New York City’s Uncertain Financial Future

New York City is facing a dual threat to its budget this fiscal year: the euro and school contracts.

New York City could face a $1.7 billion shortfall this fiscal year if the mayor’s negotiating strategy with two school unions does not succeed.

At the same time, a new report from John Liu, the city’s comptroller, also warned that the worsening economic crisis in Europe could hurt New York’s financial stability.

“Mounting concern over the Euro zone remains a wildcard and our city’s potential exposure to a European collapse is significant,” Liu said in a written statement.

The comptroller said the crisis has led his office to forecast lower tax collections from individuals and businesses for the city.

Citing data from the Federal Reserve, the Comptroller’s office said European banks have more than $1 trillion in assets in New York City.  Those banks employ thousands of people, in addition to those employed at non-financial European businesses with operations in the city.

The biggest risk to the city’s finances, however, could come from still pending contracts with the United Federation of Teachers and the Council of School Supervisors and Administrators. 

The city's has pushed for a contact with zero wage increases.  The Comptroller’s office estimates that if other recently agreed to collective bargaining agreements provide an outline for the final contracts, the city could have to pay nearly $1.7 billion in wage increases this year, to includes retroactive pay.

The UFT has been without a contract for more than two years. The principals union has been without a contract since March 2010.

With reporting from Beth Fertig.