Fulfilling the Promise of Opportunity
Understanding the Drivers of Underinvestment in Human Services
While New Yorkers’ needs have been on the rise in recent years, New York City’s budget, and thus its ability to serve New Yorkers, has stagnated.
Using the New York City Funds Tracker to explore where the City’s money comes from and where it goes, FPWA identifies how inadequate federal grant dollars and shifting tax revenues – aggravated by increasing inequality – have contributed to a deepening, long-term pattern of underinvestment in human services spending. Despite budget advocates making important advances, the patterns of disinvestment in human services are persistent.
Underinvestment in New York City’s human service sector is a threat to the economic security of all New Yorkers. According to the Urban Institute’s True Cost of Economic Security measure, a majority of New Yorkers are economically insecure, with 62% of New York City residents struggling to get by or get ahead. While 62% of total New Yorkers fall below the threshold of economic security, that number rises to 72% when looking at families with children. The median household with children in New York City has costs of $165,000 and a resource gap of nearly $53,000. Without the robust social safety net and critical income supports provided for and administered by City government, those New Yorkers who, while far from thriving, may be currently able to make ends meet, could be plunged deeper into economic instability and even below sufficiency. Federal and state funding not only supports vital programs and ensures the fiscal capacity of agencies, but it also plays a key role in mitigating the structural inequities of chronically low resourcing of New Yorkers. Millions of New Yorkers rely on the human and social services provided by City agencies and their contracted nonprofit organizations for a broad range of assistance, including housing, healthcare, and childcare – these costs are among the largest households have and are higher in New York City than elsewhere in the state and country. Now, as the Trump Administration looks to cut federal funding, New Yorkers are at risk of being made even more vulnerable.
Through the NYC Funds Tracker, we can see existing pressures on New York’s ability to fund vital services:
- Revenue pressures have caused the size of New York City’s budget to stagnate in recent years;
- Pressure on human services budgets has been exacerbated by rising economic insecurity;
- Key grants that the City relies on, including TANF and SNAP, are at risk.
At this critical juncture, advocates must understand the structural factors driving this cycle of underinvestment in human services so we can raise our voices and demand care – not cuts. New Yorkers need a budget that aims towards economic security, ensuring New Yorkers are adequately and sustainably resourced so they can not only survive, but thrive.
All funding data, graphs and tables in this report were prepared using the NYC Funds Tracker, providing an example of how the tool can be used to understand the City’s budget.
Revenue constraints are causing NYC’s Budget to Stagnate
Since the pandemic (Fiscal Year 2021, “FY21”), the city’s budget has shrunk, in inflation adjusted terms, by almost $4 B.
NYC Revenue by Revenue Source
The recent decline in funding re-establishes the downward trend in federal grants that was present even prior to the pandemic. As can be seen in the New York City Funds Tracker, between 2011 and 2019, federal grants to New York City had decreased by 15.18%.
Now, with the removal of pandemic era funding, federal grant levels are about the same value as they were in FY11 when adjusted for inflation, sitting at $11 B.
Federal Grants to New York City
The recent decline in funding re-establishes the downward trend in federal grants that was present even prior to the pandemic. As can be seen in the New York City Funds Tracker, between 2011 and 2019, federal grants to New York City had decreased by 15.18%.
Now, with the removal of pandemic era funding, federal grant levels are about the same value as they were in FY11 when adjusted for inflation, sitting at $11 B.
FPWA long warned about the impact of the expiration of the anomalous increase in federal funding during the pandemic, and now the numbers reveal that the funding cliff has left New York short-changed.
New York Shortchanged on Federal Funding
According to the NYC Funds Tracker, federal grants accounted for 10% of New York City’s budget in FY24 – slightly below the average federal grant contribution in past years.[1]
This lower-than-average share of federal funding comes in spite of elevated need in New York, evidenced by spikes in the number of New Yorkers on public assistance programs, such as cash assistance, SNAP, and Medicaid. This further compounds the uneven recovery from the pandemic where incomes at the top of the spectrum have vastly outpaced middle and low-income wage growth.
The City’s own revenue sources speak to the City’s ongoing recovery.
With decreasing federal funds following the pandemic, the City’s own revenue sources become more important than ever, accounting for 73% of the City’s revenue in FY24. Revenue sources show evidence of an uneven recovery. While sales and corporation taxes are on an upward trend, real estate and personal income taxes are still below pre-pandemic levels.
Decreasing Revenue from Personal Income and
Real Estate Taxes Show NYC Still in Recovery
While More New Yorkers Struggle to Pay their Bills, the Wealthiest are not Paying their Fair Share.
One of the main constraints in the City’s own revenue sources is in revenue from personal income tax, which, when adjusted for inflation, has decreased 14% since FY19. This is despite many of New York’s wealthiest seeing huge increases in their personal wealth during the pandemic, with income for those making over $25 M increasing by 84.5% between FY20 and FY21.
Personal Income Tax Revenue Has Decreased from $18B in FY19 to
$14 B in FY24
This phenomenon, in which overall wealth has increased while public sector resources have declined, is due, in part, to the special nature of New York City’s tax base.
New York collects a large proportion of its personal income tax from high-net worth individuals, of which there are more in New York than prior to the pandemic. Yet while these individuals have more personal income, a large portion of their wealth tends to come from other sources not captured by personal income tax, such as commercial or financial assets.
At the same time, middle-income earners – a smaller but sizable portion of the tax base – are being squeezed.
Over the last five years, New York has lost a net of more than 76,000 jobs paying middle-income wages – with remaining middle-income earners experiencing slower rates of real wage growth, relative to other income groups.
So, while the wealthiest New Yorkers pay less than their fair share, more New Yorkers are being made economically insecure, or being forced to move out, impacting both livelihoods, and the City’s budget.
Even though the amount of wealth in New York has increased, the amount of taxable income has not increased proportionally. As funding from federal grants and existing tax sources continues to decrease, it is incumbent on New York City policymakers to begin thinking about how additional revenue can be secured in a way that promotes the long-term economic security of New Yorkers.
Human Services Budgets Respond to Rising Need
In looking at the NYC Funds Tracker’s data on expenditure, we can see budget trends that reflect the City’s response to rising inequality and the increased demand for social services.
In recent years, spending on key human services agencies has increased to help meet acute need, both compared to last year and during the pandemic (FY21).
Funding to Agencies Serving Acute Need Has Increased in Recent Years
These increases have been required to support greater need for housing vouchers, medical care, and food and cash assistance. From FY20 to FY24, demand for human services programs soared, with the number of SNAP recipients increasing by 15%, Medicaid by 25%, and cash assistance by over 50%. In this context, the funding increases are relatively modest.
Despite recent gains for some human services agencies, funding is still down for many compared to pre-pandemic trends.
While these funding increases appear promising at first glance, looking at longer-term trends reveals a different story. Even with these recent funding increases, for some agencies funding is still down since, if not prior to, FY19.
ACS is down 11.3%.
DSS is down 1.8%
CCHR funding has fallen almost 30%
While Some Agencies Funding has had to Increase in Recent Years to
Meet Need, Inflation-Adjusted Investment is Still Lower than
Pre-Pandemic Levels
The NYC Funds Tracker shows that while these recent funding increases are a step in the right direction, they are still not enough to bring some agency funding back to pre-pandemic levels. Further funding is needed to ensure agencies are able to respond to sustained need in New York City.
The Importance of Federal Grants for Human Services
The decline of federal support is a key reason New York City’s budget has been constrained in recent years.
Despite an uneven recovery (employment is still below pre-pandemic levels) which has increased the supportive needs of New Yorkers, federal grants to the City have decreased in real terms by over $6 B, from $17 B in FY22 to $11 B in FY24.
The decline in funding, and the potential further decreases, puts human service agencies at risk as they are highly dependent on federal and state grants.
Federal and State Grants as a Percentage of FY24 Agency Spending
This decreasing federal funding can be observed when looking at some of the most important grants the city receives. Federal dollars allocated to SNAP funding decreased (in inflation-adjusted dollars) by 23%. SNAP funding remains comparable to pre-pandemic despite additional need.
FY24 SNAP Funding Below FY18 Levels Despite Additional Need
Similarly, while New York City’s cash assistance caseload skyrocketed by more than 50% between FY23 and FY24, the federal block grant that helps support it, Temporary Assistance for Needy Families (TANF), is far below FY18 funding levels.
TANF has a long history of underfunding. With annual federal appropriations to the TANF program remaining stagnant since the block grant was created, the real (inflation-adjusted) value of the total amount of TANF cash assistance has fallen by 40%. This state of underfunded benefits may deepen in the upcoming fiscal years, with federal attacks on benefit programs.
In this way, the future of TANF funding continues to be volatile and insufficient – as it has been throughout the history of the NYC Funds Tracker.
Next steps
The Evolving Federal Funding Threat
The precarity of necessary federal funding is now being exacerbated by a new Federal administration – one intent on making real its threats to dismantle vital state and local aid that New Yorkers rely on.
The NYC Funds Tracker quantifies just how much is at stake – with just over $11 B in federal aid to human services provided in FY24.
This federal funding is vital for all New Yorkers, not just those with the lowest resources. Without federal aid, the City may have trouble sustaining needed investments in affordable housing, education, public safety and sanitation.
Looking Back to Look Forward
In looking at how the funding landscape, we understand how the reduction in federal aid has left New Yorkers more vulnerable, and more unequal.
We also see the importance now, more than ever, of ensuring the city has its own sustainable revenue sources, including ensuring those who hold extreme wealth pay their fair share.
In light of the looming threat of federal cuts, New Yorkers must come together to resist attacks on services at the federal, city, and state level.
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