Two clear paths emerge from major fiscal challenge
Two Paths Forward in Major Fiscal Crisis
On Tuesday, Mayor Zohran Kwame Mamdani released a $127 billion preliminary budget proposal for fiscal year 2027, confronting what he characterized as an inherited fiscal crisis and presenting the city with two starkly different approaches to resolve the challenge. The budget unveils a sophisticated response to what the administration discovered was years of underbudgeted essential services including rental assistance, shelter operations, and special education that created a two-year fiscal gap of approximately $12 billion when the mayor took office.
Upon taking office, the Mamdani Administration identified patterns of systematic underfunding across critical city services. Working with agency leadership, officials launched aggressive cost-saving measures including creation of Chief Savings Officer positions within every city agency tasked with finding recurring efficiency improvements. These savings initiatives are projected to total $1.77 billion across the two fiscal years.
The Preferred Path: Progressive Revenue Solutions
Mayor Mamdani stated that the most sustainable and fairest solution requires raising revenue from the wealthiest New Yorkers and most profitable corporations while ending what he calls the drain of city resources to state government. He articulated this approach as fixing an imbalance between what the city provides the state and what the city receives in return.
The mayor requested authority to increase personal income taxes on New Yorkers earning more than $1 million annually and to raise taxes on the most profitable corporations. This approach would recalibrate the city’s long-standing fiscal relationship with the state, addressing what city officials have long characterized as unfair cost-shifting from Albany to city government.
The Path of Last Resort: Property Taxes
Absent new state revenue authority, the city would face what Mayor Mamdani described as a much more harmful path: raising property taxes and drawing from budget reserves. The preliminary budget assumes a 9.5 percent property tax rate increase that would generate $3.7 billion in fiscal year 2027 alone. This would be the first citywide property tax rate increase since the Bloomberg administration in the early 2000s.
The proposal includes drawing down $980 million from the city’s Rainy Day Reserve Fund in fiscal year 2026 and an additional $229 million from the Retiree Health Benefit Trust in fiscal year 2027 to balance the budget as legally required. Budget watchdogs have expressed concerns about using reserves outside of recession conditions.
Strategic Investments Within the Budget
Of $14 billion in city-funded agency expense changes across both fiscal years, the vast majority addresses previously underbudgeted needs. Approximately 4 percent of changes, or $576 million, supports targeted new investments. These include $100 million in fiscal year 2026 for enhanced snow removal capacity; $5 million in fiscal year 2026 for warming centers and shelter connections for homeless New Yorkers; $11.9 million in fiscal year 2027 for new Street Health Outreach and Wellness mobile units and a new Bridge to Home site for people living with severe mental illness.
The budget allocates $5.3 million in fiscal year 2026 and $38 million in fiscal year 2027 for 200 new attorneys and 100 support staff to reduce tort liability and advance city affordability efforts. Additionally, the city more than triples baseline funding for HRA’s Community Food Connection program with $54 million in new fiscal year 2027 funding.
Capital Planning and Housing Preservation
The preliminary five-year capital plan totals $113 billion in all-funds and includes $662 million in fiscal year 2027 to modernize and preserve more than 3,200 affordable housing units. The budget also provides $48.2 million starting in fiscal year 2027 to fully fund the renovation and expansion of Bellevue Hospital’s Adult Comprehensive Psychiatric Emergency Program, addressing critical mental health infrastructure gaps.
Read more on NYC Mayor’s Office and NYC Office of Management and Budget websites. For analysis on city fiscal policy, see coverage from Empire Center and Citizens Budget Commission.
