With coronavirus wreaking havoc on the economy as the city and state are working on their budgets, leaders are starting to prepare for a major downturn.
Gov. Cuomo said Tuesday he’s asked the state comptroller to evaluate the outbreak’s impact on the state budget.
“You know what’s going on in the stock market. You also have what’s going on the economy overall, right? Conventions are being stopped, tourism is down, hotel bookings are down, restaurants are down,” Cuomo said in Albany. “So we just did the budget projection estimates. The world then changed since then, so I asked him for any advice that he might have."
Comptroller Tom DiNapoli’s spokesman acknowledged the request from Cuomo, saying, “the outlook has changed dramatically since the release of the consensus revenue forecast by the governor and the legislature.”
Earlier this year, Cuomo unveiled a proposed $178 billion budget. A projected deficit of $6 billion, blamed on runaway Medicaid spending, already posed a huge problem for lawmakers. But they had no way of predicting the coronavirus, too.
The deadly disease on Monday caused the Dow Jones Industrial Average to incur its worst drop since the financial crash of 2008, among other economic woes, raising fears of a recession.
Still, the city’s top elected officials aren’t talking about budget cuts, at least not yet.
“The stock market dynamic [is] deeply troubling,” Mayor de Blasio said at a press conference at Bellevue Hospital in Manhattan. ”We’ve got to see this play out — clearly could have an impact on revenue.
“We’re very worried about our businesses and drop-off in sales for them and obviously, that has revenue ramifications in many ways.”
Taxes account for about 60% of the city’s revenue, with the rest coming from state and federal grants, along with fines. While the coronavirus might not have an immediate impact on relatively stable sources of revenue like the real estate tax, experts are concerned that a drop in consumer spending could put a serious dent in the amount of sales tax collected.
“We are having conversations about the budget,” Council Speaker Corey Johnson said at the press conference. “How is this potentially going to affect the revenue that comes into the city, what adjustments are we making, are we doing additional investments in public health, in the other areas that we need?”
Political scientist John Mollenkopf of CUNY predicted the Council may have some tough choices to make.
“This could be a pretty substantial hit on the budget and it’s not something we’re particularly well prepared for,” he said, noting the steady increase in city budgets since de Blasio took office in 2014 during a period of economic growth.
“If the tax revenues fall substantially from what they’re projected to be, that’s going to impose serious fiscal stress on the city, which it hasn’t experienced in quite some time,” Mollenkopf added.
Since the coronavirus hit the country, the state has allocated $40 million in emergency funding to the crisis. The city has spent $7.3 million on the outbreak to date, most of it through the Health Department, according to the mayor’s office.
“Every dollar we saved on snowstorms is probably going to be put into the coronavirus,” said Councilman Ben Kallos (D-Manhattan), who chairs the Contracts Committee.
“There’s a real opportunity to find places where there has been waste in our budget and generate some cost savings,” he added.
City Comptroller Scott Stringer said he’s monitoring the situation.
“We need more recurring agency savings and a budget cushion of at least 12% to hedge against unexpected economic downturns and protect our most vulnerable New Yorkers,” he said in a statement. "While at this stage it is too early to see measurable impacts in economic impact data, we will continue to monitor daily and revise our economic and revenue forecast as appropriate later in the spring.”