November 7, 2012 (New York, NY) – Manhattan Borough President Scott M. Stringer, Congressman Jerrold Nadler, and Congresswoman Carolyn B. Maloney today released a report projecting severe cuts to federally-funded New York City programs if Congress fails to head off the looming “Fiscal Cliff” budget cutbacks and tax increases scheduled to take effect on January 1. In the aftermath of Hurricane Sandy, the report projects a fiscal hit to the city of more than $800 million for programs that include FEMA assistance (such as the $310 million in disaster relief already approved for New York City and Long Island), housing, transportation, anti-terror, education, and social services.

The authors of the report, “The Fiscal Cliff: How Looming Program Cuts and Tax Hikes Could Affect New York City Residents,” said these across-the-board cuts are avoidable and called on Congress and the President “to reach an agreement that recognizes the struggles of middle class families across the country and does not threaten the nation’s fragile economic recovery.”

If Congress fails to head off the sequestration threat by January 1, 2013, the impact on federal programs serving New York City will be deep and wide-ranging. And the elimination of tax cuts—including cuts passed under President George W. Bush and President Obama--will deepen the financial pain:

• For a middle class family earning $100,000 in New York City, the additional tax hit will average $4,000 per year
• A family earning $50,000—the City’s median income—will see a tax increase of nearly $2,000
• For families in the bottom 20 percent of the income distribution, taxes will increase by an average of 3.7 percent, largely from the expiration of the EITC expansion

The report details the impact of the fiscal cliff using reports by the Tax Policy Center and the Federal Office of Management and Budget. It does not discuss all possible cuts, but provides a snapshot of the depth and breadth of cuts should sequestration go into effect.

“New York City cannot afford to go over the fiscal cliff, and Congress must take swift steps to make sure these devastating budget cuts never take place,” said Manhattan Borough President Scott M. Stringer. “Cities matter, and as the economic engine of the nation, New York City matters most of all. These cuts would deal a crippling blow to the city’s recovery from Hurricane Sandy and to working and middle class families in all five boroughs. It is imperative that Congress and the President step back from the precipice and ensure that these cuts in vital services—and a significant rise in taxes for working families—never take place.”

Congressman Nadler said: “It should be clear to everyone by now that sequestration would have catastrophic effects on our economy, and would lead to job losses and disruption to social services right here in New York City.  I remain committed to working with my colleagues in Congress to cancel the sequestration as soon as possible so that we can get back to our number one priority: continuing to rebuild our economy by creating jobs. We must stop the dangerous and self-made disaster that sequestration, or equivalent spending cuts, will bring.”

Congresswoman Maloney said: “We always knew that hurtling off the ‘fiscal cliff’ would wreak devastating consequences on New York, and now Manhattan Borough President’s new report details just how destructive those consequences will be. Our public school students, law enforcement officers and first responders, public housing tenants, and health care consumers and providers will be particularly hard hit, and I pledge to work with my colleagues in Congress to avert this all-too-preventable disaster. I applaud the Borough President for shining a spotlight on the dangerous brinksmanship in our nation’s capital and its ramifications for New Yorkers from all walks of life.”

The potential federal funding cuts to New York City outlined in the report include:

Disaster Relief

• Federal Emergency Management Agency (FEMA): Disaster Relief Fund and Other Programs: $878 million nationwide.

(Note: Unlike other cuts discussed in this report, the projected cut to FEMA is a national figure. We cannot make a projection regarding the effect on New York City because disasters, by their very nature, are spontaneous and unpredictable. However, given that FEMA has already dedicated over $310 million (as of November 7) to recovery/relief efforts in New York City and Long Island, the effects on the region in reduced disaster relief are bound to be significant)

Housing

• Community Development Block Grants: $12.3 million
• NYCHA Operating Budget: $75 million
• NYCHA Capital Funding: $27 million
• Section 8 Rental Assistance: $88.8 million (the equivalent of eliminating over 8000 Section 8 housing vouchers)

Transportation

• Federal Transit Administration Capital Investment Grants: $27.75 million for East Side Access and Second Avenue Subway.

Anti-Terror/Public Safety

• Homeland Security/Public Safety Grants: $25 million
• Grants for Criminal Justice Research and Victim Services: $3 million

Education

• National Endowment for Arts/National Endowment for Humanities: ~ $1.5 million
• National Science Foundation/National Institutes of Health: Over $100 million
• Department of Education Funding (Title I et al.): ~ $75 million

Social Services

• WIC: ~ $19 million (equivalent to 30,000 families)
• HIV Testing: $2.5 million (over 63,000 fewer HIV tests in NYC)
• Workforce Development Programs (including for Veterans and Seniors): $2 million
• Homeless Services and Home Heating Assistance: $10 million each
• Legal Services: $1.3 million

World Trade Center

• September 11^th Victims Compensation Fund : $24 million
• World Trade Center Health Program : $14 million

Background: The threat of sequestration grew out of the political impasse that ensued in the spring of 2011, when the country faced a looming crisis as the federal government approached its “debt ceiling” – the amount of money it was permitted to borrow. As part of a subsequent budget agreement, the Budget Control Act of 2011 established a Joint Select Committee on Deficit Reduction (JSC) which was charged with identifying $1.2 trillion in additional spending cuts and/or revenue increases over the next ten years.

Congress included an unprecedented provision to motivate the bipartisan JSC: If it failed to come to an agreement by November 23, 2011, a process known as “sequestration” would be triggered, producing an across-the-board cut in federal spending of more than $1 trillion over nine years. Programs would face cuts of between 7.6 percent and 10 percent. These cuts were designed to be so damaging, Congress would have little choice to come to a long-term agreement on deficit reduction. But the JSC failed to reach an agreement, triggering the scheduled cutbacks for January 2, 2013. At the same time, numerous tax cuts are set to expire on Jan. 1, 2013, which would lead to tax increases totaling $536 billion in 2013—an average of almost $3,500 per household. 

Currently New York City’s 2013 budget projects over $6.6 billion in federal categorical grants. An 8.2 percent reduction could result in over $540 million in cuts. In addition, the New York City Housing Authority (NYCHA) would suffer $190 million in cuts to its operating and capital expenditures, and Section 8 vouchers for affordable housing. In addition, many of the City’s most cherished cultural institutions and universities – from Columbia University to the Metropolitan Museum of Art – could face over $100 million in cuts.

Note: These projected federal cuts for New York City only list the impact for one year. Without congressional action, they would continue in future years.

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