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Brian Lehrer: Brian Lehrer on WNYC. We'll talk now about New York City's finances. Now, in other times, this might be a dull topic for accountants to get wonky about over beers or something, but with Mayor Adams slashing services and debate over the real cost of the asylum seekers and with a major shift in the kinds of jobs available in the city compared to pre-pandemic times, this is personal for so many people. As the mayor and city council debate taxing and spending for the next fiscal year that begins in July, there's a new report on city finances from the city's independent budget office, and it's got a lot of interesting details, some of which are at odds with the mayors in some cases, in some very interesting ways.

If that's not enough to pique your interest, the report actually includes some pretty good news. With us now is Louisa Chafee, director of the New York City Independent Budget Office. Louisa, thanks for coming on. Welcome to WNYC.

Louisa Chafee: Thank you so much for having me, Brian. I'm delighted to be here.

Brian Lehrer: Could you first explain to people what the Independent Budget Office is and when and why it was created?

Louisa Chafee: Sure. The Independent Budget Office is a New York City agency created 35 years ago in 1989 to be modeled on the Congressional Budget Office and give New York City information on budget and related policies. We have access to city data, but we are completely independent from any other elected official.

Brian Lehrer: Independent. Can you do a short 1970s history lesson on that? Why did the city government face such a financial crisis in the 70s, and what were the main lessons learned that the Independent Budget Office is supposed to make sure stay learned?

Louisa Chafee: [laughs] Brian, short may be challenging, but basically in the 1970s, New York City's finances weren't explained or accounted for in a way that was publicly understandable, and the city ended up at dire risk of going bankrupt. Out of that grew the idea that the city should, in fact, have multiple budget actions a year so that the public would have much more insight as to what was going on. The Independent Budget Office, which we call the IBO, was created as part of that transparency movement.

Brian Lehrer: If you are independent from the mayor and city council, who do you actually report to? Where does your funding come from, and who appoints you?

Louisa Chafee: I was appointed just a year ago by an advisory board that is defined by the New York City Charter. 10 individuals representing various parts of the New York City economy and government expertise, and our budget is set at a fixed percentage of another city agency.

Brian Lehrer: Wow. You had to do a job interview with 10 people, huh?

Louisa Chafee: [laughs] It was really fun.

Brian Lehrer: [laughs] I'm sure. Just to get to know you a little bit more for our listeners, you said you've been a director for one year. What did you do before?

Louisa Chafee: The majority of my career, I've been in government. I worked in City Hall for over 11 years in the Bloomberg administration. I started my career in the administration for children's services, that's the child welfare agency. I also worked for the governor as the Deputy Secretary for Human Services. That's overseeing anti-poverty agency statewide. Then I spent seven years in the philanthropic sector working for UJA-Federation of New York, which is of the largest community trusts in the country, and I focused on the some 50 nonprofits and their domestic service public policy challenges.

Brian Lehrer: All right. That's a good intro to the report. A little bit of history there, a little bit about you, a little bit about the office with Louisa Chafee, director of the New York City Independent Budget Office, which does have a new report out on New York City Finances. On your list of key findings, the first one I think goes into the category of good news. The city government is running a surplus in the current fiscal year that's $2.8 billion more than the Adams administration estimated. The city government with all its expenses, Louisa, is running a surplus?

Louisa Chafee: Yes, we are. Again, the IBO comes to this finding because we both look at the city's taxes and also the city's economy. What we see is about 2.8 billion more money than the administration had anticipated. This is because there's about 900 million more in tax revenues coming in, and also because IBO estimates that spending is, in fact, about $1.9 billion lower than the administration had suggested in the fiscal action they printed in January, which we call the preliminary budget.

Brian Lehrer: Then why did they close the libraries on Sundays if they're running a surplus?

Louisa Chafee: [chuckles] Isn't that the question, Brian? The program to eliminate the gap known as PEGs or the way the city reduces spending was issued in September with three rounds, and there have been-- three rounds of 5%, I should say, so that the administration asked their agencies to reduce their spend in every budget action leading up to when the budget is agreed upon and negotiated in the late spring. Some of those PEGs have already been reinstated. In other words, cuts were made in November and the monies have been replaced in January. For example, the police class that was cut is reinstated, but there are still some major pegs outstanding.

IBO, in a nonpartisan way, is presenting information to the public so the public can decide where they wish to drive the policy conversation from there.

Brian Lehrer: We'll take calls in just a minute, but similarly, for the next fiscal year, which begins in July, your report projects more than a $3 billion surplus, but $3 billion a year happens to be the same number that the mayor says the asylum seekers are costing. How do those things fit together?

Louisa Chafee: The asylum seeker actual cost has been a subject of pretty animated debate as we know. IBO's intention is to bring data and steady conversation to this area. We, starting last spring, created three models, low, medium, and high because so much of the costs are what will happen, not what are currently happening. Over the 2 years, the administration in November anticipated that the costs would be 10.9 billion and the IBO anticipated they would be 6.7 billion. Again, this is in comparison to a budget of somewhere between $109 and $116 billion. Another thing to remember is that over those two years costs, the state has now committed to invest some $3 billion.

We are looking at a genuine challenge to the city, but IBO believes that this is a dollar sum and an operational challenge that the city is continuing to address and will manage to navigate through.

Brian Lehrer: Now, listeners, city workers, city taxpayers, or anyone else, it's question time for the director of the city's Independent Budget Office. 212-433-WNYC, 212-433-9692. Call or text for Louisa Chafee. Anything on what the city spends, takes in taxes from you and others, what job markets are expanding or shrinking? We'll get to some of that. What about that office building doom loop that may not actually be happening despite a lot of remote work, or anything related? 212-433-WNYC, 212-433-9692. Let's take a phone call right now from Jason in Flushing. Jason, you're on WNYC. Thank you for calling in.

Jason: Thank you so much, Brian. This is Jason from the Human Services Council, and I wanted to ask, the IBO wrote a report in the fall highlighting how much increases to DC 37 have outpaced human services wage increases. Human services is a very large workforce that contracts with the city and hasn't seen a cost of living adjustments or wage increase in a number of years. The JustPay campaign is fighting to ensure that this workforce isn't left behind. Do you think that the human services workers are an important part of the New York City economy? Can you speak to how they historically have gotten wage increases from the city?

Louisa Chafee: Thank you, Jason. The IBO did do a report looking very carefully at the salary adjustments based on the DC 37 union negotiations that city employees have gotten and what the comparable increase would be if the workforce under contract with New York City providing human services were to get the same level of raise. We did need to recognize that the city made an investment called the workforce wage enhancement of some $60 million, but IBOs report found that over a 5-year spread, the underpayment of the nonprofit sector was at least $415 million compared to what their peers, meaning similar workforce in the city would be getting.

I have to say, Brian, I've spent years working with the nonprofit sector. There are about over 1,000 nonprofits in New York providing critical services from childcare to senior services and almost everything in between, and we believe that this is important information for equity for all New Yorkers providing critical services to New York City residents.

Brian Lehrer: I take it, Jason, and I'll follow up with you, that you feel like human services workers in particular among the city workforce are being left behind while teachers and uniformed first responders and others are getting more appropriate raises.

Jason: Yes. As Luisa mentioned, there was a workforce enhancement, but it was a very small pile of money to be split between over 85,000 workers. Previous mayors have done a multi-year cost of living adjustment deal, like the deal that DC 37 received, and that's really what the human services workforce needs as well. The JustPay campaign is fighting for 5%, 3%, and 3% to try to close the wage gap somewhat.

Brian Lehrer: What do you see, Jason, from your perspective, the effects of the asylum seekers being on the demands on human services workers and the way the city is funding you?

Jason: I think that [inaudible 00:12:18] is able to respond as effectively--

Brian Lehrer: Your line is breaking up badly. Let's see if we can stabilize it. Try it one more time.

Jason: Sorry about that. Is this better?

Brian Lehrer: Yes.

Jason: I think we've seen that the nonprofit sector is struggling to respond as effectively as it could due to the years of under-investments from the city, due to contracts not always paying on time or paying the full cost of providing services. That adds up in the budgets of human services organizations. When it comes time to respond to a crisis or an emergency like responding to asylum seekers, it's a bit harder for these organizations to be able to respond as effectively. I also think that the low wages creates issues with retaining a talented workforce who might decide to leave for other sectors for better-paying jobs.

That also makes it more difficult for us to provide the services, and yet we still see so many nonprofits are stepping up every single day to continue serving this community. I think we're trying our best, and I think we're calling on the city and the mayor to really make sure that they are properly investing in the benefits and the work that we are putting into not just serving as asylum seekers, but really serving all New Yorkers every day.

Brian Lehrer: Jason, thank you very much for your call. We really appreciate it. He's talking about the nonprofit sector, and one of the critiques that members of city council have leveled at the Adams administration is that they have used some for-profit companies for certain asylum seeker services that could have been more efficiently purchased, I guess, from nonprofits and therefore saved the city money to spend on other services for New Yorkers. Is that something you looked at at all?

Louisa Chafee: Brian, city procurement is a really complex area, and we continue to very carefully track which agencies are engaging organizations to provide these services, which type of procurement tool is being used, because that's really where you see the most variety in price, and also what the rate structure is. We are seeing the city move from emergency to more standard requests for proposal procurements and move from health and hospitals to the traditional sheltering agency of homeless services. That movement is happening, but we are also really concerned about the fiscal pressure on the nonprofit community.

Many of these providers are multimillion-dollar organizations because of the level of work they do with the city, but due to slowdowns in contract registration and contract payment, a lot of these organizations are carrying huge amounts of, in effect, interest-free loans to the city. We continue to track really closely, we're looking at our data, and we will be providing additional reporting on this in the April timeframe.

Brian Lehrer: As we continue with the director of New York City's independent budget office, Louisa Chafee. Louisa, here's a text from a listener who writes, what about the schools, major cuts to the DOE, the Department of Education. My daughter is in a 4th-grade class with 30 kids to 1 teacher, overcrowded classes because they have to let teachers go because of cuts. Please ask your guest if they will give back dollars to the schools. Louisa, I know one of the items in your analysis is the effects on the city budget of the state law that actually requires a phase-in of smaller class sizes. I wonder if you could talk about that in the context of responding to the listener's text.

Louisa Chafee: Brian, thank you. I'm going to try and do this in not the period of time that the answer would really justify. The Department of Education's overall budget is about $30 billion, so it's about a third of the city's budget. It is an enormous agency. IBO--

Brian Lehrer: Can I stop and have you linger on that for just a second, because I see the bar graph that came with your report that shows, and this may surprise a lot of listeners, where city spending actually goes, and by far the number one is education at over $30 billion a year. The next closest is social services at less than $15 billion a year. Education is more than twice as much as the next biggest thing. Police, for example, takes 6 or 7 billion according to this chart, education over 30 billion. That's not to say the police budget can't be debated, but some people have said about the United States government with as much as it spends on Medicare and Medicaid and social security, that the United States government is an insurance company with an army.

I guess we could say the New York City government is a school system with a police force if we wanted to go down that road. With that as a starting point, it is the major thing that our city tax dollars go to.

Louisa Chafee: Brian, yes, the Department of Education, a transformative agency providing education to an enormous number of children is the major part of the city's budget. You are right, expense budget. I also think it's interesting to compare some other areas. As you said, NYPD is 6 billion, cultural affairs is 200 million, and the libraries after the last round of cuts are, from the city, 450 million. They have a few other revenue sources. It really puts it into context, and I encourage people to check it out, makes you think about where our taxpayer dollars go.

I do want to get back to the question, though, and talk about how the Department of Education is facing the challenges they have. We want to recognize that when COVID monies arrived in New York City, critical federal COVID aid, one of the largest agencies reeling from the pandemic was the Department of Education. Monies were invested in Department of Education from the COVID that were time-limited. DOE, the Department of Education, has the challenge now of adjusting with the COVID monies reduction. Some programs, they're moving other money in, and some programs they're cutting, and there are some really strong consequences.

There are other factors that DOE is going through. For example, as you mentioned, the class size law which intends to increase the teacher-student ratio, but will require shifts in employee size, and DOE needs to budget for it. We've done the math and figured out how we think that should be structured. I'm going to give a plug to another IBO tool. IBO made YouTube videos for individuals to figure out their school's budget. We do think it's a great way for people to understand what's going on in your school, and we'll put that up on our Twitter page, but there are real challenges in that 30-plus billion dollar budget, and we also want to recognize the leadership that that agency continues, and that they are right-sizing, and that they are moving monies around to adjust various increases and decreases in programs.

Brian Lehrer: Bottom line, Mayor Adams, if I'm understanding him correctly, says the city cannot afford what the state law requires in terms of the reduction of class sizes over the next few years. Are you, at the Independent Budget Office, concluding otherwise, that the city can't afford it?

Louisa Chafee: Brian, we don't make conclusions in general because it's not our job to create the policy. It's our job to illuminate the numbers. We have done a class size report, and we do encourage folks to look at that. We have also done a report on the reduction of COVID funding, which is a factor and also we are in the process of looking at other parts of DOE's budget. We understand the intention of the class size law, and we really encourage the public to read the fine print and understand the goals and the different routes to getting there.

Brian Lehrer: Xander in Brooklyn, you're on WNYC. Hi, Xander.

Xander: Hey, Brian. Can you hear me?

Brian Lehrer: Yes.

Xander: Hey, so I just wanted to share my experience in the last five years working in community-based composting. We do a lot of education and empowerment for communities to both have a resource for composting and learn how to do it themselves, but we've only been subject to the city's budget cuts to the point where I've been laid off three times in the last five years. I just see how it destroys these programs' functionality and it causes them to have to restart whenever city money is available again. These programs are very cheap. The way that the city budget operates, I've just seen how destructive it's been, and just want to share that frustration and see if there's any way to organize to make that not the case in the future.

Brian Lehrer: Xander, thank you very much. Does that ring true to you that, I guess, a non-profit involved in composting has had to come and go in terms of their staffing?

Louisa Chafee: Brian, I don't know the details, although empathy to you, Xander, but we do know that many of the cuts have resulted in entities under contract, which is how nonprofits provide service with the city being reduced, and so that does resonate. We are concerned about how some of these budget reductions manifest and how people live in the city. We think it's fully plausible and within the $2 billion sanitation budget, the proportional cuts to reduce programs may be low, but they can have huge impact on New Yorkers. It's part of what we've been looking at across the agencies is when cuts for dollar sums that in the overall scheme of $109 or $16 billion, a cut of a couple hundred million is made, the consequences to humans versus the consequences to the city's bottom line.

We just really encourage New Yorkers to think about how its city is making those fiscal choices.

Brian Lehrer: We've got a few minutes left. Can I ask you about another really dramatic bar graph in your report, which is about different sectors of the economy and what has happened to jobs compared to the pre-pandemic era? We have a number of sectors that have declined some. The biggest decline is in retail trade. I guess that would make sense to a lot of people. In-person stores have taken a hit, so a loss of about 40,000 retail sector jobs compared to before the pandemic, if I'm reading the graph right, leisure and hospitality, down maybe 15,000 would be the next biggest hit, various other ones like that.

The finance sector and insurance sector, that has grown a little bit. Technology, though we've heard a lot about tech layoffs these days, the tech sector has also grown a little bit, but like we were talking about the education budget before, there's one line on this chart that shows an epic increase in the number of jobs in one sector, and that is health care and human services. This seems to say there are 140,000 more jobs in health care and human services in New York City than there were before the pandemic. Nothing approaches that in terms of an increase in the number of jobs.

If 40,000 retail jobs were lost, the biggest in the negative direction. This is 140,000 jobs gained in health care and human services. Where and why?

Louisa Chafee: Brian, we're so glad that you noticed this because we, too, are really looking at this very closely. To be clear, this is Bureau of Labor Statistics data, and the category is broad, but it appears that the largest growth are in what we might think of as home health aides, which are relatively low-paying jobs for people who are assisting people over 65 and/or the disabled in their daily needs through some level of contracted services. It is a remarkable growth, and we think it's important to remember the overall story which is that the city's overall employment numbers are back up to where they were pre-pandemic, but the ratios of the industries has shifted really remarkably, and this enormous growth in a low paying industry has real indicators for New York City.

We're looking at it closely, and we would like to understand more just as you would because it's a really remarkable level of growth in just one area.

Brian Lehrer: Is it that the population is aging?

Louisa Chafee: Absolutely. Yes.

Brian Lehrer: Is it because there are more poor people than there were in New York and a lot of the home health aides-- it's an inverse of what you might think. A lot of the people who even have home health aides at all are the poorest elderly because Medicaid funds it. Medicare does not. Ironically, a lot of people who are either not very affluent or very poor can't afford the home health aides that they might need. Is this also expansion of Medicaid in New York State?

Louisa Chafee: We don't have a data-driven answer fully, but you are right, probably the largest factor is the increasing ratio of the aging population. We are trying to understand this more as are many other economists, because it really is a distinct difference. Once we have more, we'd be happy to come back on and talk to you more about it.

Brian Lehrer: All right. Give me one last thought, and this is on taxes. We've been talking so much about what the city spends. How about what the city takes in in taxes? If the city has a $110 billion annual budget, roughly. What's the largest source of that $110 billion?

Louisa Chafee: Within the taxes, property taxes are the largest income source. That continues to grow, although we do not see it growing indefinitely at the same ratio, but the property taxes are significantly higher than the other taxes that factor in such as personal income taxes or business taxes and New York City is a property-driven economy on many levels.

Brian Lehrer: I guess you don't take a position, and this will be the last question, at the Independent Budget Office on whether the tax system makes sense, whether some people are overtaxed, some people are undertaxed, there are, of course, constant debates about this.

Louisa Chafee: There are complex debates, and, until now, no, we do not take positions as I said, but we do publish data and we do try and illuminate the different aspects of the property tax system and help New Yorkers understand how this structure came to be and where the debate is in shifting the structure.

Brian Lehrer: A primer, folks, on the New York City budget from the chair, the director of the Independent Budget Office, Louisa Chaffee, the budget office just out with a report comparing their analysis to Mayor Adams' analysis and looking at the basics as we've been describing and discussing. I hope this was interesting for you non-accountants out there. Louisa Chafee, thank you very much for coming on with us.

Louisa Chafee: Well, thank you so much. It was a pleasure to be here today.

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