By Greg David, THE CITY

This story was originally published by THE CITY. Sign up to get the latest New York City news delivered to you each morning.” 

In November, Mayor Eric Adams said the sky was falling on city finances because of soaring costs for caring for asylum seekers and ordered agencies to cut their budgets. Among the slated casualties were a class of new police recruits, Sunday library hours and street corner trash collections.

This week, the mayor said the sky is not falling — reducing the projected cost of caring for migrants by about $1.5 billion and rescinding many of the reductions that he had demanded less than three months ago, including adding back the police class, keeping libraries open, reversing cuts to community schools and Summer Rising programs and restoring trash collection.

The mayor Tuesday portrayed the events as a sign of how his administration was successfully managing the arrival of tens of thousands of asylum-seekers. But fiscal experts say the sudden shift was a direct result of a series of decisions the administration took — at least one of which was unprecedented — that first made the fiscal situation appear worse in November and then better in January.

As a consequence, the administration has eroded its credibility with the City Council, with whom he must negotiate a budget by June 30, and with voters, say the mayor’s critics.

“It is critical to underscore the need for a better approach to budgeting that is based on a more accurate and shared set of facts,” Council Speaker Adrienne Adams and Council Finance Chair Justin Brannan said in a joint statement.

Former Speaker Melissa Mark-Viverito predicted the scenario would make it more difficult to enact a budget. “You’ve just created and exacerbated the bad will, because now they can’t trust what the mayor says,” she told Politico.

The key decision in November that made the forecast so dire was to not update projections for either tax revenues or spending. That resulted in a whopping $7 billion gap to be closed for the fiscal year that begins July 1.

Yet if anything, the economic picture by then had changed for the better. When the mayor offered his budget proposal in April of last year most forecasters were predicting a recession as a result of the Federal Reserve Board move to hike interest rates to cool inflation. But come November it was clear there would be no recession, and tax collections were much stronger than expected.

The Independent Budget Office, other fiscal watchdogs and the City Council all took into account the better-than-expected economy and foresaw much smaller gaps to be closed. The Council, for example, argued immediately there would be more tax revenue and in early December said it would amount to at least $1.2 billion.

“It was an error and they did this consciously,” said Louisa Chafee, director of the IBO. “It was a choice they made.”

Meanwhile the specific approach on how to cut the budget was unusual and sowed confusion about the scale of the problem and the impact.

While all recent mayors except Bill de Blasio used PEGs — short for “program to eliminate the gap” — to force agencies to find more efficient ways to operate, Adams announced in September that he would require agencies to cut their budgets by 5% for each of the upcoming budget updates scheduled for November, February and April.

The three PEGs at once and the size were unprecedented, the IBO found when it checked with budget officials from several administrations. Chafee herself was involved in PEGs as a budget official under Michael Bloomberg.

The Adams PEGs came under criticism from both fiscal watchdogs and progressive Democrats.

Earlier this month, the nonprofit Citizens Budget Commission issued a report that showed 80% of the savings would not actually affect operations, with much of the reductions coming from accounting maneuvers like recognizing underspending or booking savings from jobs that had not been filled.

Council finance chair Brannan in particular kept up a steady stream of objections to the budget cuts.

The mayor Tuesday rejected the idea that he had “whiplashed” New Yorkers or that he had mismanaged the budget.

“I understand that some people want to politicize this and I got it, you know, but we have to remain focused during these times of navigating the city out of this condition we’re in,” he said. “We just have to stay focused, because this task is a Herculean task and history is going to be kind to this administration when they see what we accomplished.”

Nevertheless, the effect was to say the city was in a fiscal crisis in November — a moment when he was seeking to pressure federal officials for aid on the migrant front. The restorations and brighter fiscal outlook January came because it became clear no federal aid is likely, while the steady drumbeat of criticism had dented the mayor’s popularity.

The reduction in the costs of asylum seekers resulted in part from lowering the daily cost of housing but also because the number of asylum seekers in the shelter system has declined as the city imposes rules requiring those being housed to reapply and because the number of new arrivals has slowed.

And in updating its economic and tax forecasts, the city increased budgeted revenue for the current year by $1.3 billion and $1.6 billion for the fiscal year beginning July 1.

The result is that the $109.4 billion preliminary budget the mayor released Tuesday is balanced without the most high-profile service cuts that grabbed the headlines in November.

In several weeks, detailed budget analyses will be released by the city and state comptrollers and other fiscal experts creating a very different dynamic to the one that occurred in November.

“There will be much less of a divergence between where we think the city is and where the administration thinks we are,” said Chafee of the IBO.

Still, the whiplash has left scars.

“There is no question that there is pressure on the city’s budget. As its economy and finances improved this fiscal year, it demonstrated the critical importance of transparent decision making and building trust with the city’s stakeholders, including the public,” said state comptroller Tom DiNapoli.

THE CITY is a nonprofit newsroom that serves the people of New York. Sign up for our SCOOP newsletter and get exclusive stories, helpful tips, a guide to low-cost events, and everything you need to know to be a well-informed New Yorker.