Familiar budget games threaten the City’s ability to prepare for looming risks

Key Findings

• In recent years, the Mayor’s budget proposals have increasingly used budget games that obscure the City’s actual fiscal resources and spending priorities. Recent Executive Budgets have underestimated the upcoming fiscal year’s revenue by an average of $4.3 billion—5.6 percent.
• Recent budgets have also overestimated spending. The Mayor’s January 2025 Preliminary Budget made $6.4 billion in downward revisions to spending—especially on asylum seekers, city worker payrolls, and in-year reserves—across fiscal years 2025 and 2026. Other fiscal observers have identified nearly $3 billion in additional overestimates.
• Overestimated spending has been partly offset by underestimates of spending on core services. The Preliminary Budget made $4.7 billion in upward revisions to spending, especially social services, education, and overtime.
• These misleading fiscal tactics threaten the City’s ability to respond to the risks posed by the federal government and economic uncertainty. A budget that does not reflect actual revenue and spending positions allows the Mayor to dramatically modify the budget over the course of the year. This raises the risk that critical services that are inadequately funded in the Adopted Budget will remain underfunded in the event of a revenue downturn.

FPI Recommendation

The Adopted Budget should anticipate realistic revenue and spending on core services while maintaining a flexible reserve to prepare for fiscal uncertainty. The budget response put forward by the City Council takes important steps toward these goals.

Introduction

In the next week, the Mayor will release his Executive Budget proposal for fiscal year 2026. The Mayor’s Preliminary Budget, released in January 2025, suggests that the Mayor is intent on continuing budget games that jeopardize the City’s ability to respond to the dual risks posed by a hostile federal administration and an uncertain economy. A better approach, like the one put forward by the City Council, would include more realistic revenue, spending priorities that invest in core services, and flexible reserves that positions the City to weather fiscal uncertainty.

In recent years, the Mayor has ramped up misleading budget practices by underestimating revenue and obfuscating spending priorities by over-estimating likely spending in some areas and under-estimating other areas. Recent Executive Budgets have underestimated the upcoming fiscal year’s revenue by an average of $4.3 billion—5.6 percent. Further, recent budgets have inflated some costs, especially for asylum seeker services, while underestimated other spending, especially for education and social services. Taken together, these practices falsely deflate the City’s apparent ability to fund services and create a misleading picture of its spending priorities.

The failure of recent budgets to reflect spending priorities and available revenue hand greater power to the Mayor to adjust the budget throughout the year. These tactics were used to justify unnecessary budget cuts last year. In the year ahead, they threaten the City’s ability to respond to looming federal and economic risks. First, these practices make it difficult to gauge the actual level of unallocated fiscal reserves that can be used to fill funding needs. Second, they raise the risk that underfunded but essential services, especially in education and social services, remain underfunded in the event of a revenue downturn by the Mayor simply holding spending to its inadequate Adopted Budget level.

Instead of continuing these misleading tactics, the City should adopt a budget that reflects its full fiscal capacity and commits to funding actual spending needs. The City Council’s budget response takes important steps towards these goals. The Council revised expected revenue up by $2.3 billion, a more realistic level. Further, the Council corrects for misleading underestimates of social services spending, committing to adequately fund those programs. Downward revisions of overestimates more than offset these upward revisions. Taken together, these actions create fiscal space to spend $2.2 billion on Council priorities and a surplus of $1.9 billion to be available as fiscal risks emerge throughout the year.

Familiar budget games threaten the City’s ability to prepare for looming risks

Key Findings

• In recent years, the Mayor’s budget proposals have increasingly used budget games that obscure the City’s actual fiscal resources and spending priorities. Recent Executive Budgets have underestimated the upcoming fiscal year’s revenue by an average of $4.3 billion—5.6 percent.
• Recent budgets have also overestimated spending. The Mayor’s January 2025 Preliminary Budget made $6.4 billion in downward revisions to spending—especially on asylum seekers, city worker payrolls, and in-year reserves—across fiscal years 2025 and 2026. Other fiscal observers have identified nearly $3 billion in additional overestimates.
• Overestimated spending has been partly offset by underestimates of spending on core services. The Preliminary Budget made $4.7 billion in upward revisions to spending, especially social services, education, and overtime.
• These misleading fiscal tactics threaten the City’s ability to respond to the risks posed by the federal government and economic uncertainty. A budget that does not reflect actual revenue and spending positions allows the Mayor to dramatically modify the budget over the course of the year. This raises the risk that critical services that are inadequately funded in the Adopted Budget will remain underfunded in the event of a revenue downturn.

FPI Recommendation

The Adopted Budget should anticipate realistic revenue and spending on core services while maintaining a flexible reserve to prepare for fiscal uncertainty. The budget response put forward by the City Council takes important steps toward these goals.

Introduction

In the next week, the Mayor will release his Executive Budget proposal for fiscal year 2026. The Mayor’s Preliminary Budget, released in January 2025, suggests that the Mayor is intent on continuing budget games that jeopardize the City’s ability to respond to the dual risks posed by a hostile federal administration and an uncertain economy. A better approach, like the one put forward by the City Council, would include more realistic revenue, spending priorities that invest in core services, and flexible reserves that positions the City to weather fiscal uncertainty.

In recent years, the Mayor has ramped up misleading budget practices by underestimating revenue and obfuscating spending priorities by over-estimating likely spending in some areas and under-estimating other areas. Recent Executive Budgets have underestimated the upcoming fiscal year’s revenue by an average of $4.3 billion—5.6 percent. Further, recent budgets have inflated some costs, especially for asylum seeker services, while underestimated other spending, especially for education and social services. Taken together, these practices falsely deflate the City’s apparent ability to fund services and create a misleading picture of its spending priorities.

The failure of recent budgets to reflect spending priorities and available revenue hand greater power to the Mayor to adjust the budget throughout the year. These tactics were used to justify unnecessary budget cuts last year. In the year ahead, they threaten the City’s ability to respond to looming federal and economic risks. First, these practices make it difficult to gauge the actual level of unallocated fiscal reserves that can be used to fill funding needs. Second, they raise the risk that underfunded but essential services, especially in education and social services, remain underfunded in the event of a revenue downturn by the Mayor simply holding spending to its inadequate Adopted Budget level.

Instead of continuing these misleading tactics, the City should adopt a budget that reflects its full fiscal capacity and commits to funding actual spending needs. The City Council’s budget response takes important steps towards these goals. The Council revised expected revenue up by $2.3 billion, a more realistic level. Further, the Council corrects for misleading underestimates of social services spending, committing to adequately fund those programs. Downward revisions of overestimates more than offset these upward revisions. Taken together, these actions create fiscal space to spend $2.2 billion on Council priorities and a surplus of $1.9 billion to be available as fiscal risks emerge throughout the year.