NYC faces a potential fiscal cliff with a nearly $10 billion deficit by 2026

Total revenue is expected to drop by $10.5 billion in fiscal year 2023, according to a new report titled “New York City’s Financial Plan Review.”

The city’s fiscal position “improved significantly” last year, the report added, but that was due to a number of one-time factors, including higher-than-expected tax collections, extraordinary federal aid for COVID relief and record pension returns due to stock market gains. . Many of these factors are beginning to reverse, the consultant said.

“While the City’s published shortfalls are managed according to historical standards … these factors could create risks that significantly worsen the City’s budget volatility and put the City on a path to unaddressed structural budget imbalances,” the report said.

New York City Mayor Eric Adams said at a press conference on Monday that the city is preparing to “get into a financial typhoon.”

“If I don’t make smart decisions now, am I going to wait until I’m on the cliff or avoid the cliff?” Adams said.

Adams last week asked city agencies to cut spending by 3%, but without cutting services. However, going forward, further spending cuts, in addition to prioritizing critical programs, will be part of balancing the city’s budget, according to the Citizens’ Budget Committee, a non-partisan organization.

“The magnitude of the potential gaps and the specter of other lighter risks means that the City will need to continue to see an improvement in its economic recovery, and related revenues, despite slower growth in the rest of the country, to avoid the situation. We need to focus on revenue improvements, service adjustments and how to close the budget. difficult decisions,” the report said.

The report indicates that a shortfall could affect the budget for city services, including police, fire, sanitation and public transportation.

In particular, the comptroller’s office said the Metropolitan Transportation Authority, or MTA, “financial uncertainty combined with debt payments” could force it to close future budget gaps “through service cuts, higher-than-anticipated fare increases or delays to critical capital projects.” .” The MTA also updated its financial plan in July which showed that fare revenue is expected to return more slowly than projected in the February Plan.

The report also said many of the city’s new services, like the expansion of the City’s pre-school program for 3-year-olds, were funded with federal aid that is no longer available.

The city’s economic woes were initially fueled by the pandemic, but are now more or less exacerbated by lower tax revenues and the potential cost of out-of-budget labor contracts. Its pension funds also fell far short of the expected rate of return in the 2022 financial year, increasing the burden on the council’s contributions.

At the same time, New York City faces labor market challenges that have seen a slow recovery, further threatened by a possible recession. This is leading to record vacancies in commercial properties – adding to budget shortages – which the council expects to peak in 2023.

– CNN’s Mark Morales contributed to this report