The majority of New York’s spending went to fund missing revenue for operating the Departments of Correction, Fire, Police, Sanitation and Education. It was similar in other cities.
In all, New York said it experienced a revenue loss of 8.3%, or $5.9 billion over two years—about the total amount of federal Coronavirus State and Local Fiscal Recovery Funds it received.
The loss might appear dramatic, but it is actually far less than in other large cities. Both Houston and San Antonio, for example, experienced revenue loss of more than 25% in 2020 and last year.
Yet New York’s unemployment rate, a proxy for economic recovery, showed that it was still lagging behind peers including Chicago, Dallas and Los Angeles.
After New York put a little more than half its funds in revenue replacement, it allocated a bit more than one-quarter of the relief money to businesses and nonprofits, through programs such as the $100 million New York City Small Business Resilience Grant, as well as to household and worker assistance.
The question now is what to do with the rest of the money.
As of April 1, $3 billion was in unobligated funding, and New York is taking a cue from the federal government and beginning to think about how those funds can go toward long-term investments in public services. They include mental health and senior services, as well as housing, legal and employment help for low-income and homeless residents. A federal formula for using the money to replace lost tax revenue leaves the exact amount that can be used for various purposes somewhat muddy, because it depends on how much of a revenue shortfall the city will experience this year and next, DiNapoli said.
“In the event a recession takes hold in the near future, collections could decline sharply in late 2022 or in 2023, which would appear to increase the allowance for revenue replacement under the presumption created by the [U.S. Treasury] Department’s latest rule,” he said.