transportation, Warehousing, & Utilities Information Finance & Insurance Real Estate & Leasing Professional & Technical Services Management of Companies Admin. & Support Services and Waste Mgmt. & Remed. Servs. Educational Services Health Care Social Assistance Arts, Entertainment, & Recreation Accommodation & Food Services Other Services -40,000-30,000-20,000-10, ,000 20,000 Employment change in percent Source: FPI analysis of NYS Department of Labor payroll employment data.

40 38 New York City's unemployment rate for the fourth quarter 2009 was 10 percent; it was higher for men, blacks, and Hispanics. 18% 16% 16% Unemploy yment rate, fourth quarter of % 12% 10% 8% 6% 4% 11% 9% 9% 13% 6% 6% 14% 11% 6% 2% 0% Source: Fiscal Policy Institute analysis of Current Population Survey data for fourth quarter 2009.

41 16% Unemployment is highest in the Bronx and Brooklyn. 14% 13.9% Unemployment rate, December % 10% 8% 6% 10.4% 11.2% 9.0% 9.3% 9.2% 4% 2% 0% New York City Bronx Brooklyn Manhattan Queens Staten Island Source: New York State Department of Labor.

42 New York City's unemployment is higher among less educated and younger workers. 40% 37% 35% Unemployment rate, fourth quarter of % 25% 20% 15% 10% 10% 13% 12% 13% 7% 20% 8% 9% 11% 6% 9% 5% 0% Total Less than high school High school graduate Some college or associate's degree Bachelor's degree or higher and older All ages Source: Fiscal Policy Institute analysis of Current Population Survey data for fourth quarter 2009.

43 25% Unemployment rates are much higher when discouraged workers and the underemployed are included. 23% 22% 20% U6 rate, fourth quarter of % 10% 17% 16% 17% 11% 10% 5% 0% All Males Females White non- Black non- Hispanic Hispanic Hispanic Source: Fiscal Policy Institute analysis of Current Population Survey data. Note: U-6 is an alternative unemployment rate specified by the Bureau of Labor Statistics that includes marginally attached workers. Asian and other

44 Nearly half of New York City's unemployed have been out of work for more than six months, and one in six for over a year. 60% Unemployed more than 26 weeks Share of unemployed, fourth quarter of % 40% 30% 20% Unemployed more than 52 weeks 46% 46% 47% 21% 17% 12% 45% 18% 43% 17% 51% 22% 52% 10% 0% All Men Women White non- Hispanic Black non- Hispanic Hispanic 0% Asian and other Source: Fiscal Policy Institute analysis of Current Population Survey data for fourth quarter 2009.

45 4 Personal bankruptcies in downstate New York have been rising rapidly and in line with the nation overall. Downstate New York 3.5 U. S. First quarter 2006 = Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q3 Source: American Bankruptcy Institute (ABI). "Downstate" is the Southern District of NY (Bronx, Dutchess, New York, Orange, Putnam, Rockland, Sullivan & Westchester counties) and Eastern District of NY (Kings, Nassau, Queens, Richmond, & Suffolk counties). ABI does not break out New York City. Calculations by Fiscal Policy Institute.

46 44 Business bankruptcies in downstate New York and the United States Downstate New York U.S. 3.0 Business filings per quarter ; Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q3 Source: American Bankruptcy Institute (ABI). Data is for Southern District of NY (Bronx, Dutchess, New York, Orange, Putnam, Rockland, Sullivan & Westchester counties) and Eastern District of NY (Kings, Nassau, Queens, Richmond, & Suffolk counties). ABI does not break out New York City.

47 The total number of food stamp recipients in New York City increased 42 percent since December 2007, while the number of temporary assistance recipients grew only 1.4 percent during the same time. 1,800,000 1,600,000 1,400,000 Food Stamps Total number of recipients 1,200,000 1,000, , ,000 SSI 400, ,000 Temporary Assistance

48 2,950,000 The number of Medicaid enrollees in New York City increased by almost 190,000 people from August 2008 to September ,900,000 2,850,000 2,800,000 2,750,000 2,700,000 2,650,000 Source: New York State Department of Health, Medicaid eligibles and expenditures by county.

49 Major Categories of American Recovery and Reinvestment Act Spending and Tax Cuts, NYS and NYC (as of November 2009) Total New York City Major Categories of ARRA Stimulus Spending 15, ,745.0 ($ millions) Direct to Individuals 8, ,774.9 Making Work Pay Tax Credit 2, Food Stamps 1, Unemployment Insurance 3, ,760.6 $250 Economic Recovery Payments Pell Grants TANF Emergency Contingency Fund (back to school allowance) For Local Government & Schools 5, ,337.8 Medicaid 2, ,918.5 Education 2, ,419.3 Major Infrastructure Programs 2, Weatherization Clean Water & Drinking Water Highway 1, Sources: NYS official Recovery website, Office of the State Comptroller, Open Book New York website (TANF ECF data), and estimates for Making Work Pay Tax Credits and $250 Economic Recovery payments by Fiscal Policy Institute using state figures through November 2009 from the Center on Budget and Policy Priorities. 47

50 48 Impact of the American Recovery and Reinvestment Act (ARRA) in Preventing People from Falling into Poverty Estimated number of persons prevented from falling into poverty in 2009 as a result of seven provisions of ARRA 1 United States 6,000,000 New York State 419,000 New York City 283,000 1 The seven provisions include: Making Work Pay Tax Credit, Child Tax Credit, Earned Income Tax Credit, $25 increase in weekly unemployment insurance benefit, extended unemployment benefits, 13.6% increase in Food Stamp benefits, and one-time $250 payment for retirees, people with disabilities, and veterans. Arloc Sherman, Stimulus Keeping 6 Million Americans Out of Poverty in 2009, Estimates Show, Center on Budget and Policy Priorities (CBPP), September 9, 2009, and unpublished estimates by CBPP.

51 4,150 New York City will need to add more than 400,000 jobs over the next five years to restore jobs lost in the recession and to keep up with labor force growth. 4,050 Employment level needed to keep up with labor force growth and restore jobs lost since August 2008 Total employment (thousands) 3,950 3,850 3,750 3,650 Total employment 3,550 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Source: FPI analysis of Current Employment Statistics and Local and Area Unemployment Statistics.

52 New York City needs 400,000 jobs over the next five years to bring the unemployment rate down to 5.7 percent. To restore the 147,000 jobs lost in the recession (as of December 2009) and to keep up with labor force growth, New York City needs 400,000 jobs over the next five years. The city s labor force grew 1 percent a year from 2000 to This 1 percent growth rate is projected forward for 5 years. Job growth of 400,000 by December 2014 would bring the unemployment rate to 5.7%, a modest goal considering that unemployment averaged 5.4% in 2006 and ,000 jobs a year over 5 years means New York City needs 80,000 jobs a year. This is not unattainable since New York City gained more than 87,000 jobs a year for the 4 years from 1996 to 2000.

53 New York City s economic outlook The pace of national economic growth is the main determinant of New York City s outlook. Severe problems related to housing and consumer debt burdens likely will operate to keep the pace of recovery slower than that following most recessions. The Mayor s Preliminary Executive Budget forecasts moderate real GDP growth of 2.3% in 2010 and 2.8% in The GDP outlook for 2010 is about the same as that of the Congressional Budget Office s January forecast. For both New York City and the U.S., most projections foresee a weak and gradual recovery for the job market, with the unemployment rate not reaching pre-recession levels for several years. The Mayor s Preliminary Executive Budget projects that New York City will see much less than half of the 400,000 growth in jobs needed by the end of 2014 to bring the city s unemployment rate to 5.7%. New York City s wage and income growth are also likely to remain restrained. 51

54 National economic policy considerations With states facing combined budget deficits of $350 billion for 2010 and 2011, and state revenues lagging the recovery, more federal fiscal relief to states (and localities) would help to minimize damaging budget cuts or tax increases that will dampen consumer spending and business investment. Given the prospect of prolonged high unemployment and the long-term damage that would create, a robust job creation program that includes targeted wage subsidies, public service jobs, and infrastructure investments would boost short- and long-term economic growth. 52 Near-term economic recovery is more important than reducing the deficit; there is a real risk that a freeze in government spending now could stall the economic recovery. Finance regulation that protects consumers, pension funds and state/local governments, and that separates proprietary trading from commercial banking (the Volcker rule) would lessen the risks of another damaging financial bubble.

55 The Fiscal Policy Institute is a nonpartisan research and education organization that focuses on tax, budget, and economic issues that affect the quality of life and the economic well being of New York State residents. One Lear Jet Lane Latham, NY Park Place, Suite 701 New York, NY