Joseph Krist
Publisher
NEW YORK AND TRUMP CUTS
The New York City Independent Budget Office (IBO) publishing its independent analysis of the Mayor’s Preliminary Budget. New York State receives $93 billion, and New York City receives $9.7 billion in federal funds for programs through various agencies that support New Yorkers. The Department of Government Efficiency (DOGE) has clawed back $81 million in FEMA FUNDS Appropriated by Congress, money that was legally appropriated and dispersed to New York City for migrant shelter services.
The report also notes some emerging trends in terms of the City’s ability to withstand revenue losses. New York City has been able to balance its annual budget by paying next year’s expenses with current year surpluses. In recent years, the amount of surplus the City applies to the following year have decreased. Thus, despite the City being projected to have a $3.8 billion surplus this year, its fiscal position is tightening. Last year, the surplus was $4.4 billion and in 2023, it was $5.4 billion.
The City’s financial challenges extend beyond federal policy and reliance on past surpluses. Other financial management challenges include chronic underbudgeting, rising overtime costs, and funding ongoing education programs with time-limited COVID-19 funds that have expired. Last year, IBO reported that it had found a $605 million shortfall in the Fiscal Year 25 Executive Budget due to unaccounted overtime. than $840 million than budgeted in 2025.
Persistent budgeting issues—such as underestimated program costs, excessive overtime spending, and imprudent budgeting—combined with potential federal funding cuts and economic uncertainty, put the City’s ability to weather near-term shocks and maintain long-term fiscal stability at risk.
CONGESTION FEE RESULTS
New York’s congestion pricing plan raised $48.6 million in tolls during its first month. The first month’s revenue will pay for $11 million of expenses related to setting up tolling cameras and other parts of the system, and environmental projects to address concerns about urban pollution that might arise because of changing traffic patterns. That leaves about $37.5 million that can be applied toward financing a slew of major transit repair projects.
Congestion pricing is projected by the MTA to generate about $500 million per year during its first three years, $700 million per year after the first toll increase, and close to $1 billion a year after the next one. The tolls are expected to increase for most drivers to $12 in 2028, and to $15 in 2031. Some 68 percent was charged to passenger cars, while 9 percent was billed to commercial trucks, and 1 percent to buses and motorcycles. Roughly 22 percent of the tolling revenue came from taxis and for-hire vehicles, which are charged a smaller, per-trip fee that is added to the fare and paid by passengers.
CHICAGO BORROWS FOR TODAY
The Mayor’s proposed $830 million bond issue has been approved. The idea of bonding to meet budget shortfalls is not new, certainly not in Chicago. What is different is that the amortization schedule for the bonds does not contemplate any principal repayment for 20 years. It may be the ultimate “kick the can down the road” use of bonding for operations. Effectively, the City is operating under the strains of prior mismanagement which has driven up the City’s debt burden. Now, another generation will find itself paying for the mistakes of the past.
The approved issue comes with some strings. The Mayor had to agree that the money could not be used to cover controversial non-teacher Chicago Public Schools pensions. He continues to push for another bond to pay off those expenses. The Mayor says the City is facing the imminent prospect of closing out the 2024 budget with a deficit if the Board of Education doesn’t agree to make a $175 million pension payment by March 30. If the Board doesn’t, the City will have to reach into reserves to cover the shortfall.
That would increase the downward pressure on the ratings of both the City and CPS. CPS has $9.3 billion in long-term debt. The proposed bond for CPS would be some $242 million. The city is facing the March 30 deadline because its 2024 fiscal year ended Dec. 31 and it has 90 days to close out its books. The city is legally obligated to make the contribution and did so through 2020.
The debt and pension issues will likely cap the City’s ratings where they currently are at best.
BUDGETS IN THE MIDST OF DISRUPTION
This time of year is always interesting, sometimes fraught and always dramatic as the states undertake their annual budget process and rituals. The process always entails more than money as session lengths are tied to fiscal deadlines so this is the opportunity to continue or reverse policies. This year the normal pressures associated with budget making are being ratcheted up by the fiscal uncertainty being driven by the Trum administration.
First, what is the employment/economic impact of proposed cuts to the federal workforce. Take Virginia, where some 144,000 residents in the greater Arlington area are federal employees. Will those cuts also wind up impacting employment in the private sector jobs tied to the federal government – advisers and consultants from contractors? That’s where the fired today/rehired tomorrow moves currently underway are so damaging.
The same questions can be asked of any locality with a substantial civilian but federal employment base. Many communities benefitted from the location of federal offices both large and small. Regional offices for things like the Social Security Administration, Veterans Affairs have supported communities effectively in lieu of other economic development. Another is the importance of federal leased buildings in many places.
Federally leased office space under long-term leases has often been seen as a stabilizing factor for some development projects. The musings from the DOGE point to the potential savings associated with mass layoffs and breaking leases for things like offices.
FEDERAL FUNDING ROULETTE
In fiscal year 2024, Maine received and spent about $4.8 billion in federal funding, not including funds distributed to nonprofits, the state university system or quasi-state entities such as MaineHousing, according to the Maine Department of Administrative and Financial Services. In education alone, the state is distributing $250 million in federal funds to school districts in the current fiscal year. Academic programs for disadvantaged students and English-language learners, special education, nutrition, and career and technical education are what tend to be funded from those funds.
DISASTERS
Interstate 40 is set to open to traffic on Saturday for the first time since Hurricane Helene. The repairs have been complied such that there is one lane in each direction extending approximately 12 miles from Cold Springs Creek Road (Exit 7) in North Carolina to Big Creek Road (Exit 447) in Tennessee. Speeds are limited to 35 mph. Standard 18-wheelers allowed; no wide loads are permitted.
It was a massive job. The hurricane washed away about 3 million cubic yards of dirt, rock and material from the side of I-40. Crews installed 90,000 square feet of soil-nail walls across the 10 different damage locations in less than 130 days. They also drilled nearly 2,100 feet of nails and fortified 4 miles of the shoulder for truck traffic.
The project was executed as a P3. NCDOT entered a CMGC (Construction Manager/General Contractor) contract for the permanent reconstruction of I-40.
PORTS
The threat of a longshoremen’s strike at the East and Gulf Coast ports is now gone with the latest settlement between the ship and port operators. This follows settlement of a strike at West Coast ports in mid-2024. Now the shadow over ports and their workers relates to tariffs. Will tariffs actually happen and if they do what will be the impact on shipping volume? Whatever declines happen they will be compared to a robust base of recent operating data.
The Port of Los Angeles reported record volumes for the month of January, processing 924,245 industry-standard containers compared with 855,652 a year earlier. This also follows an exceptionally busy 2024 — the port handled more than 10.3 million units, marking its second-best year. The Port of Long Beach also reported its strongest January on record, as well as its second-busiest month ever. The number of containers processed increased 41.4% to 952,733 containers from 674,015 last year. The port said the results largely were driven by retailers moving cargo ahead of the anticipated tariffs on goods from China, Mexico and Canada.
The Northwest Seaport Alliance said combined January container volumes from the ports of Seattle and Tacoma, Wash., increased 25.4% year over year to 264,869 TEUs from 211,283. Port Houston volume increased 7% year over year to 356,407 containers from 332,961. Those volumes were also 5% higher than the 340,418 containers processed the previous month. This follows a record-breaking year with the port processing 53,066,219 tons of cargo in 2024.
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