Joseph Krist
Publisher
NEW YORK BUDGETS
As we go to press, the State fiscal year end approaches with major uncertainties overhanging the process due to the Mayor of New York’s plan to raise property taxes. That idea has been pretty effectively shot down in both the State and City legislatures. There is simply no appetite for a property tax increase which would primarily impact working class homeowners. This week, the Mayor signaled that the fight over property taxes is over for now.
That doesn’t reduce pressure on the State to provide more revenues to the City. At the same time, it brings the Mayor’s new spending plans into focus. There is strong pressure from Albany in an election year being applied to the Mayor to reduce his spending wish list. It is the budget process which will reveal if the Mayor has the requisite skills to manage the City. You can’t balance the budget on Tik Tok.
It was political mismanagement that initially damaged Mayor Brandon Johnson in Chicago. We see parallels in Mayor Mamdani’s approach. The politics of the issue were pretty clear – a new City Council and Council Speaker; a governor up for reelection along with the entire state legislature – all facing tremendous pressure to address affordability. Yet the initial ask is for more revenue.
Both the State and City face issues stemming from legislative mandates. The City is under pressure to meet reduced class size mandates in its public schools. The new School Chancellor has already indicated that the resources do not currently exist to meet those mandates on a timely basis. The State is dealing with the realities of its climate policies. At the end of a winter heating season marked by historically high electric rate increases as well as absolute rate levels, the expectation is that the clean energy goals in existing law will be relaxed.
All this in the wake of the four rating agencies all casting doubt on the City’s short term rating outlook. IBO released its analysis of the 2027 Preliminary Budget and Fiscal Years 2026 – 2030 Financial Plan. IBO forecasts budget gaps of $535 million in 2026 and $5.939 billion in 2027. It estimates $5 billion less in property tax revenue at existing rates. IBO’s economic forecasting projects slower growth in personal and business income tax collections. It is noted that budget expenses are more accurately shown, correcting prior underbudgeting. IBO estimates that total revenues will grow by an annual average of 2% a year from 2025 through 2030, but expenditures will increase by an average of 4.5% a year.
The Preliminary Budget proposes using nearly a billion dollars of the $1.97 Billion currently in the Revenue Stabilization Fund (“Rainy Day Fund”) to balance the current year budget, with the financial plan reflecting a replenishment in 2028. This would be the first withdrawal of funds since the Rainy Day Fund was established in 2020. State law limits the withdrawal of more than 50% of the fund in any fiscal year, absent a compelling fiscal need certified by the Mayor.
As the process unfolds, information about the City’s economic engine produced mixed results. Wall Street’s securities industry bonus pool reached a record $49.2 billion in 2025, up 9% from the previous year, while the average bonus rose 6% to $246,900, according to New York State Comptroller Thomas P. DiNapoli’s annual estimate. The increases reflect a rise of more than 30% in Wall Street’s profits, which totaled $65.1 billion in 2025.
Securities industry employment edged down slightly to 198,200 in 2025 from a 30-year high of 201,500 in 2024, according to preliminary data. The city’s share of securities industry jobs nationally was about 17.9% in 2024, down from roughly one-third in 1990, but still more than any other state. Wall Street was responsible for 20.2% of all economic activity in the city in 2024.
It accounted for 19.4% of the state’s tax collections in State Fiscal Year (SFY) 2024-25 and 8.4% of city tax revenue in City Fiscal Year (FY) 2025. DiNapoli estimates the 2025 bonuses should generate $199 million more in state income tax revenue and $91 million more for the city when compared to the previous year.
So, what is the problem? The Governor’s proposed budget assumed bonuses in the state’s broader finance and insurance sector would increase by 25.9% in SFY 2025-26, while the city’s FY 2026 financial plan assumed an increase of 15.1% in the city’s securities industry bonuses. Based on DiNapoli’s estimate, tax revenue from the bonuses may fall short of expectations for the current fiscal year.
Given the recent state of the market and the uncertainty associated with the war against Iran, any estimate of bonuses and the tax revenue they might generate should likely be tempered. So, it was disappointing to see that the Mayor’s response to the bonus data was “This report makes clear how now more than ever we need to tax the wealthiest New Yorkers and the most profitable corporations to make the most expensive city in the country more affordable,”.
The campaign is over. It’s either govern or take a downgrade.
IMMIGRATION AND GROWTH
Budget season offers a chance to see how optimistic the economic assumptions are which guide legislators’ budget decisions. In the midst of these budget deliberations, the US Bureau of the Census released its 2025 population estimates. The data provides food for thought as to what a realistic level of projected growth is going forward under current immigration policies, many of which were established in the second half of 2024.
Population growth slowed in a majority of the nation’s 3,143 counties and the District of Columbia between July 1, 2024, and July 1, 2025, according to the estimates released by the U.S. Census Bureau. Among the 2,066 counties that grew between 2023 and 2024, nearly 8 in 10 saw their growth slow or reverse direction in 2025. In many cases, counties already in decline saw losses accelerate. Every metro area in the United States, in fact, experienced lower immigration rates
Meanwhile, 310 of the 387 U.S. metropolitan statistical areas (metro areas) had slower growth between 2024 and 2025 than during the prior year. The three metro areas with the steepest percentage point declines in population growth rates were along the U.S.-Mexico border: Laredo, TX (from 3.2% in 2023-2024 to 0.2% from 2024 to 2025); Yuma, AZ (3.3% to 1.4%); and El Centro, CA (1.2% to -0.7%).
These shifts were largely due to lower levels of net international migration (NIM), which declined nationwide. Nine out of 10 U.S. counties experienced lower NIM levels between July 1, 2024, and June 30, 2025, compared to the year prior. The one in 10 counties that did not see a drop in international migration did not see an increase either.
San Diego County in California lost about 5,300 people. Net international migration fell to about 6,100, from about 18,000 in the previous year. Los Angeles, the country’s most populous county, experienced a loss of nearly 54,000 residents. In Miami-Dade County, the population shrank by more than 10,000 people, after growing by over 64,000 residents the year before. New York City also experienced a decline of about 12,200.
CLIMATE
The Maryland Supreme Court ruled against reviving climate lawsuits brought by Baltimore, Annapolis and Anne Arundel County that were struck down by lower courts. The lower Maryland court ruled that federal law overrides state law on air pollution that crossed state lines. The court blocked such lawsuits from proceeding and accused the plaintiffs of trying to use litigation to regulate greenhouse gas emissions.
TotalEnergies has signed settlement agreements with the U.S. Department of the Interior to “relinquish” two offshore wind leases worth nearly $1 billion off the coasts of North Carolina and New York and “will no longer develop offshore wind projects” in the U.S. Concurrently, Dominion Energy’s Coastal Virginia Offshore Wind project, or CVOW went online and began supplying power to the grid.
The failed effort by the Trump administration to stop construction only caused a monthlong pause on construction which cost Dominion some $230 million from equipment storage, contractual penalties, an idle workforce and delays in using time-sensitive vessels.
FUEL TAX HOLIDAYS
Georgia on Friday become the first state in the U.S. to suspend fuel taxes due to the impact of the war with Iran on gasoline prices at the pump. Gov. Brian Kemp signed into law a 60-day suspension of the state’s 33-cents-per-gallon tax on gas and 37-cents-per-gallon tax on diesel. Officials estimate Georgia will forgo $360 million to $400 million in fuel taxes. The state may be an outlier this time.
Gov. Ron DeSantis said he has no plans to suspend Florida’s 23.5-cent gas tax, adding there is no “simple fix.” Proposals in Maryland and Connecticut to declare gas tax holidays have not been well received. This contrasts with the experience in 2022 when the last surge in gas prices occurred. At that time, state fiscal positions had been bolstered by federal pandemic aid. In 2022, Connecticut, Florida, Maryland and New York adopted holidays. Illinois and Kentucky delayed scheduled gas tax increases.
GREEN MOUNTAIN MILEAGE FEES
The Vermont Legislature is considering legislation to establish mileage fees. Under the bill, H.944, EV owners and lessees would be assessed 1.4 cents per mile on their annual travels. An odometer reading would be recorded during their car’s annual inspection and reported to the state Department of Motor Vehicles. Drivers could choose to pay their bill all at once or in monthly or quarterly installments. The bill addresses concerns about cost as the mileage-based fee would replace the current fee of $89, on top of the cost of a vehicle registration, that EV drivers have been charged since that fee was established in 2024.
Economists from the Joint Fiscal Office also estimated that the new fee would cost the average EV driver in Vermont $154 a year, based on an annual mileage of 11,000 miles. The resulting revenue could amount to between $350,000 and $1 million in the 2028 fiscal year, which runs from July 2027 to June 2028, and some $2.5 million in the year after. A new 1% tax on the total cost people pay to rent a car, if that car is a fully electric vehicle would be established. EV rentals otherwise would not be subject to the mileage-based fee.
TRI STATE EXIT FEES
The 10th Circuit Court of Appeals in Washington D.C. issued a decision that sides with the Federal Energy Regulatory Commission in a case involving Tri State Generation and Transmission and its exit dispute with United Power. FERC’s numbers favor United. As such, United must pay about $331 million (and it already has). That’s somewhat north of the $235 million that an administrative law judge in Colorado had recommended in 2020. It is far less than the figures of $1.3 billion and more that Tri-State early in the negotiations had said would be fair.
Colorado based Mountain Parks Electric is no longer a customer. Durango-based La Plata Electric will be on its own as of Wednesday, April 1. It will, however, continue to buy some power from Tri-State. Three public power districts in Nebraska in November also gave their two-year notice of plans to leave. Last week, Jemez Electric of Espanola, N.M., also announced its plans to leave within two years. In 2028, Tri-State will be down to 34 members compared to 44 a decade ago.
HOUSING EMPLOYEES
The San Diego Unified School District is moving forward with a plan to build nearly 3,000 units of workforce housing. The District board set a goal of developing housing for 10% of its staff by 2030 in an effort to boost retention of its 13,559 employees amid the region’s housing affordability crisis. Private developers would enter into a joint-use agreement to lease the district’s land, and finance construction through a combination of private loans, tax credit programs and tax-increment financing, depending on the project.
The district has set aside $205 million in bond funds to fill any critical funding gaps that arise during the construction process. The district has also put in place other contingency plans, such as agreeing that if their preferred contractor has any funding issues, they can begin negotiations with their competitor, and spreading out the housing plans among six sites, allowing them to bypass extensive environmental reviews and approvals that would be required for larger projects.
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