(Bloomberg) -- New York City’s independent budget monitor projected a $1.8 billion budget shortfall next year, far below the $7.1 billion gap expected by Mayor Eric Adams, helped by stronger-than expected tax receipts this year.  

The city is likely to experience at least some sort of shortfall, in part because of the costs of sheltering asylum seekers and other migrants. But city spending will be about $3.5 billion lower than the Adams administration’s forecasts, the Independent Budget Office said. 

That decline is in part because a hiring freeze will cut personnel costs and competitive bidding for asylum seeker care will lower rates from current emergency contracts. In addition to lower spending, tax collections will probably exceed Adams administration’s estimates by about $1.2 billion, thanks to the improving outlook for the economy, according to the IBO. 

“Although the city faces fiscal challenges, recent economic indicators and tax receipts, combined with re-estimates of city spending, provide a clearer picture of the city’s fiscal health in the near term,” said IBO director Louisa Chafee in testimony to City Council’s finance committee.  

Last month, Adams said the city would hold off on hiring new police officers, reduce trash pickups, and make cuts to the city’s pre-kindergarten to offset soaring costs related to the migrant crisis. 

Adams, who has criticized the Biden administration for failing to provide financial support to manage the migrant crisis, projected spending on asylum seekers would grow to more than $5 billion next year.

While the IBO’s deficit projection for the fiscal year starting July 1, 2024 is rosier than the mayor’s, the agency projects higher budget gaps for fiscal 2026 and 2027 of $7.2 billion and $6.6 billion, compared with the mayor’s $6.5 billion and $6.4 billion. 

IBO expects the city to spend more on education programs currently funded by one-time federal Covid-19 relief. The city will also need to cover perennially under-budgeted costs like police overtime and funding for students with disabilities. 

 

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