New York City is facing a $2.2 billion budget shortfall in this fiscal year and a projected $10.4 billion gap the following year, according to a new analysis released Friday by new Comptroller Mark Levine, who blamed years of underbudgeting and reliance on one-time fixes.
Levine said the gaps, the largest the city has faced this late in the budget cycle since the Great Recession, are not the result of an economic downturn, but of spending decisions made under the previous mayoral administration of Eric Adams.
“This wasn’t caused by a bad economy — it’s the result of budgeting decisions from the previous administration that we must now deal with,” Levine said.
Mayor Zohran Mamdani, responding to Levine’s assessment of the city’s finances, said responsibility extends beyond City Hall, placing blame on both his predecessor and former Gov. Andrew Cuomo, whom he defeated in last year’s mayoral race.
“New York City is facing a stark fiscal challenge, due to Mayor Adams’ deep fiscal mismanagement, former Governor Cuomo’s decade-long exploitation of our city, and the resulting imbalance between how much New Yorkers give to the State, and how much we receive in return,” said Mamdani in a statement. “Based on our Administration’s assessment so far, the gaps for fiscal years 2026 and 2027 are in line with the City and State Comptrollers’ findings.”
Cuomo’s spokesman, Rich Azzopardi, said in a statement that Mamdani’s claims were “untethered from the facts.”
“Under Governor Cuomo, state aid to New York City schools rose 68 percent, and the state absorbed billions in New York City Medicaid cost increases,” Azzopardi said. “If Mamdani thinks the system is unfair, he’s had five years in office to do something about it.”
Levine’s analysis expands on financial data released in December and comes as the city enters budget season, with the state budget due next week and Mayor Zohran Mamdani’s preliminary city budget expected in February. Levine said the scale of the projected gaps presents “serious challenges” for the city’s finances.
Despite some signs of labor-market weakness, Levine said the city’s broader economic outlook remains relatively strong. Tourism, Broadway attendance, commercial leasing, and a strong stock market have continued to drive revenue growth, undercutting claims that the looming budget gaps are tied to an economic slowdown.
Instead, Levine pointed to projected spending levels in FY26 that exceed expected revenues and a failure to fully account for known, recurring expenses.
His office identified $3.8 billion in unbudgeted costs in FY26 alone, with even larger gaps projected in subsequent years. Those costs include rental assistance, overtime, homeless-shelter expenses, public assistance, special education due-process cases at the Department of Education, and contributions to the Metropolitan Transportation Authority.
At a press conference in Lower Manhattan on Friday, Levine said his office’s projections significantly exceed those published by the city’s Office of Management and Budget just weeks earlier, and he warned against continued reliance on one-time budget solutions.
“We want the city to end the practices that got us into this mess — reliance on one-shots, and particularly this long-running practice of underestimating expenses that we know we’re going to incur,” Levine said.
Levine said that growing the city’s economy is one of the few ways to ease future budget gaps without resorting to cuts or other painful tradeoffs, arguing that increased business investment and job growth would generate additional revenue.
As City Hall and Albany prepare their respective budgets, Mayor Mamdani has proposed raising taxes to fund major policy initiatives and help close future budget gaps. Mamdani has backed increasing the state’s corporate tax rate for large companies to 11.5%, up from 7.25%, matching New Jersey’s top rate, and imposing additional income taxes on New Yorkers earning more than $1 million annually.
Gov. Kathy Hochul has ruled out raising taxes on high-income earners in this year’s budget, though she has previously left open the possibility of changes to corporate income taxes. Hochul did not propose any tax increases in her State of the State address this week.
Following that speech, the Citizens Budget Commission, a fiscally conservative nonprofit watchdog, backed Hochul’s stance, warning that higher taxes could weaken New York’s competitiveness.
“Our future depends on residents and businesses coming, staying, paying taxes, and creating jobs here,” CBC President Andrew S. Rein said in a statement. “This requires the State to focus its money and management on programs that deliver results.” The group also criticized the governor’s proposals for lacking clear cost estimates, saying the financial impact of new initiatives will only become clear once the executive budget is released.
After Hochul’s State of the State address on Tuesday, Mayor Mamdani reaffirmed his view that raising taxes on the wealthiest New Yorkers and large corporations will be necessary to close future budget gaps and protect basic city services. Speaking on Friday at an unrelated press conference, Mamdani said the city’s fiscal challenges reflect mismanagement by the previous mayoral administration and a long-standing imbalance in the city’s financial relationship with the state, noting that the city contributes 54.5% of the state’s tax revenues, but only receives. 40.5% in return.
Mamdani said his administration plans to press Albany for changes during the budget process, arguing that NYC contributes a disproportionate share of state tax revenues relative to what it receives in return: “This is the beginning of the budget process. We will continue to make the case. What we will always make clear is that it’s the health and well-being of New Yorkers that we’re advocating for.”
Levine cautioned Friday that policy expansions without sustainable funding could further strain the city’s finances. He cited a potential expansion of a housing voucher program — currently tied up in court — which his office estimates could cost between $6 billion and $20 billion over five years if implemented. Those costs are not reflected in the city’s current financial plan.
Healthcare costs pose another growing risk, Levine said, confirming that the city’s Health Insurance Stabilization Fund is insolvent and carries outstanding obligations that will need to be resolved through negotiations with municipal labor unions. While retirees should not worry about losing benefits, he said the city must begin accounting for rising healthcare costs starting in 2027.
Before leaving office, former Comptroller Brad Lander released an audit finding that the joint health insurance fund was insolvent and mismanaged, with roughly $3.1 billion in unpaid liabilities. The audit recommended dissolving the fund and budgeting for health insurance costs annually.
Despite the bleak projections, Levine said the city does not need to abandon ambitious goals, though he cautioned that major initiatives may need to be phased in over multiple years and grounded in more transparent accounting.
“This does not mean we still cannot act boldly,” Levine said.
Levine framed Friday’s report as an opening step in what will be months of negotiations across city and state government.
“In February, Mayor Mamdani and his administration will have the difficult responsibility of producing a balanced preliminary budget,” Levine said. “I’m committed to working alongside Mayor Mamdani and leadership in Albany to ensure the city can make good on its financial obligations and deliver a balanced budget this year and next.”
Separately, Levine was also asked about decisions made under his predecessor, including the city maintaining pension fund investments in Palantir Technologies, whose software has been used by federal immigration authorities and Israeli weapons manufacturers.
In response, Levine emphasized the comptroller’s role as a fiduciary overseeing one of the largest public pension systems in the world, saying his office favors shareholder engagement over divestment when addressing controversial corporate practices. He noted that the city’s pension portfolios collectively exceed $300 billion and include a wide array of publicly traded stocks, including companies “that I and others find have objectionable practices.”
“We are aggressive shareholders,” Levine said. “We own. We have a vote for the board of directors, and we have the power to engage in shareholder activism.”
Levine said his office is preparing its shareholder activism agenda for 2026 and indicated that concerns about federal immigration enforcement would factor into that work.
