Mamdani and Menin Press Albany on Budget Gap as Hochul Rejects PTET Fix

As New York City stares down a $5.6 billion budget gap, wrangling over fiscal priorities and the state’s funding formula could determine the city’s trajectory—and ripple into the nation’s economic health.

The rotunda at City Hall rarely rings with harmony—least of all when the city faces a fiscal shortfall larger than Vermont’s annual budget. Yet on Tuesday, Mayor Zohran Mamdani and City Council Speaker Julie Menin stood shoulder to shoulder, striking a rare note of unity as they grappled with a looming $5.6 billion deficit. Their message to Albany was as direct as it was familiar: New York City cannot shoulder this burden alone.

The city’s predicament is as much political theatre as budgetary arithmetic. Constitutionally barred from running a deficit, the city must balance its books by June 30 or risk the ignominy of state intervention. Both Mamdani and Menin appear prepared to wield the budgetary scalpel judiciously—trimming excess without eviscerating core services—but acknowledge that cuts alone cannot fill a hole this size.

Seeking salvation beyond municipal belt-tightening, the mayor and speaker have pressed Governor Kathy Hochul and state legislators for greater aid. Their proposal: a temporary reduction of the passthrough entity tax credit (PTET) to 75%, a manoeuvre estimated to net the city nearly $1 billion in additional revenue. The PTET, obscure outside tax-advisory circles, allows partnerships and S corporations to pay state income tax at the entity level, thus sidestepping the federal cap on SALT deductions—a boon for the city’s affluent and its coffers alike.

But the governor has shown little inclination to rescue her metropolis. Hochul dismissed the PTET adjustment with a characteristically brisk “It’s not happening.” Albany’s own budget is nearly a month late, mired in internecine disputes. In the capital’s arithmetic, New York City remains both golden goose and perennial supplicant.

The raw numbers offend most notions of fairness. A recent CUNY Institute study found that city taxpayers generated 58.7% of New York State’s $70.7 billion in income-tax revenue last year. Yet only 40.5% of state operating expenditures—$47.6 billion—flowed back to the city. New Yorkers have grown wearily accustomed to this lopsided return on their tax dollars; it persists less out of logic than historical inertia.

For city leaders, the imbalance is a perennial dilemma. The fiscal gulf between contribution and benefit feeds resentment—and, in lean years, open political friction—between the city and the rest of the state. That the city’s demands have become both more urgent and more moderate—seeking only a temporary tweak in a tax credit—is itself a sign of the shifting economic landscape.

The immediate impact of such a shortfall is rarely theatrical but always felt. A gap this size bodes ill for everything from after-school programmes to potholed streets, if new sources of revenue or shared sacrifices cannot be engineered. Administrative “fat” is a finite resource; the pruning of nonessential outlays eventually nicks essential services. The familiar recourse—patching the gulf with one-shot revenue raisers—grows less credible with each cycle.

A metropolis on a fiscal tightrope

New York’s predicament is hardly unique among America’s major cities, many of whom face the double whammy of rising costs and uncertain state support. What differentiates New York, aside from scale, is the sheer imbalance between what it sends to state coffers and what it receives. The city’s fiscal health is not just a local concern: as America’s biggest urban economy, it is both bellwether and engine, contributing disproportionately to state and national growth. Each dollar withheld from the city reverberates far beyond its borders.

The city’s limited leverage is rooted in a long-standing dependency on Albany’s largesse. Unlike many global megacities, New York’s power to tax and spend is circumscribed by the state legislature. As a result, even sensible tools such as adjusting local tax credits or crafting new revenue channels require state blessing. The politics of upstate-downstate rivalry—never entirely rational—complicate matters further.

Governor Hochul’s refusal to brook the city’s requests may strike some as fiscally prudent, but it risks a kind of penny-wise, pound-foolish stewardship. Should the city be forced to slash services or delay overdue investments, the long-run costs—in social strain, diminished competitiveness, and eventual out-migration—could dwarf short-term savings in Albany’s ledger. The notion that the city must “do what’s right” for its bottom line is irrefutable; the corollary, that the state must meet the city halfway, is equally valid but less politically convenient.

Globally, cities from London to Tokyo tussle with regional and national governments over revenue sharing and fiscal autonomy. Londoners routinely grumble about Treasury-overseen purse strings; Singapore, by contrast, has largely sidestepped such squabbles through a unified governance structure. New York’s patchwork is neither the most dysfunctional nor the most deft, but the stakes—given its scale—are uniquely high.

We reckon that the city’s leaders are prudent to resist easy nostrums—endless spending or toothless cost-cutting alike. The shared prosperity of both city and state ultimately hinges on a balanced approach, where fiscal discipline does not become code for urban retrenchment. Well-governed cities are rarely built on grudges or fleeting victories in Albany’s corridors. If the city is forced to “do more with less” indefinitely, the entire state may discover what a faltering economic engine feels like.

For now, the drama circles back to City Hall. Whether mere appeals or measured confrontations will shift Albany’s calculus remains an open question. The looming deadline and dismal budget arithmetic leave little room for posturing; the paths ahead are neither palatable nor easily reversible.

The city cannot tax-and-spend its way out of this fix, nor can it simply cut without consequence. The real challenge now is to chart a course that secures the city’s—and the state’s—shared future, while resisting both alarmism and complacency. As the June 30 clock ticks, much depends on whether leaders in both city and state remember just how much rides on getting this question right. ■