Business as usual is not a strategy to deal with looming federal budget cuts. New York City should act now — while it still has flexibility and resources — to protect our quality of life, our economy, and essential services for vulnerable New Yorkers.
Proactive, strategic steps can reduce possible negative impacts on New Yorkers. The range of possible federal cuts is broad and the magnitude uncertain. But one thing is clear: The city simply won’t be able to fill every budget hole or increased need resulting from federal actions. It will have to make choices.
At risk is some portion of the $7.4 billion of federal aid the city receives, which supports vital services like child care vouchers, family shelters, school food programs, and education for low-income students.
But risks extend far beyond the funds the federal government provides the city budget. Federal reductions could also hit public housing, hospitals, and health insurance coverage, and individual New Yorkers who directly receive federal benefits, such as the 1.8 million who receive SNAP. On top of that, federal regulatory and economic policy changes, including tariffs, could push up inflation and tip the nation into a recession, as some economists warn.
The New York City Housing Authority, which depends on $1.4 billion annually in federal operating support, is vulnerable. Another $2 billion of federal dollars fund more than 96,000 housing vouchers NYCHA administers for New Yorkers.
Cuts could also flow from New York State. The state receives roughly $91 billion annually from Washington, most of this supporting Medicaid, the Essential Plan — health insurance coverage for lower income residents and some immigrants — and education. Federal cuts to those and other programs could push Albany to reduce its state aid to the city or shrink services that benefit city residents, such as unemployment insurance and parks.
The cascading impact of Medicaid and Essential Plan cuts may sap NYC Health + Hospitals revenue, but increase demand for its services if New Yorkers lose public health insurance coverage — a double whammy.
Unfortunately, the city’s recent fiscal choices have weakened its ability to respond to challenges. Spending has increased faster than revenue, and unreasonable budget estimates paint a rosier picture than reality demands. The city spent $1.1 billion more on fiscal year 2024 obligations than it took in. And underbudgeting has grown to $4 billion annually, drastically understating the size of future gaps, which may exceed $10 billion even without federal cuts or a recession.
The city will have to make hard decisions. It may rightly choose to shift funds from other programs to cover federal reductions to critical services, meaning federally funded programs are not the only ones at risk. That’s why the focus must be on preserving what matters most — protecting high-need New Yorkers, sustaining our economy, and ensuring the quality of life we expect.
To do that, the Citizens Budget Commission urges the city to take five critical, proactive steps.
First, hold the line on new spending. The Executive and Adopted Budgets should not add or expand programs. The city should not grow obligations it is not able to afford.
Second, buttress the fiscal year 2026 General Reserve — unallocated money in next year’s budget. Adding at least $1 billion would help absorb the immediate blow of federal cuts.
Third, strengthen the Rainy Day Fund, adding $500 million. The fund should be reserved for a short-term emergency like a recession, not to temporarily mitigate recurring federal cuts.
Fourth, restrain spending growth with actions identified centrally and by agencies with a “Program to Eliminate the Gap.” The city should streamline administrative overhead and increase efficiency to minimize service disruptions and shrink programs that provide less value to residents.
Finally, end the budget-estimating gimmickry. New Yorkers deserve accurate and reasonable estimates of revenue and expenses, as required by the City Charter.
These recommendations do not call for blind austerity. Rather, they are designed to strategically manage risk, and build resilience. That way, when faced with cuts or economic shocks New York will be ready to respond without jeopardizing the services essential to health, housing, safety, and education for all New Yorkers, especially the most vulnerable.
The time to act is now. Waiting until the storm hits will only worsen the consequences for millions of New Yorkers. The city government can protect the core that defines this great metropolis, but only with foresight and discipline.
New Yorkers have weathered crises before with grit and resilience. With smart, timely budgeting, we can do it again.
Rein is president of the Citizens Budget Commission.
