Mamdani Announces Balanced Budget Without Cuts

New York City Mayor Zohran Mamdani released a city budget on Tuesday that completely eliminates what he has described as a $12 billion deficit left over from the Eric Adams administration, the largest gap since the Great Recession. The budget does not include the property tax increases Mamdani threatened earlier in the year or any new taxes on ordinary New Yorkers, and the mayor’s office says there are no cuts to city services for those in need.

Solving the budget riddle, which is still subject to negotiations with the city council and the resolution of a state budget that funnels billions to the city, clears a major hurdle that threatened Mamdani’s expansive agenda before it even got started. The mayor had planned for several new investments, including universal child care, free and fast city buses, a pilot of five public grocery stores, and much more. Some of these priorities are embedded in the new budget.

The deficit closure is achieved in part through addressing what Mamdani has called gimmicks and making more forthright assessments of what the city can bear. But it also adopts the kind of government efficiency critics often argue that democratic socialists refuse to provide.

“Many said the only way out of this was slashing services and passing an austerity budget. We rejected that,” Mamdani said in a video accompanying the announcement. “Our city is now on firm financial ground.”

Much of the budget hole was filled by changing the relationship between New York state and its largest city. Earlier on Tuesday, Mamdani and Gov. Kathy Hochul announced a total of $8 billion in state assistance for New York City over the next two fiscal years, achieved through reducing costs on the city while formalizing the expansion of universal free child care (worth $1.2 billion annually) and making investments in education and infrastructure.

“I have been committed to ensuring New York City succeeds, because a strong and stable City means an even stronger New York State,” Hochul said in a statement.

The state, which must approve nearly all new city taxes, has allowed one major tax on second homes valued over $5 million, known as the pied-à-terre tax. This has angered ultra-wealthy New Yorkers like Citadel founder Ken Griffin. Mamdani has added another tax on wealthy individuals, by limiting something called the unincorporated business tax (UBT), which is largely a benefit for sole proprietorships and LLCs.

But the pied-à-terre tax raises an estimated $500 million in revenues per year, just a fraction of the $12 billion needed, and the limitations to the UBT would yield $68 million. Mamdani and state leaders dealt with the bulk of the budget deficit through other means.

One provision that will have a legitimate effect on city residents is a negotiated delay to a class size reduction law that would have kicked in for the upcoming school year, requiring 80 percent of city classrooms to have between 20 and 25 students, depending on the grade level. Mamdani has been negotiating for the city for an additional two years to meet the mandate, while state legislators have talked about a percentage compliance reduction (for example, 70 percent of classrooms might comply next year).

Mamdani’s office said it was working through the final details with state officials and labor unions. The administration has committed to hiring 1,000 more teachers to begin to implement the class size reduction, but what they call a more realistic timeline will save $500 million in the next fiscal year.

Full compliance with the original timeline would have cost $1.7 billion per year for new teachers alone. Most of the city’s high-poverty schools are under the class size cap; the delay would primarily be for higher-income schools.

The Mamdani administration has also been talking about restructuring the timing of certain pension payments, while making no changes to benefits for retirees or current employees. Some have criticized this step as increasing long-term obligations while freeing up money in the short term. The final deal makes no changes to a mandatory contribution to city pension funds, while smoothing out the Unfunded Accrued Liabilities (UAL) payment, which is based on an actuarial analysis of future needs. The current schedule can fluctuate by hundreds of millions of dollars every year; Mamdani extends those payments by five years and makes them consistent, while banking the difference for the next fiscal year. City pension funds would continue to be funded above the national average, Mamdani’s office says.

CityFHEPS, a rental assistance program for poor New Yorkers that the city council expanded in 2023 but which has yet to be implemented, will also see changes that the Mamdani administration characterizes as addressing chronic underbudgeting and reining in cost growth, both by centralizing support functions, limiting emergency hotel use, and using other tools to help residents find permanent housing. The city has not been realistic about increases in CityFHEPS spending, the mayor pointed out in his preliminary budget. The proposed savings would total about $519 million in the next fiscal year.

Mamdani has faced protests from housing advocates after his administration filed an appeal in a lawsuit initially pursued against Adams to implement the expansion. The mayor’s office says settlement negotiations for the lawsuit are ongoing.

Another significant chunk of the deficit is reduced by making city government more efficient. The city found $1.77 billion in operational savings by reducing overtime, negotiating better rates on outside contracts, modernizing software and technology, consolidating leases and giving up excess property, phasing out programs nobody was using, claiming revenue owed to the city, and better estimating actual expenses.

In addition, the budget proposal would reduce so-called Carter cases, whereby families of students with disabilities can get their private-school education expenses reimbursed by the government if the city itself cannot provide a public education for those students. New York City spent $1.3 billion on Carter cases last year, so investing in special education to accept students with disabilities in public schools actually saves money. The administration estimates an increase in Carter spending this year but it will drop in 2027, with $149 million in net annual savings.

The proposed budget also restores $2 billion to the city’s rainy day fund and adds $5.2 billion to the Retiree Health Benefit Trust.

City Council Speaker Julie Menin, who would negotiate the final budget with Mamdani, released the following statement: “We are pleased with Governor Hochul and the state legislature’s commitment to providing the City with billions in additional funds and savings … We have important work ahead to advance key priorities including affordability, public transit access, and investments in the services New Yorkers rely on every day.”

Mamdani’s administration believes that any attempt to address the affordability crisis will only succeed if it is honest about past budgets that papered over significant gaps. Incorporating realistic and predictable estimates can identify what resources are legitimately available for the rest of the agenda.

In the video, Mamdani touts “investments in citywide trash containerization, cheaper groceries, safer streets, [and] relief for taxi drivers,” along with spending on libraries and parks, public-housing repairs, and capital improvements at the City University of New York.

“We’re proud to put forward a budget for the working people of this city,” he adds. “And we’re going to do it again next year.”