The coronavirus outbreak that swept through New York City this spring has left a crippling financial crisis in its wake, as local leaders warn they may have no choice but to make huge cuts to transit, education, emergency response and a torrent of other government services unless they receive billions of dollars in new aid.
As soon as Monday, about 22,000 municipal workers here could receive pink slips informing them that they will be laid off in October unless New York City can identify other ways to help close its approximately $8 billion revenue gap. The looming cuts may not spare even some front-line first responders, lawmakers and union leaders say, illustrating the magnitude of the budget crisis facing the country’s largest metropolis.
Adding to New York’s woes, hotel stays are down, millions are working remotely or out of a job entirely and as many as one-third of its 230,000 small businesses could close for good, according to the Partnership for New York City, a nonprofit organization that represents local firms. The devastation has left no part of the economy untouched, even hamstringing the sprawling network of bus and train lines that make up the Metropolitan Transportation Authority.
Without a $12 billion cash infusion, MTA leaders sounded their own dire alarm this week: They may have to scale back some services as much as 40 percent, leaving riders facing longer waits and postponing some sorely needed repairs to the subway’s aging infrastructure.
Even in a quarrelsome city like New York, there’s widespread agreement about a solution: additional help from Washington, where federal lawmakers have spent months discussing the need to authorize billions of dollars for cash-strapped local governments that saw revenue decline precipitously as a result of the coronavirus pandemic.
But that money increasingly seems out of reach for New York and thousands of states, counties, cities and towns nationwide facing their own financial headaches. Drastic measures once viewed as unlikely doomsday scenarios have become more real and urgent, threatening not only the day-to-day functions of New York City, but also the millions of people it serves.
“In July, I was cautiously optimistic,” MTA Chairman Patrick Foye said about the prospect of help from Washington. “Obviously that cautious optimism proved to be wrong. The federal government on these issues looks to be broken.”
Once the coronavirus arrived in the United States, it delivered a crippling blow to New York, turning the city’s density into a deadly vector for infection. Shutdowns ordered by Gov. Andrew M. Cuomo (D) and other leaders brought the city to an abrupt halt, arresting the spread of the virus at the cost of the state’s economy.
The financial pain has been particularly pronounced in New York City. Broadway went dark this spring, and even as the outbreak wanes, theaters haven’t been able to revive operations safely. Major events that bring travelers to the city annually, from concerts and baseball games to the U.N. General Assembly, have been canceled or postponed. Some restaurants that shuttered never reopened. Some offices that sent their employees home never brought them back. And some workers who lost jobs were never rehired in a city where the unemployment rate last month hovered around 20 percent, data show.
All of those factors have eaten into New York City’s coffers, as tax revenues fell $7.1 billion short of initial projections, the city’s comptroller estimates. In real estate alone, there was a 32 percent decline in the number of sales involving commercial buildings and multifamily rental properties over the first half of 2020, according to the Real Estate Board of New York, a trade association for the industry. The city also took in $326 million less in taxes through the first half of this year, compared with the level of activity six months before the pandemic, the group found in data released Friday.
The unexpected shortfalls forced New York Mayor Bill de Blasio (D) and the New York City Council to slash $5 billion from the budget adopted in June for the new fiscal year beginning in July. It included across-the-board cuts to city agencies as well as other more specific — if not controversial — reductions, including trash pickup on public walkways and arts education at public schools. The spending blueprint also specified the need to slash $1 billion in labor costs, a move that the mayor and others warned would result in harmful layoffs unless they could find help from the state or federal government.
“The city is in financial trouble,” said Henry Garrido, the executive director of District Council 37, which represents 150,000 workers in schools, hospitals, parks and more as the city’s largest public employee union. Garrido criticized de Blasio for the potential cuts to the workforce, urging him to use other means, such as retirement incentives, to trim costs.
De Blasio declined to be interviewed for this story. His spokesman, Bill Neidhardt, said in a statement that they are negotiating with leaders in Albany on a potential solution. Absent that, he said, the widespread cuts to the city’s workforce would have “direct effects across New York, dragging down the largest city and economic engine in the country.”
This week, the mayor and the city’s unions signaled that they could still agree to forestall them, perhaps through cuts to municipal workers’ hours, pay or benefits. But it won’t be easy on the employees it affects, nor will it spell the end of New York’s crisis. With the state facing its own budget shortfall, lawmakers in Albany could cut off some funding to the city and other municipalities. That could compound the pain in areas such as education, forcing New York City schools to cut 9,000 jobs, the chancellor of the public school system, Richard Carranza, has said in recent days. The New York City Department of Education did not respond to a request for comment.
Similar budget pressures loom over the MTA, which relies heavily on fares and tax revenue to pay for operations. With ridership severely depressed, the system is in need of $12 billion through 2021. Foye, the MTA chairman, delivered the grim news during a presentation Wednesday to the transit agency’s board, just weeks after two credit-rating agencies downgraded the MTA’s ratings in response to its deteriorating finances.
“The effect on ridership and revenues is substantially worse than the Great Depression,” he said in an interview.
Subway ridership at the peak of the coronavirus crisis fell by 95 percent, Foye said, and remains down by 75 percent in August. The MTA has considered hiking fares and implementing service reductions, including those that help the elderly and people with disabilities use the transit system. The MTA is likely to require layoffs, cuts to maintenance and the cancellation of planned expansions of the subway system, including a line that runs under Second Avenue that is years behind schedule.
The magnitude of the financial pain has added urgency to New York City’s pleas for money. De Blasio has petitioned the state for the authority to borrow as much as $5 billion to pay for the city’s operating costs. “That is the cleanest, fastest way to avert the layoffs,” the mayor said at a news conference Tuesday.
The idea has at times received an icy reception in Albany, where an oversight board has kept watch over New York City’s finances since it faced the prospect of bankruptcy in the 1970s. Like many cities struggling to cover the costs of the coronavirus, New York must confront the reality that bonds and other financing mechanisms eventually will come due — and could result in unanticipated cuts to city services or tax increases on residents to pay it back.
“Long-term debt for operations should always be a near or last resort,” said Andrew Rein, the president of the Citizens Budget Commission, a fiscally conservative organization that has opposed the mayor’s proposal on borrowing. “It pushes off current bills to future taxpayers. … It locks up money in future budgets.”
On Capitol Hill, meanwhile, New York City’s pleas for federal aid have failed to shake federal lawmakers from their months-long stalemate. House Democrats included $1 trillion for cash-strapped cities and states, as well as billions of dollars in additional money for transit systems, as part of the coronavirus relief package adopted earlier this year. But Senate Republicans balked at that plan, opting to provide far less for local governments and zero new dollars for transportation agencies beyond what Washington already has provided. The GOP’s opposition is rooted in the belief that only Democratic-led cities and states are in need of federal assistance.
New York’s leaders are quick to point out that the city had been hiring, spending and growing before the coronavirus decimated its coffers. Foye said the MTA entered the year with an $80 million operating surplus. It benefited from more than $3 billion in federal coronavirus relief but exhausted the money in July as revenue continued to fall during the pandemic.
“It has become so political in the sense of blue states versus red states. We don’t do that with a hurricane or a storm,” said Rep. Max Rose (D-N.Y.), whose congressional district includes part of Brooklyn. “That conversation never happens. Why is it happening now?”