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The 2006 New York City Budget

by Mark Berkey-Gerard, Jan 31, 2005
 

Mayor Ed Koch saw a "rosy glow on the horizon" and proposed hiring 10,000 new city employees.

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Mayor David Dinkins found money to put more cops on the street, extend library hours, and expand school health programs.

Mayor Rudolph Giuliani gave teachers a huge raise, handed out multiple tax cuts, and declared, "We have changed the direction of the city."

Each of these mayors was proposing a budget in a year (1985, 1993, and 1997 respectively) when he was running for reelection.

So in this election year, it was not surprising when Republican Mayor Michael Bloomberg's $48.3 billion budget played up the good news, downplayed the bad news, and blamed the $3 billion deficit on Albany.

Two years ago in his budget presentation, Bloomberg was upfront about closing six firehouses. In this year's presentation, he neglected to mention that his new budget cut staff at 49 firehouses. And if it wasn't clear from this that his budget address was also a campaign speech, the mayor said, "Now is not the time to change course."

But campaign season is also time for the mayor's critics and opponents to warn New Yorkers that election year budgets are often followed by post-election budget problems.

WHAT'S IN THE MAYOR'S BUDGET?

The Good News

In contrast to his three previous budget plans, the mayor did not offer a "doomsday scenario" for what might happen if he did not get his way: He did not threaten to close zoos or shut firehouses or cut back on trash pickups.

In large part, that is because the city's economy is showing signs of recovery.

Tax revenues are back to pre September 11, 2001 levels. Wall Street profits - which account for about one-third of the city's tax revenues - are up. Commercial and residential real estate are strong. And tourism is at record levels.

"We are in better shape today than we were a year ago," the mayor said. "My message is one of cautious optimism."

But some argue the mayor is relying too much on a good economy.

"You can't just say we are going to grow our economy out of these problems," said Republican Councilmember James Oddo. "What will happen is that when Wall Street goes in the tank, which it does from time to time, there will be two choices: close every firehouse in the city or raise taxes."

The Deficit

Despite the good news, the city's budget has a structural imbalance: Year after year, expenses continue to be higher than tax revenues.

In 2006, the city expects to have a $3 billion deficit.

In order to close the gap, the mayor plans to:

  • Use a $1.4 billion surplus from this year to fill the gap in next year's budget.
  • Cut $600 million from the city's current programs.
  • Receive $500 million in aid from the state government in Albany.
  • Receive $250 million in aid from the federal government in Washington.
  • Save $325 million in changes to pension and health insurance.

The mayor argues the deficit is not entirely his fault and that the amount of money the city spends on services like police, firefighters, and sanitation has only increased about six percent over the last five years.

The most significant problem, Bloomberg argues, is with so-called "non-discretionary" expenses - things like Medicaid payments, pensions and benefits for city workers, and payments on debt from past - that the city cannot control.

The cost of these four items now total more than $20 billion a year, almost 40 percent of the city's entire budget. As a result, the city faces another estimated $4.4 billion deficit in 2007.

"The city is no longer in control of its biggest expenses," the mayor said.

Some criticize the mayor for not doing more to deal with these issues.

"So are we heading for two-thirds or three-quarters of the budget being out of the mayor's control?" said Diana Fortuna of the Citizens Budget Commission. "You have to start to attack the source and get cooperation from Albany, which is never an easy thing, and cooperation from labor unions."

The Cuts

The mayor's plan calls for nearly $600 million less money for city agencies that deliver the services that New Yorkers depend on everyday, but he refused to call them "cuts."

"We are not cutting programs," Bloomberg said. "We are doing more with less."

However, the City Council argues that they are cuts and that they will be painful for New Yorkers.

The mayor's cuts include:

  • Reducing staff at 49 firehouses
  • Shorter library hours
  • Cutting $15 million from after-school programs
  • Eliminating some hot meals to homebound senior citizens.

The City Council's biggest criticism of the mayor is with his capital budget, which proposes cutting $1.3 billion from school construction over the next five years.

"We are talking about libraries, science labs, playgrounds, and bathroom repairs," said Councilmember Eva Moskowitz, who chairs the council's education committee. "The `Education Mayor' is clearly not putting children first."

Tax Rebate

Despite the deficit and budget cuts, the mayor is planning on again giving out a $400 property tax rebate to each owner of a co-op, condo, or private house who had to pay the 18.5 percent property tax increase imposed in 2002. Business owners and landlords of large buildings would not be eligible.

The tax rebate will cost the city about $250 million. The mayor said he would likely give out the tax rebate again next year as well.

City Council Speaker Gifford Miller, who fought the mayor on the tax rebate last year, but eventually accepted the idea, said it was "too early to tell" if the $400 rebate makes sense. "We need to look at it in the context of the whole budget," he said.

Since the city does not have the power to raise or lower taxes (with the exception of property taxes), Mayor Bloomberg is also lobbying Albany for some changes in when certain taxes will expire.

Governor George Pataki has proposed ending the personal income tax surcharge - a state tax on the top two income brackets - retroactively to December 31, 2004, which the mayor opposes.

Two years ago, the state reinstated taxes on clothing and shoes that cost less than $110. That sales tax is also set to expire this summer, which the mayor supports.

WHAT THE CITY WANTS FROM ALBANY

Mayor Bloomberg's budget assumes that the State Legislature in Albany will give the city $500 million.

"We send $11 billion more to Albany in tax revenue than we get back," the mayor said, "So I think asking for $500 million is reasonable."

One of the biggest priorities is Medicaid reform. Unlike most other states, New York requires local governments to pay a major portion of the Medicaid bill. New York City's costs have risen dramatically in recent years, and will cost the city nearly $5 billion in 2006.

If the state enacted the Medicaid reforms the city is asking for, it could save the $425 million next year.

The city has also assembled a long list of other ways the state could help, including:

  • Repealing the Wicks Law, which requires the city to hire multiple subcontractors for building projects (which the city calculates is worth $451 million)
  • Reforming Social Security reimbursements (worth $130 million)
  • Allocating funds to upgrade voting systems (worth $92 million)
  • Enacting tort reform (worth $83 million)
  • Giving the city permission to use red-light cameras (worth $13 million).

In addition, the mayor is fighting a series of proposals in the governor's budget that would increase tuition at the City University of New York, delay funding for Family Health-Plus programs, and provide $2 billion less for mass transit projects than the Metropolitan Transportation Authority has requested.

City Council Speaker Gifford Miller said the mayor must try a new approach if he wants to get real results from Albany.

"He keeps going back to the same playbook and we keep getting the same results," said Miller. "We need to get tougher and to fight harder."

WHAT THE CITY WANTS FROM WASHINGTON

The city is also asking the federal government for $250 million in aid in order to balance its budget.

One way the city hopes it gets help from Washington is in Homeland Security funding. New York officials have long complained that the formula for giving out security money shortchanges the city, which has a higher level of risk than rural areas. If the formula is changed in the way the city hopes, it could save $200 million next year.

The city also presented a list of other options, including:

  • Amending pharmaceutical rules and allowing drugs from Canada (worth $210 million)
  • Changing foster care funding formulas (worth $87 million)
  • Reimbursing the city for police protection of United Nations (worth $32 million)
  • Restoring local law enforcement block grants (worth 24 million).

    THE UNKNOWN RISKS

    There are a number of issues that the mayor's budget does not address that critics say could end up costing the city hundreds of millions of dollars and make the whole document meaningless.

    One major issue is school funding for the Campaign for Fiscal Equity lawsuit, which requires more funding for city schools.

    In November, a court-appointed panel recommended that city schools should receive an additional $5.6 billion a year phased in over the next four years. For next year, the panel recommended an increase of $1.4 billion, but did not say how much should come from the state and how much should come from the city.

    If the city's funding equals nearly a quarter of the money, it will have to pay an additional $330 million next year and a total of $1.4 billion by 2009.

    The city is also negotiating contracts with nearly half of the city's workforce, including firefighters, police, and teachers.

    Nearly $1 billion of the mayor's plan is based on the assumption that the unions will agree to the city's offers, which each union has already rejected.

    "The mayor says that paying cops a fair wage will cause the city pain," said Randi Weingarten, head of the municipal labor coalition. "No wonder so many average New Yorkers believe the mayor is out of touch."

    THE BUDGET ROAD AHEAD

    The "preliminary budget" Bloomberg presented last week is the starting point for the annual budget process. The mayor will present a revised "executive budget" in April. By law, the administration and the City Council must agree on a balanced budget by June 30.

    Historically, the two sides will reach an agreement after fighting over about $500 million out of the $48 billion budget - and both sides will claim victory.

    However, since it is an election year, each of the mayor's opponents is also taking aim at the plan.

    Former Bronx Borough President Fernando Ferrer said a third of the money that the mayor plans to spend to build a new stadium of the Jets could fund "an after-school program in every middle school in the city."

    U.S. Rep. Anthony Weiner called the $400 property tax rebate "the ultimate election-year gimmick."

    Manhattan Borough President C. Virginia Fields predicted that because of unresolved labor contracts, Medicaid costs, and the need for more school and transportation funding, the budget "will balloon beyond what the mayor outlined."

    "This is a different account than the rosy picture painted at the State of the City address and his `City of Opportunity,'" said Councilmember Charles Barron. "Opportunity for whom? Not for libraries, not for youth services, and not for education where schools have to be fixed up."

    RELATED LINKS:

    Governor George Pataki's Budget Address

    Mayor Michael Bloomberg's testimony on proposed state budget

    City Budget and Labor Unions

    Gotham Gazette's 2003 NYC Budget Game

     




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