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A Budget Expert Looks at the Numbers

by Gotham Gazette Staff, Feb 17, 2009
 

Late last month, Mayor Michael Bloomberg released his preliminary budget for the coming fiscal year, calling for a wide range of service and job cuts along with new taxes and increases in some existing ones. The proposal met with sharp criticism from municipal employee unions, education organizations and some City Council members, among others.

(To see if you can craft a better taxing and spending plan, play Balance, Gotham Gazette's 2010 budget game.)

While acknowledging these tough economic times -- notably a recession that has hit New York hard and opened a multibillion dollar budget gap -- many New Yorkers have questions about how the cuts will affect them, whether their taxes will rise and other issues.

To discuss these matters, Ronnie Lowenstein, director of the city's Independent Budget Office sat down with Gotham Gazette for a live online chat last week. Her office provides objective, nonpartisan analysis of the city's finances. (For a related story on the IBO report on options for cutting spending and raising revenue, go here.)

The following is an edited transcript.

Gotham Gazette: We all know a lot has changed in the past year. What are the primary differences between the city's fiscal year 2009 budget and the mayor's preliminary budget released last month?

Ronnie Lowenstein: Over the past six months it has become clear that the United States is in the midst of a deep, broad-based recession and that the financial industry -- which remains the primary engine of New York City's economy -- is in crisis. The mayor's preliminary budget reflects these difficult economic realities, estimates their impact on taxes and spending, and proposes ways of bringing the city budget into balance. The city has to focus on bringing its own budget into balance -- as required by law.

Gotham Gazette: Let's delve into some of those budget gap-closing measures. What are they? And do some of them rely too much on other governments, like the state or the federal government?

Ronnie Lowenstein: The mayor is proposing to close a roughly $4 billion gap for the upcoming year in several ways. These are -- very roughly -- $1 billion in spending cuts, another $1 billion in tax and other revenue increases (mainly sales tax increases), $1 billion from more federal funds for Medicaid, about $360 million in health co-pays from city workers and about $240 million in unrestricted state aid.

Gotham Gazette: This question is fro a reader: Will there be higher taxes for lower tax brackets this year?

Ronnie Lowenstein: Assuming you're talking about income taxes, the mayor has not proposed increasing the city's personal income tax. In Albany, however, there is considerable discussion of state income tax increases, particularly for high-income taxpayers. And definitions of "high income" vary from one person to the next.

Steve Koch: Would it be fiscally responsible to offer the highest paid teachers and administrators in the Department of Education an incentive to retire early?

Ronnie Lowenstein: While it could potentially save money, you would also need to consider the impact on education of losing the city's most experienced teachers and administrators. Another thing to keep in mind is the difficulty of finding qualified replacements in math, science and special ed -- areas where the city has had trouble recruiting in the past.

Larry Littlefield: Is the city's share of state education funding, including STAR aid, going down again? [STAR, or School Tax Relief is a state program that includes offers propterty owners a rebate on school taxes and a partial property tax exemption.]

Ronnie Lowenstein: The city's share of state aid appears to be down slightly under Gov. David Paterson's budget proposal. We haven't yet measured the effects of the changes in the STAR program, however. Under the governor's proposal, the mayor has estimated that New York City would receive $770 million less than the city had anticipated. That's what's behind his raising the possibility of laying off 14,000 teachers.

Gotham Gazette: Regarding those layoffs, is Albany really to blame?

Ronnie Lowenstein: One way to look at this is as an attempt by the mayor to lobby for local education funding in the federal stimulus package and to ensure that any federal funds flow through to local schools. You might want to see the blog we posted on this issue. [After this chat, the mayor said the federal economic stimulus package could provide the money to avoid the teacher layoffs.]

 

Peter: To what extent, if any, is the city counting on a trickle down from the federal government's bailout to help deal with NYC budget woes?

Ronnie Lowenstein: So far the mayor is counting on at least a billion dollars for Medicaid in each of the next two years. There is a good chance that some local education aid will also be included in the federal stimulus package, but the mayor didn't factor those funds into his preliminary budget proposal. Then there are other federal stimulus funds that could flow to the New York City Housing Authority and the Metropolitan Transportation Authority.

Piper Hoffman: I understand that the fiscal year 2010 plan excludes $12 million in funds the City Council had added on, including $4 million for meals; $3.1 million for transportation; $1.3 million for the Healthy Aging Initiative and $1 million for Naturally Occurring Retirement Communities. What is the IBO's position on effectively cutting these social services when New Yorkers need them most?

Ronnie Lowenstein: The council has made these services priorities in the past and we'll see how they respond in their upcoming hearings on the mayor's preliminary budget and in the council's formal response, which is due in early April.

Gotham Gazette: With all the talk about the operating budget, there hasn't been much talk about the capital budget. How will it be affected by the deficit and the recession? Are there projects already started that will have to stop?

Ronnie Lowenstein: The mayor has proposed a 30 percent cutback in the capital plan from 2009 through 2013. But the administration is not providing any details on which specific projects will be affected until the executive budget is released in April.

Gotham Gazette: Thanks, Ronnie for shedding some light on this year's budget proposal. For our readers, thank you for participating.

Ronnie Lowenstein: Thanks for asking me.


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