New York City Balances Budget, Eliminates $12 Billion Deficit

On May 12, 2026, Mayor Zohran Kwame Mamdani presented the FY 2027 budget that eliminates the $12 billion deficit inherited from the prior administration. The plan avoids new property taxes or service cuts, relying on state aid, operational savings, and policy adjustments.

The American Prospect

Governor Kathy Hochul and the state legislature pledged $8 billion in aid over two fiscal years, including $4 billion announced on May 12. The funding supports universal free child care ($1.2 billion annually) and additional investments in education, public safety, and infrastructure.

Governor Hochul and Mayor Mamdani Announce Additional Aid and State Actions to Stabilize New York City’s Budget

The budget reports $1.77 billion in operational savings from reduced overtime, renegotiated contracts, technology upgrades, lease consolidations, and recovered revenue. It also includes $500 million saved by delaying a class-size-reduction mandate, $68 million from limiting the unincorporated business tax, and $500 million generated by the pied-à-terre tax on second homes over $5 million.

The American Prospect

The plan restores $2 billion to the rainy-day fund, adds $5.2 billion to the Retiree Health Benefit Trust, and funds universal child care, faster buses, public grocery-store pilots, library and park upgrades. It will hire 1,000 teachers under a revised class-size schedule and expects $149 million in net savings from reduced Carter case reimbursements and $519 million from CityFHEPS reforms.

The American Prospect

Governor Hochul said the aid fulfills a promise to make universal child care a reality and to invest in education, safety, and infrastructure. Mayor Mamdani called the budget a joint effort with Albany that safeguards fiscal health and supports working New Yorkers. Speaker Menin noted the state’s contribution and outlined work on affordability, transit access, and essential services.

Governor Hochul and Mayor Mamdani Announce Additional Aid and State Actions to Stabilize New York City’s BudgetThe American Prospect

Housing advocates have protested the city’s appeal in a lawsuit over the CityFHEPS rental-assistance expansion, saying it delays aid for low-income residents. Critics of the pension-payment restructuring argue that extending payment schedules may raise long-term liabilities despite short-term cash-flow benefits. The pied-à-terre tax, generating $500 million annually, has drawn opposition from ultra-wealthy owners such as Citadel founder Ken Griffin.

The American Prospect

• “Many said the only way out of this was slashing services and passing an austerity budget. We rejected that,” — Zohran Mamdani, Mayor of New York City

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• “Our city is now on firm financial ground.” — Zohran Mamdani, Mayor of New York City

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• “From day one, I have been committed to ensuring New York City succeeds, because a strong and stable City means an even stronger New York State,” — Kathy Hochul, Governor of New York

Governor Hochul and Mayor Mamdani Announce Additional Aid and State Actions to Stabilize New York City’s Budget

• “We’re proud to put forward a budget for the working people of this city,” — Zohran Mamdani, Mayor of New York City

The American Prospect

The budget now moves to the City Council for final approval. Upon passage, the city will begin implementing the outlined investments and savings measures. Mayor Mamdani indicated that a comparable fiscal approach will be pursued for the 2028 budget cycle.

The American Prospect