New York City’s adopted $119.7 billion budget for fiscal year 2026 is balanced, but faces risks from uncertain federal funding and a slowing economy, according to a report released by State Comptroller Thomas P. DiNapoli.
“New York City’s finances in fiscal year 2025 benefited from better-than-projected revenues and savings from the lower cost of services for asylum seekers,” DiNapoli said. “Employment and tax revenues continue to grow, buoyed by a financial sector that has generated near-record profits in recent years. While this has enabled the city to fund substantial spending growth, given the systemic restructuring of federal fiscal policy underway and the risk of its lasting consequences, the city is vulnerable to reductions both in federal spending and perhaps from state responses to this retrenchment. It is concerning that the city made no efforts to codify plans to bolster reserves or set aside additional funds in its rainy-day fund.”
The report highlights that New York City has spent more than it collected in revenue over each of the last three fiscal years. The surplus used for prepayments declined from $6.1 billion in FY 2022 to $3.8 billion in FY 2025. Although some pressures on city finances have eased—such as reduced costs related to asylum seekers—several under-budgeted expenses remain, requiring either new revenue sources or further cost savings for future budgets.
For five consecutive years, the city collected over $3.5 billion more in tax levies than initially projected when adopting its budget. Since June 2024, revenue estimates—including taxes and miscellaneous income—increased by $3.9 billion for FY 2025, $3.5 billion for FY 2026, $2.1 billion for FY 2027, and $2.4 billion for FY 2028.
During FY 2025, nearly $3.9 billion was added in new agency spending and council initiatives for FY 2026—an amount greater than additional city-fund revenues identified during that period. The budget gap was closed mainly through surplus prepayments and revising down expected asylum seeker costs by $1.8 billion.
DiNapoli’s report does not expect significant increases in asylum seeker costs beyond current projections but notes it is unlikely further savings here will be enough to close upcoming budget gaps.
Projected out-year gaps now total $17.1 billion across three years including FY 2029—averaging about 6.2% of city fund revenues—which marks an improvement compared with last year’s average gap of 6.8%. If contingencies set at $1.45 billion per year are not needed elsewhere, these could reduce average gaps to about 4.6% of revenues.
However, DiNapoli warns that addressing recurring costs one year at a time understates future deficits: “The city expects major agencies, including the Department of Social Services, the Police Department and the Fire Department, to see city-funded spending decline in FY 2026,” he said; his report suggests this expectation may not be realistic.
The budget also assumes declines next year in overtime pay as well as cash assistance and housing voucher program expenses without providing explanations—a risk factor cited by DiNapoli’s office which could mean gaps reach as high as $10.3 billion by FY 2027.
Given ongoing unpredictability around federal economic policy decisions, DiNapoli recommends New York City prepare for scenarios where resources may shrink at all government levels by limiting new discretionary spending unless funding sources are clear and developing programs focused on efficiency-driven cost savings.
He concludes that continued economic growth depends on maintaining high-quality public services while adapting strategies to manage potential fiscal challenges.
