1. New York City & New York State Budget Briefing June 23, 2015

2.  Budget Calendars  Economic Indicators  New York State  New York City Overview

3. Fiscal year begins April 1 Key budget milestones  January – Executive Budget  March – Adopted Budget  July – First Quarterly Update  October – Mid-year Update City and State Budget Calendars New York StateNew York City 3 Fiscal year begins July 1 Key budget milestones  January – Preliminary Budget  May – Executive Budget  June – Adopted Budget  November – Quarterly Modification

4. Strong Jobs Recovery in NYC, Rest of NYS Lagging 4 Non-farm Employment Growth Since 2007

5. High Growth in Low-Paid Jobs 5 Change in NY Jobs from 2007 to 2013 (2013 Average Annual Wage on Top of Bars) $27,847 $46,835 $82,969 $51,408 $31,453 $162,653 $57,128

6. New York State Division of Budget Optimistic Economic Forecasts 6 Annual Employment Growth Annual Personal Income Growth New York City Office of Management and Budget

7. New York State Budget 7

8. Composition of NYS Receipts Fiscal Year 2016 8 $151B

9. Composition of NYS Spending Fiscal Year 2016 9 $152B School Aid, $26.0B (17%) Medicaid, $52.0B (34%) Wages and Fringe Benefits, $20.1B (13%) Other Education Aid, $9.6B (6%) Other Health, Social Welfare Aid, $13.4B (9%) Other Local Aid, $10.9B (7%) Other Agency Expenses, $7.8B (5%) Debt Service, $5.1B (3%) Capital Projects, $7.2B (5%) CBC “Big Three” 65% of State Spending

10. High Medicaid, Education Spending with Average Outcomes 10 (Commonwealth Fund State Health System Performance, 2014) 19 Ranking out of the 50 states plus D.C. High Medicaid Spender (spending per enrollee, FFY2011) $8,901 $5,790 Average Health Outcomes $19,818 $10,700 High Education Spender (public preK-12 spending per pupil, SY2013) Average Education Outcomes (Education Week Achievement Score, 2014) C-

11. State Medicaid Costs Contained over Short-term, Federal Funds to Rise 11  State share of Medicaid below ~4% growth cap since FY 2012  Influx of federal funds - $6 billion from Affordable Care Act in FY 2016 budget, $8 billion federal waiver to be allocated over five years based on performance NYS Department of Health Medicaid (dollars in billions) Medicaid Redesign Team begins in 2012 State Enhanced FMAP Federal

12. High Growth in School Aid Despite “Cap” 12  School aid cap linked to personal income growth adopted in 2011 has been broken for 3 consecutive years  $2 billion Smart Schools Bond Act funding to be allocated  Focus on education reforms Percent Change in School Aid, School Years 2005 to 2018 Projected

13. Tight Control of Agency Budgets  Wage freeze in FYs 2012 through 2014; 2% raises in 2015 and 2016  Increased employee health insurance contributions (12-16% for single, 27- 31% for family), new pension tier adopted for FY 2012 13 $23.2M

14. Deferred Pension Contribution 14  Amortization scheme authorized during recession  $713M deferral in FY 2015 and $395M planned in FY 2016  Projected to continue through FY 2020

15. Unspecified Savings Generate Future Surpluses 15  Financial plan shows surpluses growing to $1.6 billion in FY 19  But “surpluses” depend on unspecified savings from maintaining 2% state spending growth  $1.6 billion “surplus” in FY 19 is truly a $4.2 billion gap  Out-year “surpluses” used to justify tax cuts last year “Surplus” vs. True Gaps (dollars in millions)

16. Questionable Priorities for $5.4B Settlements Windfall Unresolved issues with broader plans  $1.3B for Thruway Authority  $250M for MTA Penn Station Access  $400M for upstate hospitals Broadly-defined and undefined uses  $1.5B Upstate Revitalization Fund  $500M for broadband  $165M for upstate infrastructure  $150M for shared services, government consolidation  $150M Long Island “Transformative” Fund  $150M for emergency response 16 One-time uses, but many unclear investments  $850M reserve for Medicaid dispute with federal government

17. Continued Growth in Tax Breaks for Economic Development 17 Tax Breaks for Economic Development (dollars in millions) Brownfields Film Empire Zones Empire Zones Investment Tax Credit Excelsior START-UP NY $1,190 $946

18. Large Increase in Capital Spending Total Planned Capital Spending by Function (dollars in millions) 18  $4.5B settlement funds, plus $750M for MTA, $1B for hospitals, $400M for NYC and Long Island “Transformative Investments,” $200M clean water fund  Design-build extended for 2 years, study required $8.3B $11.2B $11.1B$11.3B$11.4B

19. CBC’s Concerns 19  Long-term impact of new federal funding for Medicaid through $8B waiver and ACA  Large increases in school aid without reforms to funding formulas  Deferral of pension payments despite economic recovery and large bank settlements  Misleading presentation of “surplus” and desire to spend it  Dubious approved and future uses of large financial settlements  Growth in economic development capital, business tax incentives despite lack of documented success

20. Composition of NYC Revenues Fiscal Year 2016 20 $83.1B

21. Composition of NYC Expenditures Fiscal Year 2016 21 Personal Service: 52%

22. Large Growth in FY 2015 & FY 2016 New Initiatives Implemented & Contracts Settled 22

23. Health Insurance and Debt Service Drive Growth 23

24. 54% of Healthcare Savings are from Baseline Cost Projections 24 Savings Targets

25. The Citywide Savings Program (dollars in millions)20152016201720182019TOTAL Total Savings($589)($466)($641)($627)($584)($2,906) Debt Service($241)($159)($393)($365)($345)($1,502) Agency Savings($348)($306)($248)($262)($240)($1,404) Federal/State Adjustments44%11%2% ($199) Adjustments/Re-estimates26%25%20%16%18%($303) Revenues19%12%11%10% ($181) Efficiencies/In-sourcing11%35%45%51%47%($500) Procurement0%18%22%21%23%($222) 25

26. FY16 Headcount 14,400> than FY14 Stays at that level for the length of the plan 26

27. Ten-Year Capital Strategy Totals $83.8 Billion 27

28. Significant Increase to Accommodate New Priorities 28 AGENCY Increase Over 2014 Strategy ($ in billions) NOTE Housing Pres. & Dev.$4.6 Mayor’s Housing Plan Transportation$4.4 Bridge investments; Road repair acceleration Education$3.4 Increase in repair and rehabilitation work Citywide Equipment$3.1 ONENYC energy efficiency; building retrofits Economic Development$3.0 $2 billion Neighborhood Revitalization Fund Environmental Protection$2.3 Green Infrastructure Program; Sewer expansion Health & Hospitals Corp.$1.5 Federal funds for Sandy-related reconstruction Parks and Recreation$1.5 Doubling investment for repair/reconstruction Courts$1.1 Mandated program NYCHA, MTA, Libraries$2.1 Response to agency requests ALL AGENCIES$30.1

29. Affordability is a Concern: Debt Burden Is High According to Metrics Used by Rating Agencies Debt Outstanding, FY2016Debt Service, FY2016 29 Note: Does not include debt of the New York City Municipal Water Finance Authority.

30. Additional Risks: HHC & NYCHA HHC  HHC’s operating deficits grow from $618m in FY 2016 to $1.5b in FY 2019 (cash basis)  Corrective actions to reduce deficit by $475m in FY 2016 are questionable  City’s plan for HHC to assume health service provision for correctional facilities could further strain resources NYCHA  NYCHA’s operating gap grows from $150m in 2016 to $194m in FY 2019  $17b in capital needs  Mayor providing over $100m in annual operating support  NYCHA & City released 10- year strategic plan; includes CBC’s recommendations 30

31. CBC’s Concerns Operating Budget  Additional expenditures will likely be added  Savings Program is too small, not sufficiently focused on efficiencies that produce recurring savings to boost reserves  Majority of healthcare savings counted toward MLC & City targets are artificial  HHC & NYCHA’s financial challenges persist Capital and Debt  Capital plan is very large, debt service is growing  No use of pay-as-you-go capital to limit debt increases  Reporting on capital spending is inadequate 31

32. Questions/Comments? 32