Why does NYC have a budget gap? What to know as deadline nears

Mayor Zohran Mamdani's budget deadline is this week, and it still isn't entirely clear how a gap of over $5 billion will be filled.

NYC is poised to release its executive budget on Tuesday, May 12 after extending the deadline. But what services could receive cuts (or boosts) is still up in the air.

Here's what to know about the budget gap, and what to expect as the deadline creeps up.

What is NYC's budget gap?

One of Mamdani's biggest tests since becoming mayor — a massive funding gap in the $120-plus billion city budget — is about to come to a head.

Late last month, he asked the state for help in filling the deficit, which is estimated to be around $5.4 billion, according to Politico's Playbook.

The executive budget was supposed to be due Friday, May 1. But Mamdani and Speaker Julie Menin extended the deadline through May 12 for the 2027 fiscal year after the city said it was waiting for New York State's budget to be finalized.

In asking the state for budget help, the Mamdani administration wants the NYC Passthrough Entity tax credit chopped from 100 percent to 75 percent, with the city keeping the other 25 percent.

That shift would put about $1 billion back into the city’s pocket, “while still allowing New York City residents to save on federal taxes,” the city said in a news release.

In February, Hochul committed to sending an additional $1.5 billion to NYC over two years to assist with the budget crisis. But her office isn't prepared to trim the pass-through credit.

But she quickly shut down the idea when confronted on Mamdani's newest call.

"We're not changing PTET," she said at a news conference Tuesday. "It's not happening." She then said NYC officials "have to do what every other city's doing" in reviewing spending.

The governor's rebuke followed a partnership between her office and the Mamdani administration on another funding proposal.

Mamdani and Hochul recently revealed a pied-à-terre tax, which will add an annual charge on one to three family homes, condos and co-ops valued above $5 million if owners have another primary residence outside of the city. It is projected to raise the city around $500 million, according to officials.

"We cannot close this deficit with savings alone. We need new revenue. And we need a structural reset in our relationship with the state," Mamdani said at a press conference in April, asking the Gov. Kathy Hochul for more aid.

"That is the only way to meet our legal obligation to pass a balanced budget, and to do so without imposing a financial burden onto the backs of working people."

Why does NYC have a budget gap?

The Mamdani administration has claimed that former Mayor Eric Adams' "staggering fiscal mismanagement left a $12 billion hole in NYC budget for the next two fiscal years."

He has referred to the gap as the “Adams Budget Crisis,” and said that in prior years, the deficit was "consistently and intentionally understated."

In January, Adams' spokesman, Todd Shapiro, denied the blame.

“Eric Adams dealt with one of the toughest economic crises in the history of New York City, from Covid, in which the economy was crippled, and brought it back to one of the healthiest, one of the best economies that New York City has seen in years,” Shapiro told the New York Times earlier this year.