New York City’s top fiscal official, Jacques Jiha, Ph.D., joins Policy Outsider to discuss how the City managed its budget through the turbulence of the pandemic, how the City’s budget process differs from the state’s, and how the City and state work together to maintain fiscal stability in the largest metropolitan region of the country.
Guests:
Jacques Jiha, Director, New York City Office of Management and Budget
Robert Megna, President, Rockefeller Institute of Government
Transcript was generated using AI software and may contain errors.
Alexander Morse 0:04
Welcome to Policy Outsider. I’m Alex Morse. Continuing our work, looking at how finances are managed in New York State in our Behind the Fiscal Curtain series, we have Bob Megna, president of the Rockefeller Institute of Government, on today to interview Jacque Jiha, the budget director for New York City’s Office of Management and Budget. New York City was the epicenter of the COVID-19 pandemic and had revenues evaporate almost overnight. And so how did New York City manage the fiscal and societal crisis? How did the state and city coordinate their pandemic response to ensure vital and essential services were disrupted as little as possible? And what opportunities do new administrations at the state and city level present for partnerships and collaboration? All of this and more, coming up next.
Robert Megna 1:12
Listen, let’s just jump in. So, Jacque, I’ve been trying to remember, how many years do we know each other?
Jacque Jiha 1:22
Bob, it’s been like a long time, since 1988.
Robert Megna 1:25
Wow. Is it that?
Jacque Jiha 1:30
Yes, 1988.
Robert Megna 1:31
So Jacque and I, for those who care about stuff like this, have known each other since we worked together at the Ways and Means Committee in the New York State Assembly. Jacque was a real innovator. He brought a lot of economic knowledge and econometric methods to the job. Stuff that people were paying outsiders to do that kind of work or vendors. And the Assembly brought that in-house and Jacque was really one of the great innovators in that space. And we both learned a lot about fiscal affairs and taxes and budgeting together way back in that period. Jacque, what I find though, is people are sometimes interested in our backgrounds, because what is it? What kind of people end up doing these budget jobs? Why don’t you tell us a little bit about where you come from and what your background is.
Jacque Jiha 2:40
Thank you, Bob. I mean, Bob and I have known each other for a long, long, long time. And, again, thank you Bob, for all the great things you mentioned to me about the work we did together in the Assembly. But you’re also a genius as well. You brought a lot to the table. By working with you, I Iearned a lot. As you know, I was born in Haiti and came to New York in 1979 to pursue my education. And so I’m an economist by training. I went to Fordham University and earned a bachelor’s degree in economics and then moved over to The New School to get my PhD in economics. So even though I was trained on the monetary side, I ended up being on the fiscal side. My first job out of grad school was working for you in the Assembly and there was a mean scope. And so then I spent a good, I believe, six years up in Albany working for the state. Then I came down to New York City, working as the chief economist for the Comptroller’s Office in New York City and became deputy comptroller for budget for the city’s Comptroller’s Office. And I was there for a good eight years, then I returned back to the state as the chief investment officer for the New York State Comptroller’s Office, where I basically oversaw and managed the pension funds for the state. From there, I moved to the private sector, where I became COO and CFO for Earl Graves Limited, which is a multimedia company with properties in plant, TV, and internet. When Mayor de Blasio became mayor, Dean Fuleihan, who used to be our old boss in Albany reached out to me and referred me to the mayor for the position of commissioner of finance. So, I spent six and a half years as the commissioner of the New York City Department of Finance. And during the COVID crisis, the mayor shuffled his cabinet. He asked me to become the OMB director because he told me at the time, he wanted somebody with a steady hand dodging the fiscal crisis. So in a nutshell that’s me. That’s my work experience. And I’ve enjoyed every moment of it.
Robert Megna 5:07
You’ve had a wonderful career. Let’s go back a little bit though. Because I always thought, when we worked together that coming from Haiti and growing up in a different environment that you brought a perspective to all of these kinds of jobs that not everyone has. Do you agree with that? Has it helped you?
Jacque Jiha 5:53
Oh, definitely. Growing up knowing poverty, seeing poverty every day, gives you a different perspective on life and showed me the importance of public service. Because we’re in this business to make a difference in people’s lives. At the end of the day, this is not for money. But I remember when I came back from private, talking to the mayor, he asked me, will you take a salary? I said, “Yes, 100 percent salary.” He says money is not the issue. What’s important for us in building this kind of work is making a difference in people’s life. To try to create as many opportunities as we can for people.
Robert Megna 6:18
Jacque, it’s so true. I had almost the opposite thing when I left Budget and went to another job where I was doing budget but for a university. The governor found out what they were paying me, he said, he did a 100 times harder job for less than half the money.
I know it’s true. Thanks for your service. And now that you knew crisis, you knew poverty growing up in Haiti, and now we’ve lived through probably two or three of the hardest years ever and you’re still you’re down in New York City and we’re still living through that. I know both of the mayor and the governor have been talking about bringing people back to work and how important that is. What’s it been like trying to manage city finances over this period?
Jacque Jiha 8:10
To be honest with you, it’s been very difficult. The pandemic was, from my perspective, the biggest stress that the city has ever experienced. Before the pandemic, things were very good for New York City. Revenue was growing, we had very strong job growth. All that changed overnight as we became the epicenter of the pandemic, we had to adjust our revenue forecast down by some $10 billion. You can imagine, overnight adjusting the revenue down by $10 billion. At the same time, we were spending money like crazy because we were competing for PPEs, competing for ventilators, the price of these things went up significantly. And so we’re like, “okay, the revenue is coming down significantly all at once, and your expenses going up all at once. What do we do?” At the same time, we’re facing the prospect of a significant budget cut from the state. At the time, as you remember, the state had a budget with two scenarios, one, if they received fiscal stimulus, and another one, if they did get the fiscal stimulus. We’re looking at a 20 percent cut from the state. So it was extremely difficult and we had no choice but to present a balanced budget. Now, we went to Albany and asked for assistance. Unfortunately, we didn’t get any. We asked Albany to give us permission, the authority, to issue short-term borrowing to short-term notes, which the state uses that authority to finance their operation but they didn’t give us that authority at all. So it was extremely extreme. We couldn’t lay off employees for a simple reason that the mayor did not want to send a signal that this is the end of New York, that services we’re about to be reduced. And more importantly, these were the people that were at the frontline of the battle against COVID that would be the most impacted by any layoffs. Fortunately for us, we had built some reserves over time. So we used a portion of that reserve to manage the transition. But at the same time, we implemented the PEG, which is a program to eliminate the gap. This is a savings program that we have that generated about $2 billion of savings for us. And we impose a tough attrition management policy, if we find one. So for every employee you could bring in, you have to lose three. So that worked down, I had to balance significantly without laying off. So again, before we see we manage it, we have to issue a balanced budget. By law, we have to have a balanced budget. Unlike the state that had two scenarios, we have to have a balanced budget by law. So we manage to balance our budget without any layoffs, without any cut in services, without any short-term borrowing, and meet all obligations. And I tell folks all the time, I’m thrilled that we managed through this test with flying colors. This is from my perspective, one of the greatest things we did in terms of managing the city out of crisis.
Robert Megna 12:06
It’s great. And COVID was such an unusual situation because it wasn’t just like stuff that I had to deal with, for example, during the Wall Street crisis and the global financial crisis. People weren’t being told to stay home because if they went out, they could get sick and die. This was like a different level.
Jacque Jiha 12:36
We shut down the economy.
Robert Megna 12:39
I know, it was unbelievable. So you raise the relationship with the state. And that’s always an issue for the city and for the state. Here’s the strange one, as I see it, Jacque, but I’d love to know what you think, it took forever for us at the state level to walk back from the financial crisis due to the Wall Street collapse. It took multiple years. While we’re still reeling from COVID, at least at the state level, it looks like the money side really turned around very quickly. A lot of it was federal aid and a lot of it is that taxes did better than people thought. Have you experienced that same kind of turnaround or has it been different?
Jacque Jiha 13:39
The challenge we have, which is unlike the state, the state raises taxes. Income sensitive taxes came back sooner than anticipated. But the state also raised taxes on personal income tax and I believe corporate tax as well. So that is a big thing for the state. The second thing that the state has that we don’t is the second problem that we’re dealing with, that the state doesn’t have to deal with, is our property tax collapse. The state doesn’t have a property tax. As you can imagine. They can see wait in New York City’s about 20 percent, a record high right now. And it’s, to put it in perspective, like when I was talking to the mayor, I said, “Listen, we have about 8 million square feet of empty office space in Manhattan, which is about like the size of the entire downtown offices in New York City. So our property tax, basically, is not giving us the kind of push that we need.” So basically it’s a drag on our court. So we are seeing better than expected collections when it comes to the income sensitive taxes. Even transaction taxes are improving now because of the residential real estate transactions are back. But because of the property tax drag, we’re seeing very little work, unlike the state. So the state has the advantage of not having a property tax. And also, they had the tax increases last year. So on top of the growth that they experienced on the economic sensitive taxes, unfortunately, a lot of people who stayed at homes during COVID were high-income earners. So the state doesn’t face the same obstacle. The other challenge that we have is that we have a major problem with recouping the jobs that we lost during COVID. Right now, we’ve recouped about 55 percent of the jobs that we lost. Whereas, the studies are 64 percent and the national economy is up like 55 percent. And so, these are the major factors holding us back compared to the rest of the state.
Robert Megna 16:18
It’s interesting, there’s a little bit of a cycle there too because the occupancy and bringing people back. Hence, I guess that’s why the mayor is trying to get people back in August. That’s going to tie back to that property tax piece, right?
Jacque Jiha 16:34
Yes, yes, yes, exactly. And that’s the reason why we’re making a big push to see if people could come back to the office. People who attend the office is about 38 percent. It is heavy at this point in time. You could see that was being a major drag because a lot of New York City’s small businesses depend on foot traffic. And if you don’t have the foot traffic, people don’t go to the stores, don’t get their shoes shined, all of these small businesses in New York suffer because of that. Because it’s not high ecosystem. That’s work.
Robert Megna 17:13
Jacque, let me ask you something else. I immediately like to key in on some of, I think, the good points that you make. I think on the income tax, the other piece, some of our listeners may not realize is that the city has an income tax. But if the state increases the income tax, it’s not really easy then for the city to do that, especially if the state doesn’t want that to happen, right?
Jacque Jiha 17:41
Of course, the state raises the income taxes and we have to go to the state to get authorization to raise our own personal income tax. As you know, the city is a creature of the state. So a recent change in tax policy has to have approval from Albany.
Robert Megna 18:04
Let me ask you one thing that’s not as much of a problem for you and I think a little bit more for the state, but I think you’re seeing it every day. One that I worry about is the MTA. Is ridership and stuff getting back to close to where it was or are we still have our issue?
Jacque Jiha 18:25
We still have an issue. It’s coming back. As you know, we went down significantly again because of omicron. But it’s coming back. Hopefully, we’ll get back to a normal way. Maybe two three months from now, I’m hoping. But it’s a major concern. This is the big piece. And that’s why the mayor is making a big push in terms of his policy to make sure that public safety, particularly in the subways, is maintained. Because at the end of the day, we want to make sure we send a signal to riders that the subways system is safe and you can come back to work in the city.
Robert Megna 19:06
So given all that you’ve discussed, what has to happen this year? What are your priorities as city OMB director? How do you see the state and city trying to work together to figure some of this out?
Jacque Jiha 19:22
The good thing about this year is the state is not looking at major cuts. Even though the state is trying to pull a fast-one on us with a sales tax intercept that they are taking $200 million from us for a distressed hospital. Unfortunately, the public hospital in New York City didn’t get a penny from the first tranche of money that they took to put into the fund. So we are pushing back on that aspect but so far the relationship has been very good, very positive between the governor and the mayor. We’re hoping that we have a cordial relationship going forward.
Robert Megna 20:04
It’s always a little bit of a conflict. Because you know, and even as you were talking before, I was thinking, if I was in my old job, would I have made decisions about short-term borrowing any differently than the state did? And I must say, Jacque, I probably wouldn’t have. But not because the city didn’t have the need, just the nature of how the relationship evolves over time. So, it’s a great opportunity, though, I think, a new governor, a new mayor. I don’t know what you think, but it’s an opportunity to relevel the set a little bit.
Jacque Jiha 20:54
Yes, I think they’ve been doing that. To their credit, they’ve been doing that. It’s a very good working relationship. It’s very important because we need the state and the state also needs us because if we are healthy, if we are doing well, it also does well.
Robert Megna 21:13
What are your concerns moving forward? Where do you see us going over the next three or four years? How does this get better? What are the priorities to get fixed? It’s hard to think about the future, I know, but how do you do see that now?
Jacque Jiha 21:34
To be quite honest with you, Bob, the biggest concern that I have right now is accelerating inflation. My concern is, to be quite honest with you, the upheaval in Ukraine. It’s another concern because of the invasion of Ukraine by Russia. But my biggest fear at this point in time is inflation. And I believe my sense is the Federal Reserve is a bit behind the curve. And they probably want to overreact. And, you know, in our own experience, doing a soft landing of the economy is never easy. It is a big risk of making mistakes. The fact that New York City, from my perspective right now, in the midst of a very, very robust economy, New York City is lagging so far behind in terms of recouping the jobs that we lost. So you can imagine if you don’t have the wind at your back, now you’re going against the wind now that is going to make it even harder for us.
Robert Megna 22:42
I agree, 100 percent. Because I’ve been saying to people privately, Jacque, no one’s listening to me, by the way. And I get why they’re not by the way, it makes perfect sense. People are underestimating the impact inflation is going to have on everybody’s budget. Everybody’s jumping up and down about all the money they’re sitting on in terms of reserves or other pieces. But the cost of everything is going up pretty dramatically. Wage contracts always have to be renegotiated. I’m sure municipal workers don’t want to be left behind, especially since what you said they were on the front lines of the COVID crisis. And it’s going to put more pressure on budgets than I think people are factoring in right now. But that’s just an old budget person.
Jacque Jiha 23:44
No, no, I fully agree with you. It’s going come at both ends. From my perspective, if you have the wage price spiral, that’s one, okay. The impact on the economy and tax revenue, you also have the impact on the expenses. Like you just said, every single price is going up. And we are buying things. We buy things. So it is on both ends, on the expense side and on the revenue side. So again, as I said, I’m hoping that we can manage to soften the economy so that we don’t end up with a recession. And manages to bring down inflation gradually without any major impact on the economy. But again, I’m always concerned about inflation dynamics. Once it starts, it’s really hard to stop.
Robert Megna 24:39
Because we’re old enough to have lived through the earlier periods. And there’s a lot of people around in government who really haven’t lived through that period. And it’s kind of amazing to me. Listen, Jacque, we’ve used an enormous amount of your very, very valuable time. I want to thank you for doing this. And I think people will learn a lot from listening to your insights on this stuff. So thanks a lot.
Jacque Jiha 25:09
Thank you. Thank you very, very much, Bob. I’m looking forward to seeing you soon. Thank you.
Robert Megna 25:31
Me too. Me too.
Alexander Morse 25:31
Thanks again to Bob Megna, president of the Rockefeller Institute of Government, and Jacque Jiha, budget director for New York City’s Office of Management and Budget for sharing their experiences and insight, developing budgets and managing state and city finances throughout their years of public service. If you liked this episode, please rate, subscribe, and share. It will help others find the podcast and help us deliver the latest in public policy research. All of our episodes are available for free wherever you stream your podcasts. Special thanks to Rockefeller Institute staff Joel Tirado, Heather Trela, and Laura Schultz for their contributions to this episode. Thanks for listening. I’m Alex Morse. Until next time.
Alexander Morse 27:22
Policy Outsider is presented by the Rockefeller Institute of Government, the public policy research arm of the State University of New York. The Institute conducts cutting edge nonpartisan public policy research and analysis to inform lasting solutions to the challenges facing New York State and the nation. Learn more at rockinst.org or by following RockefellerInst on social media. Have a question, comment, or idea? Email us at mailto:[email protected].
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