Gotham Gazette

The Place for New York Policy and politics

An Election Year Budget

It was the same scene: reporters scrunched into rows of blue plastic folding chairs chaotically checking their BlackBerrys; the chiefs of the city government's largest departments lining the front row; and the mayor -- charcoal power suit, red tie -- delivering a particularly morose PowerPoint, presenting a practically apocalyptic view of the city's budget.

Let the 2010 budget season begin.

On Friday, Mayor Michael Bloomberg released his preliminary budget for fiscal year 2010, which starts July 1. With the economic meltdown showing no sign of stopping, the mayor proposed to slash almost $1 billion from city spending and raise the city's sales tax to create $900 million in revenue. He has threatened to chop the city's work force by about 8 percent -- including 14,000 teachers -- if funding from Albany does not materialize or municipal employee unions do not compromise on health benefits.

Though most city officials say the country's dire straits call for serious measures, they also recognize that 2009 is an election year. Election years breed political compromises. Not only will city officials hear from advocates and constituents protesting the cuts, they also will hear from their political opponents. Inevitably, decisions made in June affect the election's outcome in November.

Forget the 2010 budget cycle. Say hello to the '09 campaign season.

The Budget Breakdown

In 2005, after several years of gloomy budget scenarios, the mayor was upbeat -- he called his preliminary budget then "cautiously optimistic."

Translation: Things had improved since the downturn following September 11th, and Bloomberg was looking for another four years as the fiscal guardian of one of the biggest budgets in the country.

Fast forward four years and we see the same mayor seeking another term in office (albeit unexpectedly). This time around, with the economy in disarray, Bloomberg's forecast is less confident.

"I am as optimistic as I can possibly be for the longer term," the mayor said, reiterating that the city would not return to the 1970s when core services were slashed due to an economic downturn.

"I think we'll be able to do it together," the mayor added. "We have the seasoned leadership and the public support."

The city faces a yawning $4 billion budget gap due to a decline in tax revenues, attributed to the financial crisis on Wall Street. To address these fiscal woes, the mayor proposed a $58.8 billion budget -- a decrease from the projected 2009 budget of $60.1 billion. The city's deficit, the mayor reminded reporters Friday, could have been as much as $6 billion if the City Council and mayor had not acted to cut spending and increase property taxes late last year.

Essential to the mayor's proposal is funding from both the federal and state governments -- funding that is far from guaranteed. Lobbing the problem a few hours north, the mayor urged the State Legislature to rescind a proposed $770 million cut to education aid for the city or see close to 14,000 layoffs at the Department of Education, most likely teachers (with attrition that number is 15,630). The mayor said aid the state receives from Washington's economic stimulus package could right Albany's wrong. (See related story on state budget cuts.)

"I am sympathetic with the state," the mayor said, referring to the projected $15.4 billion deficit in Albany. "Here is a chance for Albany to pay for their fair share of education with someone else's money. If there was ever a case for us to put pressure on them, it's now."

The mayor plans on filling the budget gap through $1 billion in aid from the federal government for Medicaid, almost $1 billion in agency spending cuts and about $1 billion from the restoration of state cuts and renegotiating health care benefits for union workers. He also is considering increasing the sales tax to 8.625 percent from 8.375 percent in addition to repealing the exemption for clothing and starting to tax items, like haircuts that previously were tax-free.

Bloomberg said a sales tax increase is not definite since the economic climate is still settling and revenues could change between now and when the budget must be approved in June.

Overall, unless the city gets help from unions and the state, the municipal workforce could decline by nearly 23,000, Bloomberg said, through both layoffs and attrition.

Under the mayor's doomsday proposal, the majority of layoffs are slated for education, but other departments would not be immune: the Administration for Children's Services could see 608 layoffs, Homeless Services 222, the Department of Health and Mental Hygiene 57 and the Finance Department 17. The mayor proposed losing 7,686 positions through attrition from multiple agencies, including a reduction of 1,000 uniformed police officers.

The Teachers Take Their Toll

Just in time for the Superbowl, the mayor punted.

The most drastic of cuts, specifically the Department of Education layoffs, which comprise 80 percent of the total proposed workforce reduction, are because of Albany, the mayor said.

That sparked this reaction from United Federation of Teachers President Randi Weingarten: "The union has pledged, and indeed has been working together with the mayor on the federal recovery and on ensuring we get a fair share from Albany. But making virtually all our first, second and third-year teachers pawns in this political battle is callous and unfair to them and their students. Worse, in blaming Albany, the city itself masks the magnitude of its own cuts.”

Weingarten is not alone in thinking the mayor is pegging Albany for the city's problems.

Baruch College Professor Doug Muzzio said the mayor's budget was overflowing with "wishing and hoping." If the federal and state funds he is expecting do not come through, then his re-election prospects could suffer.

"If you lay off 15,000 teachers, man, that’s going to resonate," Muzzio said. "It's going to resonate loudly, through bull horns."

Whether it's political maneuvering or financial strategy, other officials and political observers think the mayor has a point. At the end of the day, they say, teachers will not be sacrificed.

"It would not be acceptable to lose 15,000 teachers, period," said Councilmember David Yassky, who also is a candidate for city comptroller. "The mayor is absolutely right that it's up to Albany to keep our school funding constant. What he is trying to highlight there is that the governor's budget would reduce our school aid quite dramatically."

Already Unpopular Cuts

As for spending in general, Bloomberg recognized some departments were harder hit in this preliminary budget than others.

"It would be fair to say everybody takes the same hit, but the real world is you have to keep the streets safe, and the real world is you have to have a certain amount of guards for each prisoner," Bloomberg warned.

Of all the agency cuts, social services have been slashed the most -- by about 8.2 percent. Youth programs, libraries, cultural affairs, CUNY, transportation, and health and mental hygiene all have cuts around 7 percent. The Administration for Children's Services, which is slated for significant layoffs in comparison to some agencies, has seen a 6 percent cut.

The police, fire, correction and sanitation departments all received cuts of between 2 and 3 percent.

But how will these reductions, if approved by the City Council come June, affect the average New Yorker?

The Sanitation Department will reevaluate trash routes (and their frequency) so workers will pick up more tonnage. The city is doing away with pickups of grass clippings. After-school programs, including summer youth programs, will be cut significantly.

Bloomberg proposed to eliminate dual company firehouses by taking away either an engine or a ladder in certain stations. He also proposed to eliminate a firefighter position on 64 engines, bringing down the count to four (It will be done through attrition and it excludes lieutenants on the scene).

He wants to increase rates for single rate parking meters from 50 cents to 75 cents an hour, stop the city's nutrition counseling for those with HIV, increase admission fees at the Central Park Zoo and the Queens and Prospect Park wildlife centers and cut funding to senior centers.

Proposals floated to increase revenue include an increase in CUNY tuition by $200 a semester and a 5-cent tax on plastic bags, both of which would require approval by the state government.

All of these proposals, particularly the cuts to social services, could provide ammunition for challengers come November.

"I think it's shortsighted by Mayor Bloomberg to propose these cuts in terms of managing the city's budget and in terms of managing his political future," said Sean Barry, the director of the NYC Aids Housing Network. "We don’t want to return to the time where New York City is warehousing homeless people with AIDS in welfare hotels."

Politics or Policy

Bloomberg didn't have the last word on Friday.

Not to be outdone, one of the mayor's political rivals, Comptroller William Thompson, came out with his own proposal immediately following the address: upping the city's personal income tax on those earning more than $500,000.

When Gotham Gazette asked for more details about the comptroller's suggestion, a spokesman said Thompson was reviewing a number of ideas and would release details once finished.

Already some advocates and council members see an income tax increase as a better option than a hike in the sales tax, which they call "regressive," since it will have a disproportionate effect on lower-income people.

"Sales tax are regressive," said Jennifer March-Joly, executive director of Citizens' Committee for Children of New York. "You raise revenue that way, that’s clear, but the problem is for those that need to shop and make far less money. It's much more burdensome than the income tax."

With sides taken and criticism thrown, revenue options may be the first concrete mayoral campaign issue in 2009.

"The mayor’s plan would balance the budget on the backs of working people," read a statement from Thompson released following the mayor's budget address. "The mayor’s budget proposal relies far too heavily on a sales tax increase at a time when the city’s hardworking families and small businesses are suffering."

The mayor said he had not put an income tax increase on the table, because he anticipated the state would increase it to solve its own fiscal woes. (See related story.)

Tackling A Base

A critical element in the mayor's budget plan is tapping city unions to pay 10 percent of their health insurance premiums. According to the Independent Budget Office, 90 percent of city employees enrolled in its insurance program do not premiums.

Brave, maybe. But political observers say it could be tough to cross unions in an election year.

"The mayor is now in a position, regardless of re-election issues he is going to have, to make the unions his partners or his election will be more problematic," said a source close to the unions in New York City. "If he gets re-elected he will have real war."

Obviously, Bloomberg does not rely on the city's unions for financial support for his campaigns, as many politicians without billions of dollars do. In a citywide election, though, union support is key.

So far, the reaction to his proposal has been icy.

In response, Lillian Roberts, the executive director of city's largest municipal employees union, District Council 37, released the following statement: "Union members should not be asked to shoulder the bulk of this burden. Workers did not create this fiscal crisis and cutting into their hard earned benefits should not be viewed as the quick fix that will solve it."

Others scoffed at how realistic this proposal would be: "Be serious here, Mr. Mayor," quipped Muzzio.

The mayor has previously been criticized for not doing more to rein in rising pension and benefit costs, often thought of as "uncontrollable." Some, including political consultant Joseph Mercurio, say now is as good a time as any to negotiate union contracts. According to the mayor's office, payments to retirees for pensions and health benefits will increase from $11.7 billion in 2007 to $16.8 billion in 2015.

An analysis last year by the Independent Budget Office projected about $400 million in savings could be garnered during the first year of city employees paying 10 percent of their premiums.

The Political Hurdles

Councilmember John Liu, a candidate for public advocate, recognizes a tough budget year can mean tough politics.

"It stinks to run for election in a very difficult time," said Liu.

Though officials interviewed by Gotham Gazette say politics will not enter into their decisions on the budget, their policy choices could certainly affect the election.

"Politics plays a role in everything," said Councilmember Letitia James, who is running for re-election to her seat in Brooklyn.

Bloomberg extended term limits and launched his third term candidacy because he said he was needed to lead the city through tough times. That said, the outcome of this year's budget could dramatically influence whom the electorate (which still favors Bloomberg) chooses this November.

Most politicians, even those who themselves are seeking higher office (like Yassky, Liu or David Weprin), contend politics will not come into play this budget cycle.

"It's fiscal reality," said Councilmember David Weprin, the council's finance committee chair and a candidate for comptroller. "I think you need somebody in the comptroller's office that is going to recognize the fiscal situation and deal with it."

Yassky, agreed. "You first decide what's the right policy and then you go and make your case to voters and they can understand it."

Arguably the most eternal optimist is the alleged non-politician, the mayor himself.

"I hope and I expect that the fact that it's an election year will not enter into it at all, because (the council doesn't) have any choice, nor do I," the mayor said Friday. "We have to address these issues, and I would argue the public wants these issues addressed and wants you to make the tough decisions. My advice to anyone in government is do what you think is right and in the long term it will work out."