Gotham Gazette

The Place for New York Policy and politics


A Budget Expert Looks at the Numbers

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.

Paying Attention to Cities

For More on Helping New York's Economy

An $825 Billion First Step By James Parrott
The stimulus package proposed by Congress is key to halting the economy's downward spiral but it will not solve all our problems. Economist James Parrott of the Fiscal Policy Institute looks at what the package would do -- and what more needs to be done.

Using the Crisis to Prevent the Next One By J. Mijin Cha
The current turmoil can help us reduce our dependence n Wall Street and create good "green collar" jobs that help fuel a resurgence of the middle class. The director of campaign research at the Urban Agenda explains how.

Infrastructure Investments that Make Sense By Carter Craft
As big as the stimulus package may be, the country has to invest the money wisely. An urban planner offers some novel ideas for New York projects -- from recycling grease to ferries for freight.

From Gas-Guzzling Cars to Clean Buses By Charles Stone
Simply lending funds to struggling auto companies won't spur economic growth. Instead, an economist suggests, the government should create a voucher program to deploy the resources of the auto companies, spur investment -- and help the environment.

Previous Articles
A Federal Stimulus for City Parks By Anne Schwartz
Advocates hope that President Obama and Congress will recognize that funding parks would not only improve the quality of life and the environment but also spur investment and raise real estate values.

Stimulus Money: The Downturn's Silver Lining? By Graham Beck
The stimulus package could offer more federal funds for transportation projects. The MTA is making its list, but there are sure to be lots of restrictions -- and competition.

Barack Obama's early pronouncements, from creating a White House Office of Urban Policy to promising bold new investments in infrastructure, education and alternative energy, suggest that the new president understands something that many of his recent predecessors clearly did not: what's good for cities is good for America.

New York, the nation's biggest city by population and economic activity, could greatly benefit from a president who is committed to ending years, if not decades, when the federal government all but turned its back on the needs of urban communities. Even before the current economic downturn, the city lacked the resources to adequately address mounting problems of aging public infrastructure, housing shortages, traffic congestion, environmental pollution and growing economic inequality. While these problems can't all be placed at the feet of officials in Washington, the federal government has long underfunded programs that primarily benefit city dwellers. In the last eight years, things got even worse for New York.

Federal support for mass transit stayed roughly flat since the start of the decade, even as ridership in numerous cities - including New York - surged to record levels. The Bush administration drastically reduced funding for public housing, contributing to rent hikes, service cutbacks and a nearly $6 billion backlog in capital work at the New York City Housing Authority, whose buildings are home to more than 400,000 low-income New Yorkers. The administration also underfunded the project-based Section 8 program by nearly $3 billion, dealing a profound blow to one of the nation's most critical affordable housing programs at a time when demand for low-income housing in New York far outstrips supply. And it cut funding for the nation's workforce development system by roughly $2 billion, with New York City's job training and youth employment services taking a disproportionately large hit. Perhaps most galling, New York was consistently shortchanged in homeland security funding.

Washington's disdain for the priorities of cities like New York was not limited to traditional areas of concern to urban advocates. The absence of federal leadership on issues such as immigration, health care, energy policy, scientific research and access to higher education also adversely affected the five boroughs in countless ways.

Reciprocal Relations

New York could use a helping hand from Washington, especially in these tough economic times. While the Bloomberg administration has made progress in several areas, only the federal government can provide the resources and leadership needed to help the city accomplish its housing development goals, expand the transit system or make the city more energy efficient.

But, more than ever, the country also needs New York. In today's global economy, the nation's singular international city is inextricably linked to that of the country.

Obama, himself a lifelong resident of cities, has sent some encouraging signals that he understands this dynamic and plans to free up more resources to strengthen urban areas. But just what should he do to help New York?

A Plan for the City

Last week, the Center for an Urban Future published a report that laid out 51 specific recommendations for what the Obama administration and the 111th Congress could do to help New York.

Our recommendations started with the premise that one of the most critical jobs of the federal government today is keeping New York safe. This means allocating anti-terror funds to localities based on risktheyface rather than politics, moving aggressively to prevent the spread of weapons of mass destruction, passing legislation to get illegal guns off the street and enacting bills already proposed in Congress that would pay for thousands of additional cops in New York and other cities.

Another critical priority is helping New York and other cities maintain and upgrade their existing transportation infrastructure. Specifically, the Obama administration should dramatically increase the share of federal transportation funding that goes to mass transit, fund Amtrak at a level that enables vast improvement to intercity rail service, accelerate plans to develop and implement a more technologically advanced air traffic control system that would reduce flight delays and include more ferry projects in federal transportation infrastructure packages.

On economic development, Obama could help New York by increasing federal investment in microlending programs as a way to support the smallest entrepreneurs. A renewed federal commitment to scientific research would also go a long way given that New York is home to one of the world's largest concentrations of academic research institutions.

On housing, the president should restore funding for public housing, meet federal commitments to the project-based Section 8 program and help spur the creation of new supportive housing for the mentally ill.

There are many other things the new president could do, from taking immediate steps to ensure that the 2010 Census does not undercount New York and creating a large-scale nationwide effort to retrofit buildings to be more energy efficient, to expanding the federal Earned Income Tax Credit and streamlining the visa process to make it easier for artists to enter the country.

Others will undoubtedly have different ideas. The important thing is for New Yorkers to realize that having a friendlier audience in Washington is only the first step. Rather than simply waiting for Obama-or Adolfo Carrion, the Bronx borough president, who will reportedly head the new Office of Urban Policy-to set an agenda, New York's policymakers and champions should be helping to frame the national debate about what a more enlightened urban policy should look like and crafting a set of policy recommendations that federal officials could run with from the get-go.

Jonathan Bowles is director of the Center for an Urban Future

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