Question

In: Economics

How is the New York City Budget determined?

How is the New York City Budget determined?

Solutions

Expert Solution

The budget process for the City of New York is a year round process that is centered around a fiscal year, not a calendar year. New York City's fiscal year begins on July 1st and ends on June 30th. The New York City Charter ("the Charter") vests the responsibility for preparing an annual expense and capital budget with the mayor. The mayor must then submit the expense and capital budget to the City Council for its review and adoption.

Each budget must consist of several parts: the expense budget, which sets forth proposed appropriations for the operating expenditures for municipal services including debt service; the capital budget and program, which sets forth proposed appropriations for capital projects for the ensuing fiscal year and the three succeeding fiscal years; and the revenue budget, which shall set forth the estimated revenues and receipts of the city. In addition, the expense budget is further broken down into a contract budget, which can be viewed as a detailed portion of each agencies' other than personal services expenditures for contractual services that are personal service in nature.

Since the fiscal crisis which occurred during the f1970's, the City is required to maintain a budget that is balanced in accordance with generally accepted accounting principles pursuant to State law. In addition, pursuant to the New York State Financial Emergency Act for the City of New York, the City is required to prepare a four-year financial plan, which is reviewed and revised on a quarterly basis and which includes the City's capital, revenue and expense budget projections and outlines proposed gap-closing programs for fiscal years with projected gaps.

The Process

Preliminary Budget
According to the Charter, the preliminary budget for the ensuing fiscal year shall be submitted to the City Council by the mayor no later than January 16th. The Council then has until March 25th to hold public hearings on the program objectives, and fiscal implications of, the preliminary budget and any statements of budget priorities of the community and borough boards, the draft ten-year capital strategy and any borough president recommendations. These hearings are usually held during a two week period in which agency officials, as well as representatives of the borough and community boards may come and testify regarding their needs for the coming fiscal year. In addition, any member of the public who wishes to testify may do so as well.

The Charter requires the Council to issue its findings and recommendations related to the preliminary budget by March 25th. The Council usually issues a comprehensive response to the proposed preliminary budget which includes various policy recommendations and expenses and revenue proposals. In addition, a summary of all the budget hearings held by each of the Council's committees is prepared outlining the issues raised and recommendations and requests made by each committee.

Executive Budget
The Charter requires that by April 26th of each year the mayor must submit to the Council a proposed executive budget, along with supporting schedules that outline all the proposals in the executive budget in detail. A budget message is also submitted by the mayor that includes an explanation of the major programs, projects and objectives of the budget, the general fiscal and economic conditions of the city, the tax and fiscal base of the city along with explanations of the various components of the executive budget. It is then up to the Council to conduct public hearings in the same manner in which it does for the preliminary budget. After these hearings have taken place, negotiations begin between the Mayor's Office of Management and Budget and the City Council's Finance Division to come up with a negotiated balanced budget. The Council may increase, decrease, add or omit any unit appropriation for personal or other than personal services, omit or change any terms or conditions related to any appropriation. The Council then votes on the budget and any proposed recommendations of the Borough Presidents by June 5th. The mayor, no later than five days after the Council votes on the budget, may veto any increases or additions the Council has made to the budget and any terms or conditions proposed by the Council. However, if the Council decides to make decreases to the budget the mayor cannot take any action upon such decreases. The Council may override a mayoral veto by a two-thirds vote of all the Council Members.


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