Mayor Zohran Mamdani on Tuesday said he’d managed to balance the city’s budget, in part by reducing spending on education and a housing voucher program by $1.2 billion.
The revised $124.5 billion spending plan – down from Mamdani’s $127 billion preliminary budget – came after credit agencies dimmed their outlook of New York City’s fiscal future due to a massive budget shortfall.
But stabilizing the city’s finances, as required by law, included a number of controversial measures.
The Mamdani administration will continue to fight the expansion of a rental assistance program that advocates consider a lifeline for many struggling New Yorkers. The city will also delay implementation of a law requiring lower headcounts in public school classrooms as part of an agreement with the state. City officials say they also plan to reduce spending on private tuition for students with disabilities, a decision that could prompt backlash from families.
Mamdani faced the daunting task of filling a $5.4 billion gap, but the cuts represent a reversal of a key campaign promise that will likely disappoint some progressives. Mamdani had previously vowed to take the opposite course of his predecessor Mayor Eric Adams, who fought the Council’s rental assistance plan in court and complained that shrinking class sizes would be too costly.
Mamdani has instead continued to battle the Council in court over rental assistance. On Tuesday, he said the city would be able to spend $519 million less on the existing program as a result of new reforms. The mayor said the city would not cut the overall number of housing vouchers.
Despite the savings, Mamdani said he is spending more on the rental assistance program than Adams. He pointed to “historic” capital investments in affordable housing, including $5.6 billion across five years in the city’s public housing system.
As expected, the mayor abandoned his initial threat to raise property taxes as a way of addressing the budget deficit. The City Council, which negotiates and approves the final city budget, had rejected the property tax proposal after Mamdani announced it.
Gov. Kathy Hochul said the state was sending $4 billion in aid to New York City.
Uncertainty over the budget led ratings agencies to revise the city’s fiscal outlook from “stable” to “negative,” a step that threatens to lead to a downgrade of its credit rating.
The proposed cuts emerged as Hochul announced a revamped package of $8 billion in state aid for the city over two years to help it close its budget deficit. That includes permission for the city to delay payments into the city’s municipal-pension funds, a move that officials said will save the city $2.3 billion in the near term.
The aid package also allows the city to cut $500 million in education spending by delaying a state mandate for the city to reduce class sizes in its schools.
Hochul had previously committed more than $3.7 billion in additional state funding, including $1.2 billion for expanding childcare. She also proposed a tax on expensive second homes that officials say will generate $500 million a year, though Hochul and legislative leaders have struggled to agree on the details of how to implement it.
Mamdani could face pushback for his plan to close the remaining budget gap.
Reducing spending on private school education for students with disabilities has historically been a thorny issue for mayors. Under federal law, students with disabilities are entitled to in-class accommodations or reimbursements for private school. Former Mayor Michael Bloomberg took a more adversarial approach to families seeking private tuition payments, but his successor Bill de Blasio pushed the city to settle cases and not challenge tuition payments every year.
Reimbursements for private tuition for students with disabilities soared over $1 billion last year, according to city budget documents.
Some experts have argued that the city’s spending on private tuition has overwhelmingly benefited wealthier families. A recent Chalkbeat analysis found that nearly 71% of students who won private school tuition reimbursements were white even though the demographic group makes up less than 13% of students with disabilities in public schools.
The Citizen’s Budget Commission, a fiscal watchdog group, criticized Mamdani’s efforts to close the budget deficit.
“The Executive Budget closes over half of the gap with short-term strategies, rather than a full-scale effort to shrink spending that doesn’t deliver for New Yorkers,” said Andrew Rein, the group’s president. "A pension gimmick and temporary plugs exacerbate fiscal problems rather than solve them. Raising already nation-leading taxes risks competitiveness, rather than reinforcing attractiveness.”
