Bloomberg Testifies on State Budget
January 25th, 2010

Needless to say, it’s morose.

Mayor Michael Bloomberg says Gov. David Paterson’s state budget proposal would slice $1.3 billion from New York City, which could result in a workforce reduction of almost 19,000, 8,500 of which would be teachers. The state budget disproportionately affects municipalities, including New York City, and is balanced on the back of the city’s workforce, the mayor said in Albany this morning.

Bloomberg pointed to a proposal that would eliminate the state’s appropriation to homeless shelters, which would effectively slash $55 million from the Department of Homeless Services budget next year. This comes at a time when the city is seeing record number of homeless individuals. The mayor also blasted Paterson’s proposal to completely eliminate state revenue sharing for the city — to the order of $328. Other counties across the state are seeing 1 to 5 percent reductions.

Under this proposal, Bloomberg said the city would have to close 15 senior centers, 500 parks employees would face layoffs (equal to closing recreation centers, pools and beaches, citywide) and 500 soup kitchens would lose funding.

The good news: The mayor did laud the governor’s proposal to tax soda and increase the tax on cigarettes.

We will get a closer look at how these budget cuts affect the city on a micro level on Thursday, which is when the mayor is scheduled to release the city’s preliminary budget, according to his remarks.

Here are his prepared remarks in full:

Good morning. Thank you, Chairman Farrell, Chairman Kruger, my own State Senator Vice Chair Liz Krueger and members of the committees. Seated with me are Mark Page, the Citys director of Management and Budget, and Micah Lasher, our Director of State Legislative Affairs.

All of us, at all levels of government, face difficult decisions this year. You and the Governor have the task of balancing a budget that has a $7.4 billion gap between revenues and spending. Projections are for even greater deficits next year and the year after that. The Governor has presented what he calls a budget of necessity. We all know that hard budget choices are necessary but so are fair ones.

I regret to say that this budget which would impose a total of $1.3 billion in cuts on New York City and leave us with close to 19,000 fewer City employees to perform basic services utterly fails the test of fairness.

And that is why I am here this morning to tell you that the people of New York are counting on you in the Legislature to help create a budget that is both responsible and equitable. We expect you to hold every budget decision this year to standards of fairness and fundamental reform.

True fairness for all New Yorkers, Upstate and Downstate. True fairness in how State and local governments share the burden of closing the budget gap a burden that is now heavily shifted to local shoulders.

But for sure, fairness that in particular doesnt penalize New York City for what our 8.4 million people, voters, and taxpayers have done to keep our own fiscal house in order. That includes the hard but prudent decisions weve made to reduce agency expenses as well as raise property and sales taxes.

And we also ask you to seize this budget season as an opportunity: An opportunity to at last make the kind of fundamental reforms that put the taxpayers ahead of the special interests. And also an opportunity to end the postponing of facing fiscal reality that will only make the next budget that much more calamitous for our state and its citizens.

I want to thank the Legislature for acting fairly and wisely on the Citys behalf in the past by, for example, ensuring our fair allocation of State revenue sharing funds and, last year, by enacting the tax provisions we requested. We expect you to act with the same wisdom and fairness this year, too.

Although our criticisms of the budget are substantial, we also want to acknowledge its positive aspects. Let me begin by commending Governor Paterson for his resolve to close the budget gap more by reining in spending than by raising revenues. And the new revenue initiatives in the budget are themselves far-sighted. That includes, for example, the proposed penny per ounce tax on sugared beverages.

Today, more than half the residents of New York City, and nearly 40 percent of our public school students, are overweight, many of them seriously so. That puts them dangerously on track to contracting diabetes, high blood pressure, heart disease, asthma, depression, and other serious health problems later in their lives. Its in the interest of us all to prevent that from happening now and the surest pathway to changing behavior is through the wallet.

I also support the proposed $1 per pack increase in State cigarette taxes. Our own experience in New York City shows that increasing the cost of cigarettes strongly discourages smoking and that young people are especially sensitive to such pricing disincentives.

So together, these two revenue measures will not only provide some $650 to $700 million annually; they will also improve health and save lives across our state.

We also commend the Governors proposed, long overdue clampdown on unstamped tobacco sales originating on New Yorks Indian reservations. This is a step the City has long urged the State to take, and were delighted to see action on it at last. It will close an unwarranted loophole and prevent thousands of New Yorkers from becoming addicted to tobacco. Once new regulations are promulgated, it also will begin to raise up to $1 billion annually in State and City revenues.

I also want to commend three other revenue provisions of the proposed budget that will benefit New York City.

The first would extend the State mortgage recording tax to loans used to finance co-op purchases. This will finally treat all home mortgages the same, and the City portion of this reform will raise $50 million in revenues annually.

The second would end a requirement that the City pay extraordinarily inflated 9 percent interest to plaintiffs on court-ordered civil judgments. Today, no one gets 9 percent. The fairer, Treasury-bill-pegged rate the Governor proposes would save the City at least $1 million a year.

And the third provision we endorse would permit the City to create a sinking fund for principal on federally subsidized school construction bonds. The reduction in borrowing costs that we realize would permit us to build and repair more City schools.

Thats basically the good news and then, unfortunately, the inequities begin.

For starters, the executive budget cuts imposed on localities, including New York City, are nearly three times greater than those State agencies would face. For New York City, those cuts amount to $1.3 billion in the next fiscal year.

This truly adds insult to injury, because weve already imposed seven rounds of budget belt- tightening on City agencies since the fall of 2007. That includes the 4 percent expense reduction we instructed them to make last November for the current fiscal year, and the 8 percent reduction theyre making for Fiscal 2011, which begins July 1st.

So the State is effectively saying to localities: Were going to fix our budget problems by starving your agencies.

Let me tell you, the cuts the States fiscal mess will cause us to make will not sit well with New York City residents particularly when they realize the States budget is balanced on our workforces back to protect the States own workforce.

The executive budget claims to provide budgetary relief for local governments through a four-year moratorium on unfunded mandates imposed by Albany.

But here are the facts from where I sit. First, the Governors catalogue of proposed mandate relief measures would, in reality, have very little impact on New York City. Second, cost shifts in the budget actually add up to tens of millions of dollars of new unfunded mandates at the local level.

Let me cite two examples: special education and homelessness. The State is proposing to shift some $51 million in the cost of summer special education classes from their budget to ours. But lets be clear our schools are under Federal mandate to provide these services, no ifs, ands, or buts. So this is not a cut in spending; its a cost shift, pure and simple. And it ought to be understood as an unfunded mandate.

Theres a similar cost-shift in the area of homelessness. In the majority of cases, providing shelter to homeless individuals is mandated either by the courts or by the State. Yet the State proposes to eliminate its annual appropriation for homeless adults in shelters, many of whom have physical or mental illnesses. The bottom line for the Citys Department of Homeless Services will be a shortfall of $55 million in the next fiscal year.

The third major way the budget fails to provide mandate relief is the biggest-ticket item of them all: Our ever-mounting pension costs.

Last falls special session created a new State-level pension tier for State employees, and for the Citys public school teachers. That was a vital first step. Now I urge you and the Governor to take the next one, and enact comprehensive local pension reform.

Specifically, New York City needs a new pension Tier V covering all new uniformed and civilian City employees. And incidentally: We need it this year.

Today, uniformed services employees can and often do retire with full benefits while they are still in their 40s, creating an intolerable burden on City expenses.

On a related subject: The Governor recognizes that the rising cost of health care premiums for current and retired State employees is unsustainable. And for that reason, the executive budget would require State retirees to pay a portion of those premiums. Local governments face precisely the same grave problem and we urgently need leadership from the State in addressing it. The State must include us in that requirement.

Similarly, were disappointed that, so far, the Governor has failed to incorporate other cost-saving reforms weve proposed to him.

That includes a full elimination of the burdensome and antiquated Wicks Law that greatly adds to public construction costs for New York City and other localities. And it includes the kind of common sense tort reforms already on the books in many states, which would save our City more than $140 million a year in civil judgments.

Not only does the budget impose new mandates without real mandate relief. And not only does it impose unfair burdens on City agencies compared to those placed on State agencies. It also eliminates let me say that again, eliminates State revenue sharing for New York City, and New York City alone.

This is the third executive budget in the past four that has included this provision, which makes any justification that desperate times call for this desperate measure a true non-starter. Because in good times and bad, one governor after another has been all too willing to raid New York Citys portion of this State aid. This year, other cities and towns would see revenue sharing from the State reduced from one to five per cent.

But only New York City would have the dubious distinction of being cut off completely. Thats right cuts of one to five percent in 57 counties, and cuts of 100 percent in Bronx County, Queens County, Kings County, Richmond County and New York County.

Want to guess how thats going to sit with taxpayers? Let me tell you, the voters of New York City arent going to take it.

The executive budget cuts revenue-sharing statewide by some $349 million. We would absorb 94 percent of that cut or $328 million; thats 15 times the cut for the rest of the municipalities in the state combined.

If youre going to cut revenue sharing by that much, you should treat each locality accordingly which would make New York Citys annual cut $105 million, not $328 million.

And just to put that in perspective: The cut we face goes even deeper than the Governors budget makes it appear. Payments would be lost in both our current and coming City fiscal years for a total of close to $656 million.

As Im sure you know, New York City produces roughly half of all State tax revenues. So eliminating these $656 million in State funds would worsen an already very pronounced imbalance of payments between New York City and Albany. It would, moreover, seriously aggravate an already difficult budget season in our city, which will begin when we present the preliminary budget for the next fiscal year this Thursday.

Now as to education funding. Cuts in education operating funds are the biggest single element in the Governors plan to balance the States budget. And our Citys schools would face a cut of some $500 million.

While this is not out of line with the cut in aid that schools across the state are experiencing, it would have huge consequences in New York City, and would lead to 8,500 fewer teachers for this coming September.

Youll notice that we identify our cut as $500 million, not the $418 million in the executive budget. This is, however, misleading accounting. The Governors budget counts school construction aid against the cut in formula-based school aid that the City is receiving.

But the resolution of the Campaign for Fiscal Equity lawsuit clearly included a commitment from the State that building aid for New York City schools must be counted separately.

This year, with the stakes so high in how we budget State and local funds for our schools with the consequences so potentially dire in terms of layoffs lets not muddy the waters. Lets shoot straight with the people, and with one another. You cannot count building aid as operating aid.

And before leaving the subject of education, let me add this: Were disappointed that full funding for student MetroCards has not been restored in the executive budget, as the Governor promised it would.

For years, the City, State, and MTA had an agreement to fund student MetroCards. This year, the State has dramatically cut its share of the funding, which could force children and their families to pay thousands of dollars a year in school transportation costs.

This would not be right, especially since the State provides aid for student public transportation in other districts. The State is balancing its budget by raiding that of the MTA the organization that provides our mass transit. Do you really think its fair for our kids to suffer while other State agencies are protected?

Make no mistake about it, the City cannot and will not make up the difference out of its meager resources. Despite our budget difficulties, the City is upholding its part of the bargain and funding its share of student MetroCards. The State needs to honor its commitment too, and pay its full share.

The executive budget also continues to impose unreasonable costs on the City for placing young people in State juvenile institutions.

Over the past eight years, weve reduced our placements in these clearly failing and dangerously dysfunctional institutions by more than half. Nevertheless, the State charges us more each year more per capita, and more in the aggregate. Were paying 180 percent more today, per kid, per diem, than in 2002.

In short, were doing the right thing by keeping more kids in their home communities and getting financially clobbered in the process, to the tune of a projected $64 million in the next fiscal year. Talk about no good deed going unpunished.

At a time when the State is for good reason re-examining its juvenile justice system, lets look at this financing structure, too, and find a way to divert funds from failing institutions to proven, effective, community-based alternatives to placement. If you want to send money to upstate counties, you write them a check. We cant afford to do so.

I also want to say a few words about the Governors proposed alterations to the STAR school tax relief program. Unfortunately, his proposal would exacerbate already unfair treatment of New York City.

Here are the facts: STAR was set up as a homeowner tax exemption and because the majority of New York City residents are renters, they were left out. So to make STAR more fair, a Personal Income Tax component was incorporated into the program for New York City.

But now, STAR would be substantially curtailed in New York City. In fact, 79 percent of the statewide cut in STAR would be in New York City, even though we receive only 27 percent of STAR property and income tax relief.

This would be an effective tax increase of at least $200 million annually for New York City taxpayers. I think that under the general heading of fairness, we can and should do better than that.

As I said at the top of my testimony: The $1.3 billion in cuts included in this executive budget would have devastating effects on essential services in New York City.

Ive already described the loss of 8,500 teachers that would result from the $500 million cut in State education funds. The executive budget imposes some $800 million in other cuts spread across other City agencies. And this is on top of the reductions in City spending needed to close our own multi-billion dollar deficit, a plan we will present on Thursday, in our preliminary budget for the next fiscal year.

These State-imposed cuts let me repeat that so everyone knows where theyre coming from these State-imposed cuts would, if theyre permitted to stand, lead to the loss of more than 10,000 City employees, in addition to the loss of 8,500 New York City teachers.

And the consequences would be appalling. We would, for example, have to lay off 3,150 police officers reducing the NYPDs operational strength to 1985 levels.

Some 1,050 firefighters would be laid off, and the firehouses where they work would be closed.
Wed also have to lay off close to 900 City correction officers which is only possible if we simultaneously reduce our daily inmate population by almost 1,900 prisoners. Thats something we cant do without unprecedented reform of how the State-run judicial system adjudicates criminal cases in our city.

Today, our childrens services workers keep tabs on almost 9,000 at-risk children; under these cuts, 2,700 children would lose that sometimes life-saving protection.

Street cleaning and litter basket collection would be cut in half, and most curbside garbage collection would be reduced by a third.

Close to 19 percent of parks personnel, almost 500 people, would face layoffs the equivalent of closing all pools, beaches, and recreation centers, citywide.

Wed have to eliminate City funding for 500 soup kitchens that feed thousands of hungry New Yorkers.

And wed have no choice but to close 15 senior centers.

Such budget cuts would inevitably damage the quality of life in the city that drives the economy of the entire state. Its in your power to prevent many of those dire consequences simply by giving the people of New York City a fair deal.

Stopping the proposed elimination of revenue-sharing is key to that. If there were a fair distribution of revenue-sharing cuts statewide, it would spare some 3,400 uniformed employees and nearly 2,500 civilian employees in New York City.

Given the States finances this year, we would accept a cut of our fair share of revenue sharing reductions. We will not accept a total elimination of revenue sharing, necessitating such disastrous service cuts and State-sponsored layoffs.

Before taking your questions, let me briefly review other important elements of the Citys legislative agenda for this session that have budgetary implications.

Topping that agenda is the need for pension reform. Over the past decade, the Citys pension costs have increased by more than $5 billion and theyre still growing. This simply cant go on and this year of budget austerity is the time to draw the line and create a new City pension tier.

The prospect of layoffs in our schools also adds urgency to our proposed reform of the last in, first out teacher layoff policy. Clearly the only thing worse than having to lay off teachers would be laying off great teachers instead of failing ones.

So we need you to empower us to objectively and transparently evaluate teachers, and then make personnel decisions based on what that tells us about what matters most: success in the classroom. We also need reform of the absurdly difficult, expensive, and lengthy process of firing incompetent teachers.

And lets also lift the States cap on charter schools. The success of charter schools is indisputable; charter school students continue to consistently outpace their age-mates on the States standardized math and reading proficiency tests.

Our failure to reach agreement on this question in time to include it in the States application for Race to the Top Federal education funds was disappointing. But I am hopeful that during this legislative session we can work together to raise the current cap on charter schools in our city. This morning, there remain some 36,000 New York City children on charter school enrollment waiting lists. Lets not make them wait any longer for a first-rate education.

And finally, I also urge you to enact legislation before the March 17th deadline set by the Department of Housing and Urban Development enabling us to qualify for Federal funds for much-needed improvements to the Citys public housing developments.

Members of the Legislature: I know full well that making budget decisions isnt easy even under the best of conditions. And the conditions we face in New York today are far from the best.

But many of the worst consequences of the budget cuts Ive testified to this morning can be avoided by treating New York City fairly compared to other towns and cities, and compared to State government itself.

Thats what were expecting you to do now. So lets work together to pass a budget thats fair to our city. Now Ill be glad to take your questions.

By on January 25, 2010, 11:44 am
In category: Albany,City Hall,Community Development,Economy,Education,Electoral Politics,Gotham City,nextNY,Public Finance,Work and Labor | 11 Comments »

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11 Responses to “Bloomberg Testifies on State Budget”

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