Mayor Mamdani's Budget Challenge, with Andrew Rein

Summary

Max Politics: “Mayor Mamdani’s Budget Challenge” with Andrew Rein
January 30, 2026
Host: Ben Max
Guest: Andrew Rein, President of Citizens Budget Commission (CBC)

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Overview of Episode

This episode dives deep into the fiscal crisis facing New York City as new Mayor Zoram Mamdani, less than a month into his term, confronts substantial budget gaps he attributes to mismanagement by former Mayor Eric Adams. Ben Max and policy expert Andrew Rein of the Citizens Budget Commission unravel the specifics of the city’s multi-billion dollar budget challenges, dissect the roots of the crisis, and debate possible paths forward—including the mayor’s push for new state-authorized taxes, priorities for spending cuts, potential efficiencies, and the fraught city-state negotiations under Governor Hochul’s leadership.

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Key Discussion Points & Insights

1. Context: Timeline and Budget Process

• City Budget Calendar:
  • Mayor Mamdani’s preliminary budget due Feb 17, 2026 (delayed extension by City Council).
  • Annual “tin cup day” (when localities plead for state funding) scheduled for Feb 11, 2026.
  • Final city budget to be adopted by end of June; state budget ideally done by April 1.

“He [Mayor Mamdani] is making his case during the state budget process because he wants that help.” — Andrew Rein [04:42]

2. The “Adams Budget Crisis” Press Conference [07:01–12:38]

• Mamdani’s Move: Declared an “Adams Budget Crisis,” blaming predecessor Adams (and, to some extent, Andrew Cuomo) for hidden fiscal holes and underbudgeting services.
• Political Strategy: Standard for a new executive to use the early window to set expectations, shift blame, and reset political narratives before public patience wears thin.

“There is substance and strategy—as always.”—Andrew Rein [07:58]

3. The Nature and Causes of the Fiscal Crisis

• Magnitude:
  • Fiscal Year 2027 gap estimated at $8 billion or more; Controller’s office puts it closer to $10B.
  • Multiple chronic underbudgeting issues: NYC housing vouchers, overtime (esp. NYPD), homeless shelter costs, underfunded new programs, etc.

“The prior administration radically underbudgeted for ongoing programs…It’s really incredible.”—Andrew Rein [12:38]

• Why Was This Allowed?
  • Strong tax revenues, pandemic-era federal aid ($13B+), and conservative revenue estimates papered over underlying issues.
  • Both City Hall and Council complicit in underbudgeting, and oversight bodies raised alarms but were largely drowned out by good fiscal times.

“Problems kind of fixed themselves with great revenue... but the problem with problems ignored is, when they come home to roost, it’s a lot bigger and a lot harder to solve.” — Andrew Rein [26:06]

4. Transparency Versus Budget Reality

• Push for Honest Budgets:
  • Mamdani and new Speaker Menon seek more transparency and realism—no more “BS budgeting.”
  • The challenge: realistic accounting for required spending exposes the full scale of the deficit, pushing political leaders to face hard choices.

“If you don’t show the truth, you don’t know the problem you’re trying to solve.” — Andrew Rein [15:09]

5. Solutions: Where to Go From Here

A. Gap-Closing Strategies

• Efficiency & Savings:
  • Identify, prioritize, and implement agency savings—target inefficiencies and low-performing programs, not core services.
  • Focus on systemic fixes (e.g., procurement reform, especially at the Department of Education).

“The first thing you do is say: ‘We spend $120 billion, let’s make sure it’s directed at the right programs and we manage those programs efficiently.’”—Andrew Rein [29:25]

• Concrete Ideas:
  • End “hold harmless” school budgeting despite declining enrollment—could save $500M+ annually.
  • Press Albany for mandate relief (notably on class size reduction, which could cost NYC $1B+).

“If you needed 50 teachers and you’ve lost 200 students, you probably don’t need the same number of teachers as before.”—Andrew Rein [33:07]

• New Administration Initiatives:
  • Mamdani’s executive order (Jan. 29): Each agency must appoint a Chief Savings Officer within 45 days, tasking them to locate efficiencies and recommend cuts or process improvements.
  • Plan sounds like a new iteration of the city’s classic “PEGs” (programs to eliminate the gap).

B. Tax Increases

• Mamdani’s Platform: Wants Albany to approve higher taxes on high earners and corporations to both close the gap and fund expanded social programs (free childcare, free buses).
• State Context: Governor Hochul is firmly opposed to new taxes; state-city negotiations are tense.

C. Headcount & Staffing

• Thousands of agency vacancies exist. Should budget for these be cut? Max and Rein debate whether to reduce or keep vacancies as a cushion for future expansions.
• Prior efficiency attempts have been limited; agencies could likely survive on fewer budgeted headcount if managed flexibly.

D. Reserves

• Debate over the city’s reserves and their role; consensus that these should not be used to patch recurring underbudgeted expenses.

“We do not have the money in reserve for a recession now. We certainly shouldn’t drain it when we have federal cuts that might be recurring.” — Andrew Rein [52:53]

E. Other Revenue & Enforcement

• Possible efforts to increase revenue by cracking down on unpaid fines, fees, or violations—though not a silver bullet and politically sensitive if it affects small business or low-income residents.

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Notable Quotes & Memorable Moments

• On Transparency:

  “We don’t need any more BS budgeting. We need to show the truth.” — Andrew Rein [15:09]

• On School Budgeting:

  “We have reduced our enrollment…by a hundred thousand students…and we’ve been holding shrinking schools harmless from any budget reductions.” — Andrew Rein [33:07]

• On Political Courage:

  “No one should pretend they’re not hard, right? These are hard choices.” — Andrew Rein [36:15]

• On Tax Increases:

  “The combined New York City, New York State and locality taxes are the highest in the nation…” — Andrew Rein [46:45] “Our share of the nation’s millionaires has shrunk because we’re growing slower than the nation…If we’d kept our share, we would have $3 billion more in taxes today.” — Andrew Rein [49:01]

• On Mamdani’s Potential as a Reformer:

  “He [Mamdani] has extraordinary skills in communicating. I think he’s got the ability to communicate to people why these choices will actually deliver better education and sustainable services because we have a stable budget.” — Andrew Rein [36:51]

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Important Timestamps

• [04:42] — Andrew Rein explains state and city budget timelines.
• [07:58] — Analysis of Mamdani’s “Adams Budget Crisis” strategy.
• [12:38] — Breakdown of the real fiscal gap and chronic underbudgeting.
• [20:35] — Discussion of Council’s complicity in underbudgeting, new mandates.
• [29:25] — Outline of principles for gap-closing: prioritizing savings and efficiency.
• [33:07] — Concrete savings ideas: school funding, mandate relief.
• [39:07] — Reaction to Mamdani's "Chief Savings Officer" executive order.
• [46:45] — Deep dive into the consequences of raising taxes in NYC.
• [52:53] — On the use and misuse of city reserves.

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Conclusion

Ben Max and Andrew Rein provide a rigorous tour of New York City’s budget predicament at the dawn of the Mamdani administration. The episode exposes how years of obfuscated budgets—enabled by strong revenues and underexamined by key actors—have led to a real and urgent crisis requiring both transparency and difficult choices. The hosts ground their analysis in political and managerial realities, openly questioning the appetite for tough reforms. Rein is skeptical that new taxes are the answer, instead pressing for genuine, targeted efficiencies, accountability, and smarter state-city cooperation—while conceding that substantial political capital will be needed to deliver real fiscal reform.

“If you believe in government like he [Mamdani] does… I hope he runs it the best we’ve ever seen.” — Andrew Rein [55:40]

Transcript

[A]

Foreign. Hello and welcome to Max Politics. This is Ben Max coming to you from New York Law School and its center for New York City and State Law. Thanks for tuning in. Speaking here on Thursday, January 29, 2026. Happy birthday to my mother. It is the day after Mayor Zoram Mamdani, not yet one month on the job, gave an extraordinary press conference at City hall on Wednesday, January28, outlining what he called the Adams budget crisis, based on what he characterized as gross fiscal mismanagement by former Mayor Eric Adams and explaining the deep fiscal challenges he is now facing around the city's roughly $120 billion annual budget. With his own first city budget plan due in mid February, Mamdani talked about a budget gap he must close in the current fiscal year, which runs through June 30, and and the large budget gap he must close for the next fiscal year, which begins July 1. He also cast blame on former Gov. Andrew Cuomo, who hasn't been in office for quite a few years now, for what he called unfair structural fiscal imbalance between New York City and state, and reiterated his calls for both more funding from Albany and tax increases approved by the state to provide more of that revenue to the city by raising taxes on high income earners and corporations, a push that he of course ran on in last year's election, in part to expand city services broadly, but also to pay for his specific campaign promises like universal free childcare and free buses, among other things. Now, Governor Kathy Hochul is opposed to further tax increases at this time, and she must negotiate a new state budget with the Legislature ahead of the state's new fiscal year, which begins April 1. Meanwhile, the there are huge variables at play, like federal funding and actions by the Trump administration, the degree to which tax revenues come into the city and state at higher or lower levels than projected, and much more so. Mayor Mamdani said a lot this week about the city's fiscal challenges, which are very real. But there are many questions to answer, like what exactly are those challenges and their roots? What are the key variables at play right now, beyond the ones I just mentioned? We what does the mayor have right and wrong about problems and solutions so far? What should he or any mayor be doing to create a more efficient and effective government? What expenses need to be reined in? What is the balance of fiscal power between the state and the city? And more? And to help answer at least some of those questions, joining me on the show today is Andrew Ryan, president of the nonprofit Citizens Budget Commission. He'll be with me in just one moment to get into the city's budget picture and and what it means, Mayor Mamdani's presentation to the city. And more very briefly, if you missed any recent episodes of the show, you can find them all, of course, in the Max Politics feed after you listen to this one. Just a couple quick highlights. My most recent conversation was with Dan Gorodnik, the director of the New York City Department of City Planning. He's soon leaving that position after a very productive tenure. And he joined me for an exit interview of sorts, taking stock of what's been accomplished in the last four years, particularly in addressing the city's housing crisis, probably Eric Adams's most accomplished legacy area and what impact it will all have and what comes next and so forth. I also recently had two separate in depth conversations with the two Democratic candidates running in the June primary that's coming up real soon for New York's 10th congressional district. That's current Congressman Dan Goldman and his challenger Brad Lander, the former city comptroller, who are vying for that seat in the House of Representatives currently held by Goldman. It represents lower Manhattan and a big chunk of Brooklyn. So that's three highlights. Many more good conversations in the feed for after you listen to this one. And so Andrew Ryan is here, president of Citizens Budget Commission, cbc. Andrew, how are you?

[B]

I'm doing well and even better that I get to say happy birthday to your mom.

[A]

All right, very good. She'll appreciate that if she tunes in for this city budget breakdown.

[B]

Well, who wouldn't, Ben?

[A]

I mean, you know, why not? All right, so I said a little bit about where we are in the timeline here. But before we get into all the specifics, just a couple big picture things. Say a little bit about how you're thinking about the calendar here, where we're at, where we are in the budget process. The city and state unfold. You know, they overlap, but they're not on the same timeline. Just say a little bit about timelines here. What you're watching for where we are in the process. You know, get people up to speed. A little bit more on that.

[B]

The quick overview. The state budget process is kind of a one, one kind of product and done meaning the governor put out her executive budget. It's due to be negotiated with the legislature. They put out their one House proposals early March and they're supposed to adopt a budget by April 1, the beginning of the fiscal year. It has started to become later and later and we are in mid May, as late as mid May. So they are in that negotiation process. In fact, the legislature's holding hearings and tin cup day, for those of you who don't know what it is, is when localities come and ring their tin cups in front of the legislature, say what they want, including the mayor of the city of New York. That is on the 11th. So this February that's coming up, the mayor has be been granted by the city council an extension to produce his preliminary budget till February 17. What he does is produce that the council then holds hearings, a response, Then there is an executive budget. And that is all supposed to be wrapped up by the end of June for the state for the city's fiscal year, July 1. So state's supposed to be April 1, cities July 1. And now the mayor wants the state to help him solve the budget problem that we all knew was there and has chickens coming home to roost. We're finally hitting that fiscal wall. So he is making his case during the state budget process because he wants that help, right?

[A]

He wants that help. He's got the push for taxes. I mentioned really key. You mentioned the February 11th date where Mayor Mamdani and other local officials from around the state will be testifying in front of the state legislature. That is always a really interesting day. So for anyone who's able to watch that live stream, I highly recommend it. This will be one of the most interesting ones. Of course, anytime there's a new mayor, it's. It's perhaps the most fascinating. So that's February 11th coming up in the midst of that. And of course, that testimony then leads in six days later to his preliminary budget being due now February 17th. And then ideally, as you got at, the state has a budget, an actual budget, in place by April 1st or a little bit after, but in time for the mayor to then incorporate that into the executive budget, which usually comes, what, mid to late April, right?

[B]

Yes, late April.

[A]

Yeah, late April. So, you know, we've seen a number of times in recent years and many times in the past that when the state is late with its budget, it really messes up the city budget process as well. But as you got at, the city budget process has all these iterations and it's maybe a little, little too exhaustive, perhaps. Okay, so that's where we're at. Again, before we get into even more of the details here, what did you make of what we just saw? Like, what just happened here? We're talking the day after this press conference. Mayor Mamdani, this was pretty extraordinary. I haven't been around that long, but I've been covering, you know, city and state politics for 15 years or so here, and I haven't seen anything quite like that before. What did you make of sort of what was happening there and why Mayor Mamdani made this Adams budget crisis presentation that he made? What's sort of the big picture of what's going on here, in your view?

[B]

There is substance and strategy. As always, I can't divine what his strategic kind of plan is in that march. But we will recall if we spin back. In December, Controller Brad Lander released a report saying the city had a current year budget problem and a next year budget gap. Our new controller, Mark Levine, using based on those numbers, announced that, you know, in January, earlier, a few weeks ago, announced that this is a real problem cumulatively over those two years, according to the analysis done at the end of last year, that $12 billion. And the mayor responded immediately that this is a real problem. He yesterday reiterated that response. He then named it and talked about the causes and we should talk a little about and try to unpack that so that people can understand it better.

[A]

Yep.

[B]

And reiterated his call for tax increases. Obviously, as you said from the campaign, it was about funding his programs. The governor's helping him with child care. Not now. He's talking about tax increases to help him close that budget gap. And we can talk more about that. But this is reiterating a view of the world saying we've looked at this, we think there's a real problem. Here's what our solution is. On the substance, there have been, and I think I might have mentioned to you once, I think 14 reports between the city, state controllers, the Independent Budget Office and the Citizens Budget Commission that said this problem was there, it was looming. I mean, 14 reports in 2025 and they all vary a little about the amount of money. But this is not a surprise because we've been living beyond our means. We can go into the detail. So this is really about acknowledging the problem. There's or version of it and strategically talking about his move to solve it.

[A]

Yeah. And I'll just add to that, you know, I think there's obviously something here where he knows that this is his one big chance to sort of reset the table. Right. It's not all his yet. I mean, when you're the new mayor, there's only so much time that there's tolerance for you to point at the last guy. Right. Any executive, you know, there's only. I think people are a little tired of hearing that from President Trump. You know, at this point after a year in, you know, Biden this, Biden that and things like that. And it happens at all levels, but people get tired of it pretty quickly. And you only have a little, you only have a little legitimacy to it for a little while. Right. So this is his chance to really reset things, point the finger at Adams with a, with a lot of legitimacy behind it in terms of the budget picture he was left. Of course, he leaves out things he wants to leave out, like the city council's role and all this, and we can talk about that later. But, you know, he came into office, he had a sense, I'm sure, that this was some of the problem, but reality still smacks you in the face when you actually get into the seat. He's resetting expectations some here. He knows it's his real one chance to blame Adams, at least with a sense that people would mostly agree with him. Cuomo, too, coming out of the campaign. Right. He can still point the finger at Cuomo for a little while, although again, that has even less legitimacy to it, I think, than Adams because Cuomo's been out of power for so long. And obviously it gives him the thing we're talking about, this chance to sort of reiterate and reconfirm some of what he ran on, which we know his base, you know, still wants him to deliver on. And I also saw yesterday that they're organizing a big push of activists to go to Albany on February 25th to rally for higher taxes. They're trying to get 10,000 people to go to Albany that day for a march and a rally. So this is all, you know, again, also tied in with some of the, the politics here. And of course, he's at the height of his power. Right. He just got elected. Mayors usually will, will lose popularity pretty quickly. And you know, he's, he has that bully pulpit, but of course he risks, you know, his relationship with Governor Hochul. And we saw, you know, she seems a little irritated. I'm sure they gave her a heads up or it would be malpractice if they didn't, you know, about some of the things that he would, he would be saying. But, you know, that's, that's some of the stagecraft here as well. Okay, so inform us a little more about what the actual picture is here. As you, as you mentioned, cbc. CBC has been warning about all this for years. So have controllers and others. You know, you guys have been perhaps the most consistent voice here. What's the actual gist of the fiscal situation here from your view.

[B]

So let's unpack it in a couple of different dimensions. Amount, causes and where we are. We think that the next year's budget gap, next year's fiscal 27 approaches $8 billion. Why we say approaches is we have a good route to that $8 billion number. But we also know revenues are strong and we have a lot of vacancies. So some spending is not going to be as planned. But we also know, and this is part of the variance between what we say and everyone else says and the city's books officially is that the prior administration radically under budgeted for ongoing programs. We're talking about city housing vouchers, $800 million. It depends on the year. We're talking about overtime, of course, which has always been historically under budget, but to a degree that's now double what it used to be. Talking about shelter, you know, under budgeted by, you know, $700 million. It's really incredible. So you have to make all those adjustments. We think next year there's a real problem. It approaches $8 billion. It does not magically disappear. If you talk to people who watch these things, they kind of forget the actions that were taken and say, oh well, these problems always go away. Sometimes they go away painfully. Sometimes the economy is good. We're talking about adjusting for that good economy and all that. There's still a real problem that takes affirmative action, but by the administration. So whether it's eight or 10 or six, you know, it's not disappearing.

[A]

Let me stop you real quick. What is the difference between your 8 and the city comptroller's $10 billion estimate of the gap for next fiscal year?

[B]

For the most part he is has higher estimates of the under budgeted spending for all those programs. We look at the. We have the same kind of estimates. We have a discount because we know that there's going to be underspending in other places. That's all on the margins. And what the important thing to look at that's very related is the mayor said revenues are strong. Wall Street's giving it. Look at how much it gave the state. It was like gangbusters. Our tax system is not as reliant in the city as the state is on personal income tax. So we won't have as much upside. But there's upside there.

[A]

On the upside there real quick, the $2 billion roughly gap in the current fiscal year, do you think that is basically easily washed away by higher than expected revenue and some underspending of what's been projected?

[B]

My belief is that it will be. I think that's a reasonable belief. I think the real key is we need to move into the era of transparent budgeting. And the mayor said, you know, we're going to have a new revenue estimate. Hopefully he has a new spending estimate that identifies all that under budget spending and also all the savings from stuff that won't happen. We will get a clearer picture. I would not be surprised if this year balances out. I will say, though, what we've seen in prior years is it's usually, oh, we have a lot of extra money, which is how we kind of end up moving money forward from year to year. But we're using up all the money we had. And just as a detour into understanding the picture, last year, fiscal 25, our tax revenue increased 8.3%. That's incredible, right? Fairly low inflation. Imagine if your boss gave you a raise by 8.3%. We still needed, the city still needed to dip into prior year money that it had, you know, sitting around for $611 million because it didn't have enough to spend all to fund all of its programs. So despite tax revenues increasing over 8%, it still wasn't enough. That's the spending base we have. So we will get, we look forward. The first step is a transparent budget and what is good. And I think what the mayor has done right here, we'll see the real numbers is said. We don't need any more BS budgeting. We need to show the truth. Because if you don't show the truth, you don't know the problem you're trying to solve in the magnitude. Now, I will say he's using an estimate from December to make his case. I think that estimate will change and he said it, estimate will change, but there will still be a problem.

[A]

The so. So one of the key things here will be the new revenue estimates. So right now, just to set the stage and what's happening is, is as you're getting at, there's a lot of alarm bells going off around these gaps and they're larger than what the outgoing Adams administration had stated, what even the city Council was acknowledging. And so they're not quite, quote, unquote, manageable. They're sort of outside the bounds, at least for next fiscal year, maybe this fiscal year as we got out, you know, the, the roughly 1 1/2 2 billion is settled, but the next fiscal year is not under this sort of usual 3,4ish billion dollars that can often also be sort of taken care of relatively easily. And they're raising alarms about this. But at the same time, there are yet to take into account the likelihood that revenues will be in above projections by a significant amount. Correct?

[B]

That is correct. But I don't want anybody to leave this conversation to think, oh well, because that's not taken into account, there won't be a problem. And that's where I think we need to be clear. The mayor basically said no matter what, what upside there is on that, it will not solve that problem. He is correct on that.

[A]

Right? That's not Even if you take the low end of an $8 billion gap, the increased revenue projections are not closing that out there.

[B]

Maybe they are. They are not. They are not closing that. So. And so can we go back to his naming of the problem, please, which was certainly memorable. ABC ADAMS BUDGET CRISIS where he is correct is that the prior administration's dramatic increase radical under budgeting obfuscated the problem. We've called that out for years. My colleague Anna Champany might have been the first one to really highlight that, that the under budgeting obfuscated the problem. So we didn't know the magnitude and we started had to make adjustments to see.

[A]

And everybody, but everybody just kept going along with that because the revenues kept coming in stronger than expected. So everybody, you know, as long as

[B]

the revenues were going gangbusters, it all worked out. It all worked out except in 23, we spent 600 million more than we took in. In 24, we spent 1.1 billion. In 25, we spent 611. We're starting no matter what the revenues are. Even though we were getting, we're eating up our nest egg. And so now we, now we hit a wall even, even in a good year. And so the mayor Mamdani is right that the prior administration obfuscated the size of the problem. Although as I said, many of us were pointing out the truth. Even if they were, even if we differed slightly in magnitude. But the cause of the problem is layering on new programs and expanding programs without having the managerial diligence or political will to save money. Other places to make those new programs affordable. The mayor has identified some really good priorities. Childcare, really important. There are other things that are really important, but priority means you focus on those. And there are other parts of the budget that is not delivering great value for people. And the budget's been exploding at rates that are huge. And you need that managerial prowess, that political will to do that. Since we didn't do that, we created a budget that the city couldn't afford. That city couldn't afford. And eventually it eats up its nest egg from other prior year great revenues and we hit. We hit the wall, which is where we're sitting now. Then the question, of course, is how you solve it.

[A]

Before we get to how you solve it, let's say a little bit more about some of these problems. So you got at some of the things that have been chronically under budgeted, which basically means even though we kind of know what the real estimates of spending will be, for some reason, the mayoral administration budgets much less than that. The city council goes along with it, and that's included services like as you got at rental assistance, cash assistance, child care, vouchers, a whole bunch of costs, shelter costs, but then also you got it overtime, especially for uniform services like nypd. There's a whole variety of these that were under budgeted. Now at the same time, and this is. There's some crossover here. There's. There's also been new requirements of city spending, including the rental assistant vouchers, the class size reduction mandate that was passed at the state level. So there's also been new requirements of more spending by the city. And even though Mayor Adams sort of sounded the alarm on some of that, he still didn't want to recognize those costs fully in the budget, which again, I'm not totally sure why not. Other than that, that can come with some political problems, as he obviously saw when he was doing, you know, proposed library funding cuts and early child care cuts. Anything else on that?

[B]

To add, two quick things. One is part of the prior administration's fiscal management strategy was making it hard to spend. The under budgeting, I think, was one component of it. I don't think that's the whole reason for under budgeting, but I think it was part of the spending control, which I don't think was the right strategy because I think spending control, tight spending control, comes at the expense of services. Agencies should know. You know, I'm an agency guy. I used to be executive deputy commissioner of the health department. I'd always say, tell me how much money I have and, and I'll work with my colleagues to improve health. You know, that's the thing. Let. Let them spend. So I think that's one thing to. To understand that it was part of it. The other thing to understand is we obviously, we have a strong executive, but the council have become stronger and stronger over the years and had a say. The council knew just as well as I did what the budgets were for these things. The mayor, you know, rental assistance literally grew from a $300 million program to what it was probably going to be 1.4 billion today in the last four or five years. That's incredible. I mean, vouchers went from 20,000 to 60,000 vouchers and rents went up. I mean, one, one lens into that is holy. Whatever, you know, look at how many more people were supporting the budget. End of that is holy. Look at how much money this is. And this year's adopted budget, the current fiscal year, they adopted a budget. The council and the mayor adopted a budget with $600 million for vouchers. When we projected at that time was going to be 1.2 billion. Everyone knew this and they said, oh, look it, we added money for, for, for rental assistance in the budget. But they didn't come close to adding it. This was, this is a problem. And the council, the current new council. Speaker Mann, you and I had a great conversation with recently and the mayoral administration. It would be wonderful and a great service to New York to be transparent and accurate because we'll know what we're doing and it's the people's money. They should know our codes.

[A]

So one key in all this, as Mayor Mamdani seems dedicated to, and I think speaker men and also wants to do, and it behooves people, as I was getting it earlier, to do it at the start of your tenure. So you're sort of resetting the table in a smart way. Then you don't look like the bad guy more down the line when things need to be fixed. But it seems like there's a lot of consensus around being more accurate and transparent here. The problem is, if you do account for those much more realistic spending levels, you have to figure out still how to balance your budget. And that was part of the reason to under budget was to get to a balanced budget and then sort of deal with the consequences a little further down the line. So we'll get into that just for a second though. Clearly CBC was out there sounding the alarm on this for a long time. As you got at. I think you guys perhaps sort of ripped the bail off of this originally in terms of the degree of under budgeting way, way beyond the norm. But what happened here from your view about why this sort of just kept going? Like, was anybody asleep at the wheel here? I mean, the. Should the state, the financial control board have been a little more active here? You know, I mean, there were city comptroller reports, there were state controller reports. I mean, it seems like it still just ultimately comes down to the mayor and the city council. But

[B]

I think I've always urged, you know, we at cbc, let's turn to. You always got to look at yourself first. You know, I think we've sounded the alarm. Well, we need to continue to help New Yorkers understand what happens with their money and the challenges so that they can hold their leaders accountable for making these decisions. I think the state and city controllers, they've put out reports. I'll leave it to others to judge whether they're banging the drum loud enough.

[A]

Right. You know, and that goes for the media, too. I mean, the media will react to, especially the comptrollers banging the drum. But, you know, a lot of, I mean, I know a lot of this stuff was in stories, but then it would be like, oh, here's the budget story. And then, oh, you know, some of the oversight entities like CBC or the comptrollers say, oh, they're still under budgeting problems. And then it kind of goes away till the next round of budget stories. Right.

[B]

And I think what we also saw, which made it harder to easier to ignore, is we had gangbuster years of revenues, literally. Think about it. We had a pandemic and a recession that did not affect our revenue base because the financial services industry was strong even when we had a big notch down in real estate pro and property taxes. Then the feds gave through different pots of money, $13 billion to the city during the pandemic. So there was so much money coming in, the problems kind of fixed itself with great revenue, with great revenues and sometimes too, frankly, too conservative revenue estimating, but, you know, prudent, even with prudent estimates. So I think it allowed people to ignore the problems. And then the problem with problems ignored and obfuscated is when they come home to root, it's a lot bigger and a lot harder to solve. And part of the thing that's not on the mayor's side is time.

[A]

Yeah. You know, I will say on two other things. One, we should also note, as Eric Adams did fairly, that Bill de Blasio used some of that pandemic money in irresponsible ways. Right. To stand up recurring expenses with 100% true help. Two, I will say, and by the way, when I say the media, I include myself in that category. I will say that throughout the campaign on, you know, this podcast, at forums, the New York editorial board group I'm part of, we were asking questions of the mayoral candidates about what are you going to do about, you know, if $10 billion in federal funding goes away? What are you going to do about the budget gaps? I remember I asked candidate mom Donnie in February of last year, you know, what does he think of pegs? Programs to eliminate the gap where mayors come in and tell their agencies to find savings that then the City hall team and the Office of Management and Budget OMB can evaluate and decide which savings to accept or decline. I asked him about that. He was very skeptical about pegs, I think for unfounded reasons. But we can get into that in just one second. So, you know, I think there was conversation. I think you got at the root of a lot of this, though, which is that like, it all just kept working out because the money kept being there. Now we're seeing a situation where perhaps the money will not be there. And, you know, we have to see what kind of efficiencies the city can really find. But also, you know, it's also worth noting there's a million things going on all the time, including, you know, Donald Trump's reelection. That takes a lot of focus, again, has its budget implications. But, you know, part of the reason given, given the revenues continuing so strongly that I think people paid less attention to this is how much else going on there is. And obviously no shortage of crises and controversies and all that. Okay, what are the solutions here? So you have a roughly $8 billion budget gap to close for next fiscal year in the city. We talked about revenues perhaps coming in higher than expected. So maybe that helps you out with a couple billion at least closing that gap. Talk about the path forward here.

[B]

So we've talked about the first part, which is identifying the size of the problem with the best estimates. The second thing you do, meaning it's long past due, given where we are in January 29, even though in all fairness, he's only been mayor for 29 days. But you go to your agencies, you go to the experts, and you identify where you can save money. You prioritize increasing efficiency to deliver high priority services. You prioritize shrinking services that aren't delivering high value. And you put at the bottom of your list cuts to services, direct services to people, and you then you order them in terms of their impact. So what's interesting here is it's not about how you sit. It's not about that you save the money. It's how you do it strategically across the board. We've always talked about all these blunt instruments you do across the board, pegs and targets for agencies and this kind of stuff. The reality is it's good to get ideas and it's Good. To evaluate the impact of those ideas, you need the input from the agencies. Both managerial leadership and frontline workers. The labor and the unions are part of this. And you need that menu so that you can make your strategic budget and policy choices. That is the first order of business. The first thing to do is say we spend $120 billion. Let's make sure it's directed at the right programs and we manage those programs efficiently and we shrink or eliminate stuff that's not delivering. And I have some ideas on that. But that's the first order of business. And frankly, whether it had been January 1, the day after the election or soon after inauguration, I hope they went to their agencies and said, give me what you got and give me more. I need ideas. And that is the first order of business. We haven't heard about that.

[A]

And that is until today.

[B]

Until today.

[A]

We got a little bit today here on January 29th. Did you want to keep going before I ask you about, about that?

[B]

Well, I think, you know, I don't know what else they've done behind the scenes, but what we've heard is the continued call for tax increases. And we can come back to why we think those are risky. But the first order of business is really to figure that out and save money. And he did give one example in his press conference yesterday, and it was. It would have been much better had it been a much larger solution. Example when he's talking about $12 billion and he has a 500,000. Now, listen, there are plenty of them and a single example is fine. And I'm not going to say that that's the only thing he's ever thought of. During the campaign. He talk about procurement reform at the Department of Education. That would have been good. And I'm sure they're still thinking about these things. I'm not going to say because he didn't say yesterday, but this is the first thing you do is you dig into the agencies and figure out what you can do better.

[A]

Right. So. Well, first, before I even get into the executive order he announced today and chief savings officers and basically a program to eliminate the gap by another name. You said you had some ideas. So, so you just mentioned procurement reform at the Department of Education especially, which spends a huge amount on contracts. The city generally, led by the doe, spends an enormous amount on contracts. This is something that new speaker of the Council Julie Menon is digging into. But you said you had a couple ideas on places to save or areas of bloat or whatnot. What's at the top of the list for you.

[B]

We can come back to the process of identifying more because the reality is I did over, I did 12 rounds of pegs when I was at the health department, first two terms of Bloomberg. A golden age of public health. You can do this. It's hard work and it's painful at times, but it really is that painstaking work where you go through and a lot of stuff no one's ever heard of and little things that all adds up. So there is that process. But coming back to the big picture, we have reduced our enrollment in the New York City public schools by a hundred thousand students for the last three to four years. And I'd have to recheck. We've been holding shrinking schools harmless from any budget reductions. If you needed 50, if you needed 50 teachers and you've lost 200 students, you probably don't need the same number of teachers before. There's a process in managerial process and it's hard because you have notch effect in schools. I used to work at the Board of Education about class sizes and stuff like this. But the reality is we've been holding schools harmless. We probably have been holding schools homeless, cumulatively over $500 million, which frankly is unfair to the other schools who are getting less money per, per kid because we're holding these schools harmless. That is money that has not been delivering maximum value, just for one example. Also, you can go to the state for mandate relief. And since we're talking about education, the state obviously has a class size reduction mandate. First of all, micromanagement from Albany of city services is not, is not a very productive thing. I want the, the mayor, the deputy mayor, the chancellor, the superintendents to actually know how to run the schools and do them efficiently and then hold them accountable. Quite frankly. You know, the governor wants to give the mayor four years of mayoral control. Have at it. Let's hold him accountable. He said the buck stops with him. Let's give him the bucks and let him spend it and hold him accountable. But I think that we should loosen that class size reduction mandate because it is going to force the administration to spend ultimately over a billion dollars to, to reduce class sizes in popular schools with low need students that are achieving well above average. Why would that be the place where we should be focusing our money? That's, that's the kind of thing so you can save money from eliminating hold harmless and get mandate relief. And that could actually between the two of those, maybe that's over a billion, billion, billion and a half dollars right there.

[A]

Now, you realize right away you're pointing to, you know, something of a third rail in New York politics, which is basically any sense of reductions in education related funding. I mean, like we just keep seeing any blips of attempts to do any of what you just said, at least the first part in terms of the undoing. Hold harmless gets a wave of pushback from elected officials and labor unions and parents often and others, and just seems like the type of thing that Mayor Mamdani is very unlikely to do.

[B]

Listen, these are smart choices, but no one should pretend they're not hard, right? These are hard choices.

[A]

And even on the class sizes, I mean, maybe if you had your druthers as you got at the law, would be eliminated completely because in part it's micromanaging at the state level of city operations, as you said, but, but also its costs. But even there, you're saying potentially even broaden, you know, extend the timeline on implementation.

[B]

You can apply for exemptions, make it easier to apply for exemptions to that.

[A]

All right, so those are a couple examples.

[B]

But what may I just say, though, the mayor has extraordinary skills in communicating. There's a lot of faith in him by a lot of, you know, New Yorkers. I think he's got the ability to communicate to people why these choices will actually deliver better education and sustainable services because we have a stable budget so that we can focus on education, child care, public safety, cleaning the streets. And that's what I would hope.

[A]

Okay, so in terms, all right, so he's, he's got to identify a whole bunch of savings that was unclear at his Wednesday presentation. There were a lot of questions about where are you going to find savings. You're just talk, you just want to bring in more revenue and, and not have to make some of these hard choices. But then he indicated, you know, we'll be looking for savings and all that. And then he comes in the morning of January 29th, the day we're talking here, and he announces an executive order. Like I said, it sounds a lot like a program to eliminate the gap or a peg, but it's a little different. So he's got an executive order that every agency has to designate a senior employee as a chief savings officer looking at strengthening the long term performance of city government. I'm reading from the press release here, the chief savings officers will report directly to the head of the agency and will have 45 days to review agency operations, determine services that deliver the strongest results for New Yorkers, and locate opportunities to streamline processes and eliminate Waste. And then the agencies will be reporting to the first deputy mayor, Dean Fulahan, former city budget director and to the city's budget director, Sharif Solomon, going into, you know, further budget process. So 45 days is well beyond when the preliminary budget is due. So A, how encouraged are you by this executive order and the chief savings officers and the savings plan B, what does that mean for what we're going to see in the mayor's preliminary budget in February 17? What are your thoughts on this development this morning and some of the some of the forecasts for we're going to see in a little over two weeks from the mayor?

[B]

Well, you know, I'm encouraged by this because this is what has to happen asap. Yes, of course. Earlier is better. Quicker is better. I also know I literally started the health department and I had to do another seven points on what was already a 4% peg in two weeks. That was like welcome to, welcome to your new job. Hello, can I have 7% of your budget as ideas. It is hard and so more time. I get it. And frankly we have not seen a serious effort to really restructure in the last 12 years. There have been some but not, not comprehensively. So I'm very encouraged by this. He has to present a balanced preliminary budget. He has to do that without he has said the first deputy mayor at the breakfast we had him and thank you Dean Fulahan for coming have such a great conversation. December they would not include tax increases that the governor did not include in our budget. So I will take him at his word on that. We won't see that. I'm sure he'll talk about this issue as he always has. The mayor. Well, we'll see how the savings they identified how concrete. We've seen more vague plug numbers before, frankly. I would like to see as developed a plan as possible so that we can see about the credibility of the plan and understand the impacts of that plan. If you recall, Mayor de Blasio had his magical I'll call it billion dollar labor savings deal. And the reason I remember it is because we wrote a paper about how to get the billion dollars from labor savings because the mayor put it in his budget but never had a plan for it. It I hope we don't see that. But he has to propose a credible balanced budget based on according to the city charter and I believe State Emergency Financial Control act credible estimates of revenues, expenditures. And I'm looking forward to that.

[A]

So basically as we look ahead though to that February 17th or by February 17th, preliminary budget. We're going to obviously hear the mayor's Testimony in Albany February 11th that will, I'm sure, include a reiteration of his push for tax increases and other help from Albany. One of the questions that you're getting at or we're getting at is to balance the budget for next fiscal year. In this preliminary budget for fiscal year 27, he's going to have to put in some estimate of agency savings, right? They're going to have the new estimate on revenues that we've talked about. That could help close some of the gap. Then he's going to have to plug in numbers on agency savings. As you got at, they could put something in for new revenue based on tax increases approved at the state level. But as you said, First Deputy Mayor Dean Fulahan indicated they won't be doing that. And I think it would be an extremely big gamble for them to put that in there and probably it would

[B]

be inappropriate, quite frankly, and it would.

[A]

And it would also very likely upset the governor if they were then banking on that and then he was using that as further leverage. That could cause all sorts of problems. So, so those are some of the things we're really going to be watching to see in there. What are any other variables for the preliminary budget that are most important here? Obviously there's just like so many unknowns about the federal funding picture. Obviously there's questions about the efficiencies at agencies and savings and whether any of that is baking in reductions in budgeted headcount where Mamdani has said he wants to fill all the vacancies in city government and then some. But if you've got thousands and thousands of budgeted vacancies and you know you're not going to fill them all, should those be cut, you know, is a big question.

[B]

So putting a finer point on a number of things and coming back to another, yeah, they could eliminate half the money for vacancies and still hire people by managing vacancies more flexibly across agencies and across units within agencies. You could do that. You don't need all these vacancies that you're not going to fill. You could flexibly allocate them, reallocate where there's needed and they could have savings. We what you so there's savings in agencies. There's there's savings in headcount, not actually changing what you're going to hire, but better management of headcount. And there's a lot that can go there to actually improve agency operations, which is what we've all been screaming for. The other thing is he's talked about, rightly the state should treat the city fairly. I assume that there are going to be Items, maybe Article 6, which is the public health matching funds, that the city gets 20% and the rest of the states get 36%. Maybe that'll be on the table. Maybe the intercept of the sales tax for safety net hospitals, which used to be statewide but now is only on the city. Maybe that'll be there 150 million if I have my number correctly. So there are a number of issues there. Then there is the mandate relief and I really hope, like loosening class size that there's, there's some items in that bucket where the state doesn't have to give money, but it can let the city be more flexible and more efficient.

[A]

I'm glad you hit on all those things because obviously some of that gets at this dynamic of city state that the mayor was focused on in his presentation. Let's not go further down that road because we don't have too much more time together here. But we talk taxes.

[B]

We.

[A]

Oh yeah, we're going to talk taxes. No, no, that's, that's. I want to make sure we get the taxes. That's part of why I don't want to go further on the city state relationship. But that's, those are key points in terms of areas where the state might kick in more. Again, the governor, like she did with childcare, is going to be looking for ways to help the mayor that don't include new taxes because that again, is, is just sort of antithetical to her politics and something she's looking to avoid. She also, I think, just actually has a belief that there's enough money right now to handle everything that everybody wants to handle. The mayor, of course, has a different perspective because he'd love, you know, hundreds of millions of dollars in addition to all this to do, you know, some free buses and get that moving. So I don't think that's happening year one. But you know, is he trying to figure out a way to reignite a free bus pilot to get another study going of how that, you know, there's a lot of questions about him filling his campaign promises on the agency headcount reductions. You know, you make a really interesting point. I wonder how that bumps into politics though, because again, this is an expansionist mayor. Is he going to really come in and start slashing budgeted headcount even if he knows he can't out figure fill it? You know, what do you do about that, because you want to fill those positions at some point. If you take them away, you know, how does that work out down the line? Maybe you, you know, try to keep those and ultimately you find savings that way later on in the, in the budget process anyway. Obviously there's also the question of how much they're going to budget for NYPD overtime and how that will go. And then there's this huge question on the housing voucher program that we touched on earlier, and we won't go into more on that, but that those expenses could continue to explode while as you got at, you know, we still have this extremely difficult affordability crisis, and a lot of that relates to the availability of housing. Okay, so let's talk taxes. Obviously, the mayor wants to increase personal income taxes on people making over a million dollars a year. He wants to increase corporate taxes. You're very skeptical and in opposition to all of that, given the state's already high tax environment. Say a little bit more about that.

[B]

So the combined New York City, New York State and locality taxes are the highest in the nation, whether you measure that per capita or whether you are second highest now on a percent of personal income. But we've consistently been the highest tax place in the country. We have the highest for people in New York City, high income earners, very high income earners, no question. The highest top personal income tax rate in the country, 14.776%. Then for business activity in New York City that is taxed not only by the state corporate franchise tax, the city tax, as well as the MTA region surcharge, which totals 17.44%, also the highest in the country. The relationship in all fairness between tax rates and mobility and activity is not direct. And it's different between these two taxes. But we need to compete for those high income earners and we need them to come stay and grow their incomes here. They supply a lot of our tax revenue. We shouldn't be risking that now. And we can come back to some stats about that. And on business, we want to create jobs, businesses to locate here, our market to be attractive and not taxed higher than other markets. And so that's why we say, let's do the other things first before we risk our ability to attract, retain residents and businesses and grow businesses. Because right now our share of the nation's millionaires, our number of millionaires has been growing and our tax revenue has been coming in. So people look at that and our feel positively and we should think our progressive tax system is working and generating Lots of revenue. But our share of the nation's millionaires has shrunk because we're growing slower than the nation. On average, we've. We doubled the nation, tripled Florida, quadrupled. The bottom line is if we kept our share of the nation's millionaires constant since 2010 in New York City, we would have $3 billion more in taxes today. 3 billion. That would be on our estimate that that's almost half of the gap. We're talking right there, you know, 40% of the gap right there. If we had kept our share. And so we.

[A]

But isn't that a fun. I mean, isn't a lot of that a function of the fact that other places are growing? And I mean, we're growing, but other places are also growing.

[B]

And yeah, they're growing faster than us there. So other places are a better place to make more money, which to me, I find shocking. I don't have the answer to why.

[A]

I mean, the tax rate variances are incredible, right?

[B]

I mean, listen, taxes are one component. Quality of life, public safety. And when you're doing businesses, when you're running a business and you're thinking to yourself, where do your employees want to live? Think about all the businesses that are expanding in other places. You know, our share of the nation's headquarters have been. Has been shrinking. You know, of large business headquarters, we've. We've been shrinking because they're not starting here, they're expanding. And so on the business taxes. If the proposal on the table is to increase the state tax to New Jersey's level, I'm not sure what the rest of the state thinks about that, but what that would mean for business activity in New York would almost be double. New Jersey now, because of how we tax, it doesn't mean everyone's going to leave because you pay the tax on where your sales are. But we're squeezing margins, we're squeezing bottom lines that might have an employment effect. It might have an upward pressure on prices. And we're sending us. We would be sending a signal this all conditional shouldn't happen. We would be sending a signal about how we feel about the importance of business growth. And we need to send the signal that we need to grow here.

[A]

Now, Mamdani's argument is yes to that part. But what you're getting for those increased taxes and revenue is your employees are getting child care. Your employees and, you know, the businesses are people that use businesses and work at businesses, are getting childcare. They're getting fast and free buses. They're Going to get, you know, more things that the government will provide from that additional revenue.

[B]

And first of all, gamble. I do want to say, you know, our, our research and our competitive NYC dashboard, which is pretty awesome if everyone wants, anybody who wants to check it out. There have been domestic out migration of all income groups. This is not just a rich people run, this is, people have been squozing all throughout. So you know, he's right, he's running. It is a value proposition. Is it worth the price you're paying? At a certain point the value is not worth the price you're paying. We saw some of that during the pandemic and people moved down, said hey, I like having a backyard. You know, we have to compete on things. So the premise that I think we need to be focused on is how do we use that 120 billion to provide essential services. And I think we can if we manage them right. Listen, if we, if we had kept our spending growth at the rate of inflation since 2017, we'd be spending $15 billion less than we do today. If we had kept it at the rate of inflation since 2023, literally for the last four years, if we had kept spending growth at inflation, that budget gap that we've identified wouldn't exist. That's the amazing thing. We, we can do this. We're actually spending the money. We just have to do it wisely on the right things.

[A]

All right, any other thoughts before we say goodbye? I think we've covered a lot of things, perhaps savings levels. You want to say a quick thing? Or reserves. I mean, forgive me because I think it was funny. Eric Adams, who knows who's tweeting for him, but he tweeted something in response to Mamdani's press conference touting, you know, leaving him $8 billion in RES reserves, which to me was a pretty, you know, I mean you can point that out. But it's strange as a response to criticism of under budgeting because it's not. Those reserves are not to be used for making up for recurring under budgeted expenses. So you know, but that was only part of his response. Anyway. Do you want to say anything about reserve levels and how they should be used or what should be done on that?

[B]

We have $2 billion in our rainy day fund. The other parts, portions of that. One is like our in year kind of budget cushion that we're actually going to spend this year. And the other is the Retiree Health Benefits Trust which was used as a kind of one time reserve fund both by De Blasio at a point in time by Bloomberg at a point in time, but ranks Frankly. We have $100 billion in liability for retiree health insurance. We should be actually trying to fill that and fund it more like a pension system. And so using that is not the right thing. We do not have the money in reserve for a recession now. We should be, when times are good, putting in more money. And we certainly shouldn't drain it when we have federal cuts that might be recurring. So those reserves are there to protect New Yorkers from a recession. And those New Yorkers, especially needed New Yorkers deserve our protection. And if we start to deplete them now, they won't be there.

[A]

The last thing I want to say, and then if anything else occurs to you, I'll give you one more shot at a final thought. But the last thing I wanted to mention, the other very interesting thing I think that will be worth watching for, Imam Donnie's preliminary budget is how are they thinking about increasing revenue to the city vis a vis things he's talked about previously around collecting unpaid fines, bringing in other revenue based on actions that the Department of Consumer and Worker Protection is going to take against bad acting corporations or bad landlords or different, you know, different entities that either owe the city money or with more enforcement, they're going to bring in more revenue. You know, like you can do a blitz on parking tickets and bring in more revenue, you know, that type of thing. I'm very interested to see ways in which they identify new revenue based on just more enforcement of existing things, but that don't start to give an indication that they're going to be pressing harder on, you know, small businesses and regular, you know, New York workers, which they say they're going to avoid. So that, that'll be another interesting that

[B]

he wants to protect small businesses from undue fines and that, but he also wants to maximize revenue from, you know, fees and minds. So frankly, on the fee stuff you can only charge what you spend and on the fine stuff, we'll see what the program is. And listen, everyone who has a violation that should pay, we should have the right, right, you know, remuneration in law and they should pay it and we should collect that. So there's, there might well be some money there that doesn't solve the problem, but it's one of the components of running government well. And I think the most important thing is, is, you know, if you believe in government like he does, so committed, he believes in government doing for people. I hope he runs it the best we've ever seen.

[A]

A good note to end on Andrew Ryan, president of Citizens Budget Commission. Really appreciate the conversation. Always. Always good to get talking to you, as we always.

[B]

Thanks.

[A]

Yeah, you know, I mean, last couple times we, we talked, we were moderating a comptroller candidate debate or talking with Speaker Menon. So good. Good to have a conversation, just us. Thanks a lot. And again, CBC is out front on a lot of this stuff, so appreciate that and stay in touch.

[B]

Thank you very much.

[A]

All right. Talk soon. It. Sam.