The annual budget dance between New York City's mayor and the City Council officially kicked off this week, and this time they'll have a third party to contend with: a federal government bent on cutting trillions of dollars in federal spending.
City budget experts say Mayor Eric Adams' $115 billion proposal for the coming fiscal year leaves little to no room to maneuver should the Trump administration and Congress exact cuts to programs including Medicaid, emergency management, public safety and education. The city, and in some instances, the state, would have to make up for the shortfall — and it’s not clear how city officials plan to do that.
“About 9% of the city's budget comes from federal funds,” Councilmember Justin Brannan, the Council's finance committee chair, said during the Council's first preliminary budget hearing this week. “If even a small fraction of that were cut, there would be a hole in our budget that would make the Titanic iceberg blush.”
With an election-year budget proposal from Adams that adds nothing to the city's reserves — while leaving some of its initiatives, like CityFHEPS housing vouchers, underfunded by potentially crippling margins — it’s a scenario that could pit the survival of some programs against others.
The most glaring example would be the city’s reliance on the Federal Emergency Management Agency for $80 million in asylum seeker-related spending, which the Trump administration clawed back. The federal government has thus far not been ordered to return the funding, but a lawsuit is proceeding through the courts.
Louisa Chafee, director of the city's Independent Budget Office, a watchdog agency, said the city Department of Education gets 7% of its budget from federal funds. The Department of Social Services gets 14%, while the Department of Housing Preservation and Development owes 58% of its budget to the federal government, which pays for rental vouchers, housing inspections and the development of affordable housing.
Deep cuts to Medicaid would force the city to figure out how to make up for a gap that would be felt sharply in its public hospitals, where many patients rely on that funding for care. In another scenario, any reductions in Title I funding for schools — given to those with high percentages of students from low-income families — would affect the nation’s largest public school system, which also receives separate federal assistance for food programs. And any federal cuts to public housing or Section 8 programs would likely be disastrous for a city already in the throes of an affordability and housing crisis.
“The risks to such critical functions such as classroom instruction, safety-net supports and affordable housing are really clear,” Chafee said. “The city relies on federal funding to support Homeland Security initiatives, medical and educational research, child care, public transport, climate resiliency, and many other functions.”
It’s not clear how the Adams administration plans to handle those risks. But Jacques Jiha, director of the mayor's Office of Management and Budget, assured Council Speaker Adrienne Adams that his office was working on a contingency plan in the event of deeper cuts of the sort proposed by Elon Musk's Department of Government Efficiency.
“We don't want to send a signal to Washington that they could cut our budget with impunity,” Jiha said.
He conceded there was a degree of paralysis involved in the uncertainty, due to “the lack of clear and unambiguous guidance” from Washington.
“We cannot at this moment in time make a blanket statement or blanket promise that we could backfill every single one of any potential actions that could impact New York City,” Jiha told councilmembers.
The Trump administration’s cuts so far have made mounting budget fears an impending reality. Andrew Rein, president of the nonprofit Citizens Budget Commission, said in an interview that the city was already “underbudgeting to a degree that's massive, historically unprecedented.”
In Rein’s view and that of other budget experts, the city has for years been “living on fumes” by over-relying on budget surpluses from previous years.
“Eating up the surplus and now the risk of federal cuts, that is not a pretty picture,” he said.
Chafee urged the Council to take the Independent Budget Office's advice and save some of the city’s funding surplus for rainy-day emergencies.
Those familiar with the mayor and Council's yearly tug of war over spending priorities know the federal cuts add an unusual dynamic to negotiations. Councilmembers have also called on Adams to add funding to programs, like 3-K education and parks, that many residents consider vital.
“To state the obvious,” Chafee told the Council, “it’s starting to rain.”
