Mamdani proposes $124.7B executive budget - without raiding reserves

New York City Mayor Zohran Mamdani proposed a budget Tuesday that avoids what skeptics and watchdogs warned would be critical missteps in the new mayor’s first budget outing.

City Hall won’t pursue a threat to raise the property tax rate – an idea few observers treated as serious or even possible from the moment Mamdani first raised it in February. The city also won’t raid its budget reserves to close an estimated $5.4 billion gap between this fiscal year and next. 

Instead, Mamdani’s executive budget proposal – clocking in at $124.7 billion – closes that $5.4 billion deficit with a helping hand from the state. That comes in the form of an assumed $500 million in revenue from a new state pied-à-terre tax (though the details of the tax have not been publicly confirmed yet), $2.3 billion in savings through pension restructuring and an array of city cost burdens shifted into the future, including $202 million in offset spending obligations and flexibility in implementing new school class size requirements that will amount to $508 million in savings. Any changes to the city’s five pension funds would also need to be approved by each pension board that oversees the funds, including representatives from municipal unions. Mamdani has said the restructuring would have no impact on retirees and their benefits nor current employees and their future benefits. The deadline for the city to fully fund its pension funds would be pushed from 2032 to 2037 under the plan.

“I see this as a win, not just for our administration, but for the city of New York,” Mamdani told reporters, “A win to ensure that the city is back on firm financial footing, and it's doing so by taxing the rich, by creating a fair relationship with Albany, by finally accounting for the mismanagement we've seen in prior years.”

A few hours before Mamdani presented his budget in a Blue Room address at City Hall, he and Gov. Kathy Hochul announced in a joint press release that “Additional Aid and State Actions” would total $4 billion in “gap-closing measures” over this year and next. That was on top of an earlier $1.5 billion Hochul committed in state aid in February and a $1.2 billion infusion of cash specifically for expanding city-funded childcare announced in January. The total also includes $150 million in new school aid.

The mayor repeatedly thanked Hochul and state leaders, praising “our shared vision of a politics where the city and the state are not at odds and where we harness the mighty resources at our disposal to improve the lives of those we serve.”

The spending plan also includes $1.77 billion in savings across agencies – a result of Mamdani ordering “chief savings officers” to identify cuts of 1.5% and 2.5% across fiscal year 2026 and 2027. That’s a lower savings target than some of the cuts pursued under Mayor Eric Adams’ administration.

The executive budget total of $124.7 billion is a few billion less than what Mamdani presented in his preliminary budget in February – a fact that stood out to Comptroller Mark Levine. “His additional spending here was pretty modest,” he said after getting briefed by the mayor’s office Tuesday morning at City Hall. “Pretty remarkable. It’s been a while since we’ve seen a mayor be this conservative on spending.”

New York City Public Advocate Jumaane Williams gave a cautious endorsement of the mayor’s spending plan Tuesday.“If what was projected to come comes, I think we’re in much better shape,” Williams told reporters after leaving the briefing. “If it doesn’t, we’re kind of back to square one again.” 

While Hochul announced a deal on the state budget last week, state legislative leaders said no such deal existed, and the majority of budget bills have yet to be introduced in Albany. Among the open questions is how exactly the pied-à-terre tax will work and how home values will be assessed. That’s even unknown to one of the people negotiating the state budget, state Senate Majority Leader Andrea Stewart-Cousins, who said Tuesday that Hochul hasn’t yet shared a specific proposal. 

Mamdani’s first budget has been a relentless test for the new mayor. Weeks after taking office, Mamdani attempted to define the city’s budget deficit as a crisis of former Mayor Eric Adams’ making. He wasn’t exactly met with outright disagreement from those involved in this year’s budget – Levine and the watchdog group Citizens Budget Commission have also warned of runaway spending and persistent underbudgeting by previous administrations – but his preliminary budget rankled some of the other budget stakeholders and even some of his allies by threatening to hike the property tax rate and raid budget reserves if Hochul did not agree to hike income and corporate taxes on the wealthy and top-earning corporations. While he failed to get those two tax proposals in the state budget, Mamdani did secure the tax on second homes from the state, which City Hall has claimed as a win for taxing the rich.

“We will tax the rich,” Mamdani said Tuesday, calling it “the kind of progress that arrives too rarely.”

The New York City Council and the Mamdani administration have also clashed over how to close the multibillion deficit. City Council Speaker Julie Menin shot down the property tax threat from the outset, but tensions peaked in early April when the City Council released its own budget plan that argued the city had a lot more to count in savings – including through unspent salaries on vacant city jobs – which City Hall disagreed with, saying those savings had already been counted. Mamdani then called out Menin, criticizing her personally for not joining his calls to pressure Hochul to raise taxes on the rich.  Things have since calmed. The mayor and speaker joined forces late last month to outline strategies on how the state could help close the city’s budget gap.

Hochul ultimately rejected their primary request, a proposal for the state to scale back the city’s Pass Through Entity Tax, or PTET, a tax credit that largely benefits millionaires.