(The Center Square) — New York City tops the nation for having the worst municipal finances for the seventh year in a row, according to a new fiscal watchdog report.
The group Truth in Accounting’s 2024 Financial State of the Cities found the Big Apple’s financial condition worsened over the past year by an estimated $6.1 billion, resulting in a $61,800 per taxpayer burden and earning it an “F” grade.
The report’s authors attributed much of New York City’s financial condition to the lingering impact of COVID-19, which was mentioned 38 times in the city’s financial report.
“Despite receiving $6.5 billion in COVID relief grants and a $1.3 billion increase in tax revenues, the city’s money needed to pay bills increased by $6.1 billion,” they wrote. “Its unfunded pension liability increased due to unrealized losses of more than 8%, but New York City’s financial problems stem mostly from unfunded retiree healthcare obligations.”
While the city had 81 cents set aside for every dollar of promised pension benefits, the report noted, less than six cents had been set aside for every dollar of promised retiree health care benefits.
Overall, the annual survey of the 75 largest U.S. municipalities found that a majority — or 53 — including New York City, did not have enough money to pay their outstanding bills.
“This means that to claim their budgets were balanced — as is required by law in the 75 cities — elected officials have not included the actual costs of the government in their budget calculations and have pushed costs onto future taxpayers,” the report’s authors wrote.
Combined, the $307.4 billion worth of assets available to pay bills; their debt, including unfunded retirement benefit promises, amounted to $595.3 billion, according to the report. Pension debt totaled $175.9 billion, and other post-employment benefits, mainly retiree health care, totaled $135.2 billion, the report noted.
The cities’ poor financial health also affects city workers’ retirement plans, like those for teachers, firefighters and police officers, the report’s authors noted.
In fiscal year 2022, all of the cities continued to receive and spend federal COVID-19 relief funds, and as the U.S. economy reopened, they took in additional tax revenue. For most cities, such economic gains were offset by increases in their pension liabilities, which were caused in large part due to decreases in the market value of pension investments.
Over the past few years, investment market values have swung dramatically, the report noted. This volatility has negatively impacted most cities’ pension investments and their financial condition, which demonstrates the risk to taxpayers when cities offer defined pension benefits to their employees.
“Cities should focus on overfunding their retirement plans so they can weather market downturns,” Sheila Weinberg, founder and CEO of Truth in Accounting, said in a statement. “If elected officials choose to ignore this perpetual issue, then taxpayers will be on the hook to pay higher taxes to cover the benefits promised to past government employees.”