New York City’s proposed fiscal year 2026 budget faces uncertainty as it relies heavily on federal funding that could be reduced or eliminated under recent federal policy changes, according to a new report by New York State Comptroller Thomas P. DiNapoli.
The city’s FY 2026 operating budget anticipates $7.4 billion in federal aid, about 6.4% of total spending, but DiNapoli’s office warned on Monday that at least $535 million of that support could be in jeopardy due to pauses and cuts in federal grant programs.
“New York City has already been notified of hundreds of millions of dollars in cuts or pauses to federal funding for this year and next, but the full impact of recent actions by Washington is not yet known,” DiNapoli said in a statement.
In January, the federal government temporarily paused disbursements and obligations of certain assistance programs, pending a full review for compliance with executive orders. DiNapoli’s analysis found that nearly all federal operating funds anticipated by the city could be subject to this review, including key awards for housing, education and social services.
As of April 8, the city had been notified of funding pauses and terminations that could impact the budget by nearly $400 million in FY 2025 and $135 million in FY 2026. These estimates are based on the city’s preliminary FY 2026 budget and do not reflect future adjustments that could arise during the federal budget process.
Federal support plays a vital role in sustaining essential services, especially for the city’s most vulnerable populations. According to the report, the Department of Education (DOE) is the largest recipient of federal aid among city agencies, with an estimated $2.1 billion in grants expected in FY 2026 representing 7% of DOE’s planned spending, excluding fringe benefits.
Housing and social services agencies face even greater exposure. More than half of the Department of Housing Preservation and Development’s spending and nearly 40% of the Administration for Children’s Services budget are tied to federal funds in FY 2026.
The city’s single largest federal grant is the Temporary Assistance for Needy Families (TANF) program, which makes up nearly one-quarter of non-pandemic federal aid. TANF supported an average of over 146,189 family assistance recipients in FY 2024 and helped cover about 44% of planned costs for the Department of Homeless Services’ family shelter operations in FY 2025.
DiNapoli noted that waning pandemic-related aid also contributes to the decline in federal funding. The city used $1.1 billion in pandemic relief funds in FY 2025, but that drops to just $65.2 million in FY 2026 as those programs wind down.
