Introduction to the Pressure on Adams
Mayor Eric Adams is coming under intense pressure to increase the city’s reserve funds as the threat grows of both big cuts to federal aid and an economic downturn that would reduce tax revenues.
The Call for Increased Reserves
City Comptroller Brad Lander Wednesday called for the mayor to set aside about $1 billion in case of a recession and an additional $1 billion to be used in the event of cuts to federal aid, steps the mayor declined to take in his preliminary budget in January. The fiscal watchdog City Budget Commission meanwhile called for at least $1 billion in reserves at a City Council hearing on how to prepare for the Trump administration’s threatened cuts in aid. The Independent Budget Office is also among the voices calling on the administration to reconsider its economic and tax projections and to make sure its estimated spending is accurate.
Concerns Over Economic Downturn
“The Adams administration has done nothing to reckon with the choppy financial waters that we’re in because the increased likelihood of an economic downturn or recession threatens to reduce jobs in New York City, threatens to reduce tax revenues, and to blow a hole in next year’s city budget,” said Lander, who is also running for mayor. “The city needs to take the economic conditions we’re in far more seriously.”
State Budget Considerations
Meanwhile, there appears to be little interest in taking similar steps in the state budget still to be negotiated between the legislature and Gov. Kathy Hochul, who proposed a budget of $252 billion in January that depends on $91 billion in federal aid, primarily for health care and education. Instead, the final budget from Albany is expected to increase spending by as much as 10% and include some form of Hochul’s promise for a $3 billion tax rebate to return to taxpayers the excess sales tax the state collected because of inflation.
Need for Contingency Planning
“There is no question that the state should proactively plan and should be putting aside at least $2 billion in a contingency fund and protecting its rainy day reserves,” said Andrew Rein of the Citizens Budget Commission. The state reserves are about $21 billion.
Pressures on the City Budget
How this will all play out is uncertain, as the mayor and Council endure heavy pressure in an election year to increase spending on popular programs and prepare to cover any federal cuts to vital assistance like food aid, as well as deal with the new economic outlook. For example, on Wednesday the mayor announced he would restore $167 million he had left out in January for the 3K public preschool program. Mayor Eric Adams highlighted his religious faith during his weekly City Hall press conference, April 8, 2025. Credit: Alex Krales/THE CITY
Economic Fallout and Reserve Management
Those assumptions are clearly endangered by the economic fallout from President Donald Trump’s on-again, off-again tariff policy, Lander said Wednesday. If there is no economic downturn, Lander contends, tax revenues will likely exceed the estimates in the mayor’s preliminary budget. A modest downturn could result in revenues for the next fiscal year coming in about $4 billion less than expected. A more severe recession could result in a shortfall of $5 billion for next year and another $5 billion in 2027, he said. The mayor’s January budget had projected a $5 billion gap for 2027, which means the city could be forced to deal with a shortfall of almost 10% of the budget, forcing many difficult decisions.
Current Reserve Status
The city currently boasts $8 billion in reserves in various funds. While the amount is a record in dollars, it hasn’t been increased in recent years and has become a smaller percentage of total spending. The city also has no guidelines for when and how to use reserves despite calls from Lander and groups like the CBC to use economic indicators or specific revenue shortfalls to dip into the money.
Federal Aid and Its Impact
The amount of money at stake is enormous. The city expects more than $7 billion in federal aid in next year’s budget, a CBC analysis of grants of more than $100 million shows. Almost $2 billion goes to the Department of Education, $1.6 billion to Social Services and $1.3 billion for Administration for Children’s Services. Councilmembers Justin Brannan (D-Brooklyn), right, and Lincoln Restler (D-Brooklyn) speak at City Hall ahead of a budget hearing on the impact of President Donald Trump’s proposed budget cuts, April 16, 2025. Credit: Ben Fractenberg/THE CITY
Conclusion
The pressure on Mayor Eric Adams to budget for potential Trump funding cuts and a recession is mounting. With the city’s financial future at stake, it remains to be seen how the administration will respond to the growing demands for increased reserve funds and a more proactive approach to economic uncertainty.
FAQs
- Q: What is the current amount of reserve funds the city has?
A: The city currently has $8 billion in reserves in various funds. - Q: How much is the city expected to receive in federal aid for the next year?
A: The city expects more than $7 billion in federal aid. - Q: What are the potential impacts of an economic downturn on the city’s budget?
A: A modest downturn could result in revenues for the next fiscal year coming in about $4 billion less than expected, while a more severe recession could result in a shortfall of $5 billion for next year and another $5 billion in 2027.
