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THE City oF New York OFFice oF THE Mayor New York, N.Y. 10007 EDWARD SKYLER Desvty Mayon ron Orenations To: Mayor Michael R. Bloomberg, From: Edward Skyl gS Subject: Federal Stimulus Funds Date February 17, 2009 As you know, we have been analyzing the American Recovery and Reinvestment Act (“Stimulus”) to gauge its impact on the City’s financial plan. Although many of the details are not yet available or depend on decisions to be made at the State level, enough is known for the following assessment, which is summarized in the attached chart, 1, Expense Funding A. Fiscal Stabilization Funds Over the next two fiscal years, New York State will receive approximately $3.2 billion in Fiscal Stabilization funds. $2.6 billion is dedicated to restoring education cuts, and $579 million is dedicated for general operating relief. If the $2.6 billion for education is allocated to local schoo! aid through the traditional formulas, we would receive about $1.1 billion, or $535 million in each of the two years. The Stimulus also includes other education funding which will flow directly to the City over the next two fiscal years: $555 million through Title 1 funding for high-needs students; © $229 million through Individuals with Disabilities Education Act (IDEA) funding; ‘+ $37 million for education technology We are optimistic that by working with our partners at the State level, we can apply this funding to existing needs at our Department of Education so we can avoid the severe headcount reductions you raised as a possibility when you presented the FY 2010 Preliminary Budget. However, as you know, Stimulus funding for education will not contribute to closing our budget deficit for Fiscal Year 2010, but rather would offset the proposed State aid reduction. Regarding the $579 million dedicated to general operating relief, we will lobby the State to allocate half of the money to the City, as that would partially restore the revenue sharing cut proposed in the State FY 2009-10 Budget B. Medicaid Relief ‘The City will receive at least $2 billion over two years in Medicaid relief This will be achieved by a temporary change in the Federal Medical Assistance Percentages (*FMAP”). Although the City could receive more than $2 billion if the unemployment rate increases, any additional FMAP funding would likely be offset by a corresponding decrease in tax revenues, effectively cancelling-out any additional benefit to the C. Other Expense Funding We also expect to receive $35 million for criminal justice initiatives, in addition to an unknown amount of funding through the Community Oriented Policing Services (“COPS”) program, a grant program administered by the Department of Justice. If our COPS application is successful, we could use this funding to mitigate the NYPD uniformed headcount reductions included in the Preliminary Budget. ‘There are numerous allocations for social services, including child care, food stamp assistance, job training, and Head Start, which together total approximately $295 million over the two years. This includes $63 million in critical workforce investment funding. In addition, the Stimulus includes $142 million for housing programs and $140 million for energy efficiency programs, In total, the City should receive at least $4.5 billion in expense funding over the next two fiscal years. The total could ultimately surpass $5 billion depending on various factors, including the Medicaid-unemployment rate connection, the City’s shate of $579 million that the State will allocate, and how much of the COPS funding the City receives through the grant application process. 2. Capital Funding ‘On the capital side, the Stimulus includes a maximum of $311 million for water and sewer projects that we will have to apply for through the State. Although we would prefer that these funds be grants, the State could allocate up to half of this funding as no- interest loans. The City will also receive $233 million for transportation projects, Although this totals $544 million in capital funding, no dedicated money for school construction was included in the final bill In addition to this direct capital funding, City-affiliated entities are poised to receive more than $1.3 billion in capital money, including $390 million for the New York City Housing Authority, and more than $1 billion for the Metropolitan Transportation Authority, 3 Conclusion In anticipation of this incoming funding, the Deputy Mayors whose agencies are ‘most affected are participating in working groups arranged by subject area with the Office of Operations and Office of Management and Budget so that we can take advantage of this money as soon as it becomes available, On the capital side, this means making sure projects are truly “shovel-ready.” We expect to finalize a list of projects that will be eligible to receive stimulus funding within the coming weeks. We are also developing performance metrics to track how the funds are spent. Stimulus funding will provide much needed temporary financial assistance to the ‘The financial plan relies on $1 billion in Stimulus funding to help close the $4 billion deficit we face in Fiscal Year 2010. Although we may ultimately be able to allocate over $1 billion to address the deficit, under no circumstances will Stimulus funding alone prevent or postpone the difficult funding choices you presented in the Preliminary Budget, nor does it address the structural problems that continue to drive non-agency expenses higher every year (health care, pension costs, etc.). Rather, the Stimulus funds will prevent us from being in a situation where even more dire actions would need to be taken. (This assumes our current tax revenue forecasts don’t need to be revised downward, which would force us to consider such actions). Now that this funding appears to be in place, we will continue to pursue gap-closing measures within City government and in partnership with the State and the City’s municipal labor unions. ce: Senior Staff