New York City Government
Sources of Revenue
The simplest answer to "Who pays for New York City
government?" is you! Every New Yorker pays for city
services through taxes: principally sales, income, and real
estate taxes. Some of the taxes New Yorkers pay to the state
and federal governments come back to the city in the form
of aid (though not enough, many argue).
More than 65% of the funds used to pay the city's expenses
come from revenues raised by the city alone. About 20% of
that amount comes from property taxes. The rest of the city
revenues come from other taxes, such as income and sales
taxes, and miscellaneous revenues. The rest of the funds
come from the state and federal governments, some of it
in the form of unrestricted grants, but much of it through
categorical aid. Such aid is given for specific purposes
and must be used in accordance with a given for- mula for
such purposes as Medicaid or public assistance.
Since the State Legislature authorizes the city to increase
taxes and also passes on aid to localities upon which New
York City depends, the city budget process is heavily dependent
upon the resolution of the state budget. The state's fiscal
year begins on April 1, which means that release of the
city's preliminary budget precedes passage of the state
budget. In addition, because of stalemates between the State
Legislature and the governors, adoption of
the city budget has often preceded passage of the state
budget. When the city budget's passage is delayed, the current
year's expenditure and tax rates remain in effect. But when
the state's budget is delayed beyond the April 1 start of
its fiscal year, which has happened in most of the past
dozen years, the state has no budget. When this occurs,
the Legislature may pass continuing resolutions to keep
the government going, but new aid to localities stops or
is delayed. For the city, and other municipalities in the
state, this may mean added borrowing and interest payments
to make up for the temporary loss of state aid, especially
aid for schools.
From the onset of its fiscal crisis in 1975 through 1985,
the city was unable to raise money on its own for capital
projects or to payoff debts incurred from the sale of city
bonds and notes, the traditional form in which cities usually
raise money for long-term projects. To enable the city to
meet its capital needs, the state created the Municipal
Assistance Corporation (MAC) to sell bonds for the city,
backed by the state's credit.
Since 1985, the city has been able to maintain itself in
the traditional financing market, but "Big Mac"
remains in existence to direct the repayment of the bonds
it sold. By June 30, 2008, all of the bonds it issued will
have matured and the Municipal Assistance Corporation will
go out of business, as prescribed by the law that created
In 1975, the state also created the Emergency Financial
Control Board to monitor the city's expenditures and financial
plans. "Emergency" was removed from its title
when the fiscal crisis passed. The Financial Control Board
(FCB) adopted an advisory role and limited its review of
the city's finances to an audit of the city's spending and
revenue. However, the FCB 's role can revert to its more
restrictive mode if (1) the city has a deficit of $100 million
at the end of a fiscal year, (2) it cannot pay the principal
interest on its debt, (3) the city and state Comptrollers
say that the city can no longer borrow money, or (4) the
city does not follow mandated accounting practices.
The FCB has seven members: the Governor, the Mayor, the
state and city Comptrollers, and three private citizens
appointed by the Governor with the advice and consent of
the State Senate. The Financial Control Board is also slated
to go out of business on June 30, 2008.
Independent Budget Office
After years of the city being subject to financial scrutiny
by state and federal entities, the 1989 Charter revisions
provided for New York City to have its own fiscal watch-dog
-- the Independent Budget Office (IBO). This office is intended
to serve as a nonpartisan, truly independent, well-funded
participant in the budget process.
The IBO provides the Council, Comptroller, Public Advocate,
Borough Presidents, and community boards with information
on the preliminary and executive budgets. It also reports
on the fiscal implications of existing local laws and proposed
legislation, estimates of revenues, and changes in the city's
financial conditions. The IBO has a guaranteed budget of
at least 10% of the appropriations available to run the
city's Office of Management and Budget.
The IBO director is elected by a majority vote of a special
committee comprising the Comptroller, Public Advocate, a
Borough President chosen by the other Borough Presidents,
and a Council member chosen by the Council. The director
is to be appointed without regard to political affiliation
and serves for a four-year term, which could extend beyond
the terms of the appointing officials.
There is also a ten-member Independent Budget Office Advisory
Committee appointed by the Comptroller and the Public Advocate
for staggered five-year terms. The Charter requires that
this Committee's members have extensive experience in finance,
economics, accounting, public administration, and public
policy. The Committee selects its own chair from among the
members, who are nonsalaried and cannot serve consecutive
All of these provisions are designed to ensure the independence
and expertise of the IBO and to remove this office from
partisan considerations and "power plays" often
associated with the budget process.
Financial Information Services Agency
Throughout these sections on sources of revenue and spending,
we have indicated how the Charter provides for issuing of
reports, estimates, and standards and the publication of
financial information --all intended to open the fiscal
process to public scrutiny.
The Financial Information Services Agency (FISA) is another
link in this chain. It consists of three directors appointed
by the Mayor, one of whom has been recommended by the Comptroller.
FISA is charged with implementing and managing "an
integrated financial management system" in city government
--or more to the point, with ensuring that the city follows
sound and generally acceptable accounting practices.