Report: New York City contract spending increases ‘significantly’

(The Center Square) — New York City's contract spending has risen dramatically in recent years, according to the state's top bean counter, which says the spending consumes the city's operating budget.

The report by New York State Comptroller Tom DiNapoli found that the city's spending on contracts for goods and services by private companies has risen by $7 billion since 2019 and is eating up a larger share of the city budget than in years past.

In the fiscal year 2023, New York City's contracts accounted for 22% of the city's operating budget, compared to 16% in fiscal year 2010, according to the comptroller’s report .

“New York City’s spending on contracts for goods and services has risen faster than other spending and is consuming more of the city’s operating budget," DiNapoli said in a statement.

"This rise requires the city to provide additional detail on what is fueling spending trends and publish results from performance evaluations of new and expanded programming."

DiNapoli's analysis found the largest increase in spending came from the Department of Education, with a $3.2 billion increase over fiscal year 2019 driven by expansions to early childhood education and increased spending on charter schools and special needs students. A majority of the spending increases at the agency were funded by federal pandemic relief and state funding, according to DiNapoli’s report.

The city's charter schools added more than 21,000 seats (17.9%) over the 2019 to 2023 period, which drove up costs by about $800 million. However, state-mandated increases in per-pupil charter school payments accelerated the growth, according to the report. Meanwhile, charter school tuition rates in New York City increased by 15.1% during that period.

"Charter school lease costs also grew during this time; if the city will not or cannot offer space in department- owned buildings, it is required under State law to pay a charter school’s rental costs in privately-owned buildings at market rates," DiNapoli wrote in the report.

Contract spending by the state Department of Homeless Services increased by $457.6 million since fiscal year 2019, DiNapoli said, driven by 2016 reforms that included efforts to make repairs and enhance social services and security at shelters.

From FY 2019 to FY 2023, NYC's contract expenses for mental health programs increased by $126.6 million, which DiNapoli noted was due to the increased accessibility and use of mental health services during the pandemic.

DiNapoli said more transparency in the city's contracts is needed to determine if private vendors "are providing cost-effective solutions without hurting service quality."

"The city’s increased reliance on contracts to expand programming offers additional capacity and operational flexibility, but also creates a greater need for oversight to ensure that services are high-quality and delivered continuously," DiNapoli wrote in the report. "Sufficient staff are also needed to ensure that contracts are registered punctually and negotiated in the city’s best interest, and that providers are paid on time."