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Falling stocks and a tricky economy could bring a major budget crisis to Eric Adams from New York

Mayor Eric Adams’ $101 billion budget may be more fiscally responsible than any of his predecessor’s spending plans, but the ailing economy and market threaten to trigger a huge shortage.

To keep the city in the black — without raising taxes and fees — the mayor must keep spending, and particularly labor costs, in check when negotiating new contracts with local unions.

In short, the problem: Pension fund losses and lower-than-expected income tax revenues could force the city to draw on its $8 billion reserve fund, and even that may not be enough, as Empire Center’s EJ McMahon notes.

Blame the ailing stock exchange: The period from January 1 to June 30 was the worst first half of the year in more than 50 years. As pension fund returns plummet, the city will need to find more from its operating budget to cover benefits for current and future retirees — $4 billion more than planned from next year through 2026, McMahon predicts.

And it will only get worse if the market continues to fall.

A flagging market lowers the city’s income tax revenue based on capital gains. Adams Budgeters may have raked in a 17% drop in estimated quarterly tax payments, but as of June 15, those payments were down a whopping 31% from the same month last year, City Auditor Brad Lander reports. Lander also predicts that tax revenue growth will slow as the economy falters and Wall Street bonuses collapse.

The chilling conclusion: “Unless the stock market recovers and the economy grows stronger,” Adam’s $8 billion pad “could go up in smoke faster than the mayor anticipated,” McMahon warns. The city could be caught dangerously short.

Undoubtedly, the progressives’ solution will be to demand even more tax hikes from wealthy New Yorkers – which would only make them seek refuge in other states.

And Hizzoner has another concern: With inflation rising, local unions will demand far more pay rises than the 0.5% increase in each of the two years and 1% annually thereafter that the mayor’s plan for new contracts calls for. Other city costs will also increase faster than expected.

Adams faces an enormous challenge in keeping spending in line with income, even at the risk of losing political support from the working class. Wish him luck – he will need it.

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