Fulfilling the Promise of Opportunity
NYC Budget Watch:
FY26 Modified Budget
Last updated 12/8/2025
Purpose
With increasing uncertainty about NYC’s funding for critical government services, FPWA aims to ensure that our members, and the wider non-profit and policy community, understand the City’s budget and have the tools to advocate for fair funding for individuals, families and communities.
The NYC Budget Watch series provides a comprehensive overview of the City’s budget proposals, centering on affordability for individuals and families, and the human services sector.
In this report, FPWA analyzes the Modified Budget issued by the Mayor on November 17, 2025.
What is the Modified Budget?
The Modified Budget—commonly called the “November Plan”—is released midway through the fiscal year (FY26). It updates the City’s Adopted Budget based on revised projections of revenues and spending needs.
Through this update, the mayor may adjust current-year spending by up to 5% without City Council approval. The plan also revises forecasts for future years, offering an important view of the City’s fiscal strength and shaping planning for the next budget cycle.
On November 17, the Mayor released a mid-year fiscal update to the City’s budget.
At first glance, the November Plan shows a relatively healthy budgetary outlook, with revenue outperforming forecasts. Further analysis of underlying trends, however, reveals growing instability for New Yorkers, as wealth continues to concentrate at the top while access to housing, healthcare, and other essential services for New Yorkers struggling with economic insecurity is threatened by federal cuts.
By contextualizing the budget, FPWA shows how growing economic insecurity, as healthcare and housing costs rise while incomes stagnate, undermines the City’s fiscal foundations. We urge the adoption of a budget that promotes broad-based economic growth—through equitable revenue generation and strategic allocation of the City’s more than $118 billion budget—that leaves no New Yorkers behind.
City Outperforms Revenue Forecasts in Mid-Year Update
In FY26, NYC’s revenues are exceeding expectations.
Tax collections are above forecast, and fee-based revenues—such as those from CUNY—are outperforming prior estimates. Refinancing has improved interest income while reducing debt service costs. The City is also generating higher-than-expected revenue from miscellaneous sources.
Despite early concerns, federal operational grant losses are smaller than originally projected. Even following the recent government shutdown, the City expects to receive $1.1 billion more in federal funds this fiscal year than forecasted.
Given these improved revenues, the City increased spending for this fiscal year by $512 million and reduced the projected budget gap for FY27 from $5.0 billion to $4.7 billion. While still sizable, the gap is below typical levels as a percentage of revenue. At this time last year, the projected gap for FY26 stood at $5.46 billion.
To meet projected FY27 costs, the City will need 2.9% revenue growth—a target that remains achievable.
Modified Budget Underestimates Increasing Need
Although the City may be able to “close the gap,” the Modified Budget will struggle to adequately serve NYC residents.
While the federal money flowing through NYC’s operational budget is above forecast, deep cuts to the $100 billion in federal funding that supports necessary services but sits outside its budget—such as Medicaid, Medicare, SNAP, and Pell Grants—are undermining the City’s fiscal foundation.
As federal funding recedes, City costs are expected to rise. In spite of City efforts to allocate additional spending in the Modified Budget, fiscal needs are likely to far surpass budgeted expenses. Moreover, even as the City has filled certain funding gaps, it has reduced funding for wage growth for City workers and contractors. This may prevent wages from keeping pace with the cost of living.
Rising Healthcare Costs Are Underbudgeted
Rising healthcare costs for New Yorkers remain a significant risk to the City’s balance sheet, with increases appearing in the City’s Modified Budget.
Due to uncertainty around federal policy, the City significantly underbudgeted healthcare costs in its FY26 Adopted Budget, adopted before the passage of H.R.1. The Adopted Budget failed to adequately account for a 12.1% increase to City Health Insurance Premium (HIP), an increase attributed to the rising cost of insurance administration, medical care, and prescription drugs.
To fund these rising premiums, the November Plan allocates an additional $118 million to HIP in the current fiscal year. These costs will continue in future fiscal years and may trigger additional costs in other City employee health insurance coverage.
At the same time, cuts to Medicare and Medicaid threaten to destabilize the system further. Nearly one million New Yorkers could lose health coverage due to changes in Medicaid eligibility. Large decreases to the insured population could occur as early as December 31, as the Federal government considers letting vital ACA subsidies expire. These declines in insured populations will raise uncompensated care costs and strain public health institutions.
Struggling Public Hospitals Require $325 Million Cash-Infusion
As health insurance costs skyrocket, New York City’s public hospital system, H+H, faces mounting financial stress.
With over 65% of its patients on Medicaid or uninsured, the hospital system’s already thin margins are facing additional funding losses.
Reductions to the Essential Plan, Medicare, and Medicaid are projected to add $2.1 billion to uncompensated care expenses for the City in coming years. Further, annual Medicaid Disproportionate Share Hospital (DSH) funding—historically providing nearly $500 million to H+H—was substantially reduced on October 1.
To stabilize cash flow, the Modified Budget allocates an additional $325 million to H+H. Yet the City’s financial plan simultaneously projects a 33% reduction in City funding to H+H next year, despite clear indications that needs will grow.
Without additional funds, public hospitals risk service cuts, staffing reductions, or closures, leaving vulnerable New Yorkers without needed care.
Rental Assistance and Shelter Costs Underbudgeted by $550 Million
Housing remains the largest expense for NYC families and a consistent source of underbudgeting for the City. The modified budget adds $400 million to the City’s rental assistance voucher program, CityFHEPS, and $150 million to shelter operations. Despite additional allocations, total funding for rental assistance and shelter is about half the size that it was last year.
These programs are vital. In New York City, housing costs are the largest household budget item across all family types. In 2025, more than half of New Yorkers are rent-burdened. Nearly 350,000 lack permanent housing on any given night, staying doubled up, sleeping outdoors, or residing in City shelters.
With the imminent risk of New Yorkers losing Section 8 vouchers due to changes at the federal level, there could be higher demand and need for CityFHEPS than seen in past years.
Despite these growing needs, underbudgeting continues. CityFHEPs and shelter cost increases are not accounted for in the next fiscal year. Projected decreases in the Department of Social Services budget, driven by a 16.7% decrease in Federal grants, could leave the programs unfunded.
Without adequate funding, waitlists will grow, vouchers will fail to keep pace with market rents, and shelter capacity will fall short—forcing more residents into homelessness or unstable temporary housing.
Precarity Undercuts City Wages by $212 Million
As the City confronts anticipated budget shortfalls, suppression of workers’ wages is a frequent tactic to reduce recurring costs, but this shortsighted measure has long-term impacts on the City’s financial health.
The Modified Budget allocates $212 million less on collective bargaining for City salaries than the Adopted Budget, even as New Yorkers struggle to afford the cost of living. While this keeps the City’s recurring costs low, it undermines the economic security of City workers and may have chilling effects on non-City wages.
This is particularly acute for human service workers, two-thirds of whom earn wages below the City’s near-poverty threshold.
At the same time, these workers make up a growing share of the labor market. As of September, 80% of new job growth over the past year occurred in healthcare and human services—sectors dominated by low-wage roles and primarily filled by women of color.
As one of the primary employers of human service workers, the City’s wage rates directly impact the broader labor market. When the City fails to pay wages that support economic security, it also reduces the wages other employers need to offer to compete. In this way, using wage reductions to keep spending low in light of rising needs may increase economic insecurity across the labor market more broadly.
Amid the crisis of low-wage growth, middle-income jobs continue to disappear.
Economic Insecurity is a Budget Risk
Persistent low wages for the majority of New Yorkers compounds the City’s budgetary crisis.
As more people struggle to make ends meet, and fewer have enough to get ahead, the economy becomes more unstable, risking a recession that threatens the City’s fiscal resources.
Tax Revenues May Slow Due to Uneven Growth
We see the symptoms of economic instability in the Modified Budget’s reported revenue.
While tax revenues are up overall, they speak less of broadly distributed increases in wealth and income than they do to growing income consolidated at the top.
Although the modified budget reports income taxes up 3% over the previous fiscal year, the majority of that growth came from the wealthiest tax filers.
We can see this trend by looking at two streams of income tax reporting: the Pass-Through Entity Tax and the Personal Income Tax.
In FY23, New York City created a new method of filing taxes, called a Pass-Through Entity Tax (PTET). This taxation method essentially creates an accounting-loop hole that allows residents to deduct their state and local taxes (SALT) from federal income. To take advantage of this tax, an individual would require the support of an accountant and enough deductible-eligible income to make the administrative burden financially worthwhile. For this reason, the vast majority of PTET income is from those that make over a million dollars.
This income distribution makes it striking that PTET revenue growth rose dramatically, up 12% year-over-year, while the Personal Income Tax (PIT) that most workers file only increased 1.5%.
Even if revenue collections can be sustained as wealth grows at the top, the growing pool of low-paid or precarious workers may be forced to leave an unaffordable City or require additional support to stay, both of which will have negative budgetary outcomes.
Mayor-Elect’s Budget Should Reflect True Cost of Economic Security
While the City can withstand short-term fluctuations on Wall Street, persistent economic insecurity, in which most people do not have enough resources to cover the cost of living and save for tomorrow, poses an existential threat to the City’s financial calculus.
Not only does economic instability create ongoing costs for the City – it undermines the City’s revenue streams.
As New Yorkers suffer, so too does the vibrancy and real wealth of our City.
A budget framework which strategizes economic security over “closing the gap” should be adopted in future negotiations. A budget that invests in NYC’s workers and creates opportunity for wealth building, is a budget that can grow the budget pie, by spurring economic activity, increasing tax collection, and reducing reliance on emergency services.
The risks in the budget show that investing in people is not only a moral imperative, it is a necessary fiscal choice.
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