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Democratic Mayoral Candidates Offer Ideas for Solving City's Budget Crisis

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Mayor de Blasio at a budget presentation (photo: Benjamin Kanter/Mayor's Office)

New York City is facing its worst fiscal crisis in decades, brought on by the coronavirus pandemic, with billions in lost tax revenue and large projected budget gaps in the years ahead. It’s a crisis that the next mayor, likely the winner of the Democratic primary this June, will inherit. At a mayoral forum on Wednesday, eight of the top contenders vying for the Democratic nomination offered their solutions to the city’s budget woes, pitching ideas to fix city government’s bottom line and also ensure a robust recovery from the pandemic.

Mayor Bill de Blasio’s $92.3 billion preliminary budget for the 2022 fiscal year, which begins July 1, is expected to close a $5.5 billion budget gap through various measures including $1 billion in unspecified labor savings and about $1.15 billion drawn from the city’s reserves. That outline -- which is the subject of negotiations with the City Council before a budget deal must be reached -- leaves little for the following fiscal years when budget gaps are expected to remain high: $4.3 billion in fiscal year 2023, nearly $4.2 billion in fiscal year 2024, and almost $4.3 billion in fiscal year 2025. Those gaps largely reflect tax receipts that are expected to continue to be deflated from pre-pandemic levels and the city’s increasing costs related to services and personnel, though there are a number of tools at the city’s disposal to close those projected deficits.

There is also the unknown of federal stimulus aid that the city is counting on, which is expected to arrive in the coming months and be significant, but could be lower than expected and there is always a risk that the state, with its own fiscal problems, shift hundreds of millions of dollars in costs to the city.

The next mayor will take office in January, halfway through the fiscal year and will quickly have to provide a plan to fill those gaps. At Wednesday’s forum, hosted by Citizens Budget Commission, a nonprofit fiscal watchdog group, and moderated by CBC President Andrew Rein, the candidates showed key differences in their approaches to the problem and visions for the city’s recovery.

Though they generally seemed to agree on some matters, such as limiting the size of the municipal workforce (which has grown significantly under Mayor de Blasio but recently reduced through attrition) and avoiding mass layoffs, their positions varied on raising revenue and cutting spending. Some offered specific proposals with price tags while others floated broad ideas with few concrete details or avoided the specific questions asked by Rein.

The candidates who appeared at the forum were former counsel to the mayor Maya Wiley, former city sanitation commissioner Kathryn Garcia, entrepreneur Andrew Yang, former nonprofit executive Dianne Morales, Brooklyn Borough President Eric Adams, former Citigroup executive Ray Mcguire, City Comptroller Scott Stringer, and former federal housing secretary Shaun Donovan.

‘Stimulate, stimulate, stimulate’
Wiley’s key proposal to get the city back on its feet is a New Deal-type plan to invest $10 billion annually, about $2 billion more than the city already does, in capital infrastructure projects to create 30,000 jobs directly and another 70,000 indirectly. Her plan would include targeted local hiring to help communities with higher unemployment rates and would earmark $2 billion for the New York City Housing Authority (NYCHA).

“[W]e have to find a way to invest in our people, put dollars in our pockets and make sure that we are stimulating the economy,” she said, insisting that her plan has been “stress tested” by experts and economists. “The first is stimulate, stimulate, stimulate. This is what we learned in the Obama administration after the Great Recession as well,” she said.

Wiley has also advanced a plan to invest in the “care economy,” which includes building Community Care Centers across the city and providing $5,000 grants to informal caregivers from 100,000 low-income families. She would pay for the plan through multiple strategies including by cutting headcount at the NYPD, she has said.

To cover the city’s budget gap, Wiley said she would institute a Program to Eliminate the Gap (PEG) mandating targeted cuts at city agencies. She floated a 3% cut, though she said it was a “moving target” that could change. For PEGs, mayors will often set a percentage target for agencies to offer possible cuts that the mayor and his team then evaluate as part of the budget process.

“We have to be more efficient, more effective, and also cut some costs in government,” Wiley said, citing as an example the $500 million-$1 billion lost in Medicaid reimbursements that she said the city should be receiving. “It's also the way I'm going to look at how we're making sure that when we are doing budget cuts, we're cutting fat and not bone,” she said. She said she would work with labor unions to find more savings, particularly in health care costs.

Wiley is among the candidates who have said they support the Invest in Our New York package of legislation, proposed by state lawmakers and backed by a slew of progressive advocacy groups, which would increase taxes on the ultrawealthy, corporations, inheritances and Wall Street, among other revenue raisers. When Rein pressed her on the percentage of tax increase she would like to see, Wiley said it would adjust based on federal aid and the state budget.

She insisted that wealthy New Yorkers who have spoken with her say they are “willing to pay more, but [they] want to see managerial leadership. [They] want to see partnership, and I think that's fair. I think that's a reasonable request, and I will do it.”

Wiley also said she would support a legal requirement that the city put away money in a rainy day fund when the economy is growing, a proposal that was gaining steam before the pandemic hit and put the city’s several billions of dollars in reserves at risk.

When asked, Wiley did not say whether she wants to see the municipal workforce increase or decrease, other than her proposed cuts to NYPD headcount, and would not commit to future pay raises for city workers, which are currently not included in the city budget but will have to be negotiated with unions.

‘There are certain agencies that could get much thinner’
Garcia’s plan for stabilizing the city’s finances includes refinancing debt, negotiating labor savings and reducing redundancies and inefficiencies in city government. She cited her own experience of having cut operating expenses by 10% at the city’s Department of Environmental Protection without making any layoffs. “I do believe that there are certain agencies that could get much thinner,” said Garcia, who was among the top DEP officials under Mayor Bloomberg before becoming the sanitation commissioner under de Blasio. Garcia went on to hold several other emergency roles while remaining head of Sanitation until she departed last year to run for mayor.

As Rein pointed out, Garcia has proposed several plans that would add to the city budget including a free childcare plan for families making less than $70,000 a year, mandatory organics pickup, and investments in affordable and supportive housing.

“We know that we have to do the thing we didn't do in the ‘70s, which is keep the city safe and clean,” she said in response, stressing that she would restore $100 million to the Sanitation budget and $84 million to the Parks budget that were cut during the height of the pandemic. “We can continue to reduce spending in other areas to ensure that we meet that,” she said.

Garcia was optimistic that the city’s fiscal picture will not be as bad as currently expected, particularly because of federal aid, which could be as much as $5 billion directly for city government, plus billions more in aid to New Yorkers. But she stressed the need to spend that money wisely. “I assume you as well as I will be pressuring this administration to make sure that they don't sort of light the cash on fire,” Garcia told Rein.

She said she would use the funds strategically to spur growth through, for instance, low-interest loans to restaurants and small businesses and new infrastructure. “We should be building things during this time because it will be cheaper,” she said.

Garcia also supports a PEG of between 3-5% and rainy day fund deposits.

On municipal headcount, Garcia said, “There are places where I think we need to actually grow the headcount. I think it'd be cheaper. But there are also places where I know there are...redundancies that we could reduce.” She said she would be open to providing city workers with raises if labor unions can find productivity savings to pay for them.

‘Invest smart while cutting costs’
“The challenge is to try and get our recovery going faster, invest smart, while cutting costs simultaneously,” said Yang, who offered a series of ideas including new revenue raising measures. He said he would push property-tax exempt institutions like Madison Square Garden and Columbia University to pay a certain share for city services, potentially raising hundreds of millions – he said he would not get rid of the exemption entirely. Insisting that layoffs are “destructive,” he said he would rely on attrition to reduce bloat in the city workforce. He backed a pied-a-terre tax on vacant properties. And he pushed for “benefit rationalization” to reduce city expenses. “I think that in this day and age, people receiving health care benefits with no employee pay-in is just not excellent policy,” he said, referring to the fac that municipal employees do not pay into their health care premiums.

As Rein noted, the math on Yang’s ideas doesn’t add up to the full budget gap that the city will face. Yang, however, said the city could raise “tens of billions of dollars” by pursuing property tax reform, though that estimate seems far-fetched. “If you have intelligent reform, I believe we will actually make our economy much more dynamic,” he said, though he did concede that the revenue wouldn’t come in possibly until the end of the next mayor’s first term. He did say he was more optimistic about federal aid to help the city fill gaps.

Yang’s platform also includes proposals with significant costs including a $1 billion cash relief program for low-income New Yorkers, a version of a Green New Deal for NYCHA, expansion of Fair Fares discounted MetroCards, and municipal control of mass transit, which would need to be won from Albany.

He said he would fund the cash relief program, which would be in the form of a localized currency called “borough bucks,” with help from philanthropists. The city would pay for half of it, he said. “I think there'll be an appetite to help augment the resources we're giving in cash relief,” he said. But he also insisted that New Yorkers would receive “borough bucks” to spend at small businesses, which would in turn stimulate the economy.

Yang said he would also institute a PEG, though he said he would vary it across departments. “It would depend upon the agency for sure but you'd want it to be significant,” he said, “because you need managers to identify the fat, and then even start identifying which piece of flesh they can do without if it comes to that.”

He backed rainy day fund deposits if the economy returns to pre-covid levels and expressed certainty that the municipal headcount would decrease through attrition.

‘We need to reorient our priorities’
Morales has offered bold ideas for city spending but has provided few details about how she would achieve them. She has said her campaign is developing more detailed plans to outline the transformation she is envisioning.

Morales said the city’s focus should be on moving away from a “carceral economy” that hurts Black and brown New Yorkers towards a “care economy” that prioritizes human services and those who work in child care, elder care, long-term care, disability, and homecare. When “we talk about an austerity economy or when we start talking about issues with a budget, it's very often been just a signal to the poor that they need to prepare to shoulder even more of the burden than they have already disproportionately born,” she said.

She said she would invest in public infrastructure and public banking, among other things. “I think we need to reorient our priorities and really recognize that this is a moment for us to invest and grow,” she said.

She said one of her main proposals for filling the city’s budget gap is to cut $3 billion from the nearly $6 billion NYPD operating budget, though she has yet to explain how she would do that and she indicated that at least a significant portion of that money would be reinvested elsewhere in city government. Morales did not say how many NYPD personnel would have to be laid off in such a scenario, but said the city would see a net gain in jobs. “We're not talking about losing jobs. We're talking about creating different jobs,” she said, adding that investments in housing and mental health services from those funds would create new employment and boost the economy.

She also said she would look closer at the corrections budget, Administration for Children’s Services and District Attorney funding. “I would want a very deep audit of our city budget including all existing external consulting contracts,” she said.

Morales too has a guaranteed cash relief proposal, along with other ideas such as free buses and canceling rent that would increase the city budget. But she did not address their price tag. Rather, she criticized the city’s failure to do enough when the pandemic started, saying spending would have been much lower. “An ounce of prevention is worth a pound of cure. I'm a believer in that,” she said.

Morales also supports the Invest in Our New York Act and refuted the argument that it would drive wealthy residents out of state. “People want to be in New York and I just think that's a fear-mongering tactic that has served those folks too well for too long,” she said.

Morales also supported using a PEG, rainy day fund deposits, and decreasing the city workforce. On pay raises for city employees, she said, “I would work with labor in order to come to a conclusion or come to an agreement that was mutually agreeable.”

‘Just pouring money into our city is not going to solve the problem’
Adams’ mayoral pitch centers on the argument that city government is inefficient and creates structural inequalities that are at the root of most problems. “We continue to be dysfunctional in every other agency, we operate our city in silos, and due to that, we are inefficient...Just pouring money into our city is not going to solve the problem,” he said.

Adams offered a more detailed fiscal plan than other candidates. He would reduce labor costs by $1.5 billion through attrition of nonessential city workers, cut agency spending by 3-5% to save between $2-3 billion, push for a modest tax increase for about three years on New Yorkers making $5 million or more annually, and save about $500,000 in overtime costs by running the NYPD more efficiently.

He has also proposed an “efficiency czar” to examine city contracts and cut waste, and would redirect more city procurement to within the city.

Adams also does not believe wealthy New Yorkers will flee the city if their taxes increase. “I find our high income earners don't mind paying the taxes if they see the services, and we're not showing them that now.” he said. “And I'm going to show them how we can run the city. That they're not wasting their tax dollars.” (He has not supported the Invest in Our New York Act.)

Among his big spending items are a full-year school year, year-round youth employment programming, incentives for life sciences, an expansion of the Earned Income Tax Credit and Tax Free Tuesdays when sales tax is waived. But he did not attach costs to them, when asked.

He said his full-year school year could work with remote learning. “You could have one great teacher that's in one of our specialized high schools to teach three to four hundred students who are struggling in math with the skillful way that they're able to teach,” he said.

He also touted his push for a data tax on social media and streaming services to raise between $50-100 million, which must be approved by the state Legislature, where he’s working on it with State Senator Andrew Gounardes of Brooklyn, who has endorsed Adams’ campaign.

Adams said he would support rainy day fund deposits and would find ways to “right size” the municipal workforce.

‘We need to grow our way out of this’
On the campaign trail, McGuire has repeatedly touted his experience managing corporate budgets and billions of dollars on Wall Street. “We can neither tax nor cut our way out of the current financial situation,” he said. “We need to grow our way out of this.”

McGuire said he would create 500,000 jobs to revitalize the city’s economy. He has proposed a “comeback accelerator plan” to subsidize half of worker wages for 50,000 small businesses, at a cost of nearly $1 billion over two years. He would pay for it with existing federal and state funds for work programs and partly with federal relief funds, he said. His ideas also include allowing businesses to keep a share of sales tax for a year, waiving city license renewal fees for a year, among others. “We have to manage this as an issue for long haul rather than just respond to the immediate crisis,” he said.

He critiqued the $12 billion in increased annual city spending over the last four years, and said he would find savings through a PEG and between $1-2 billion through employee attrition. He also targeted another $100 million from ThriveNYC, the de Blasio administration’s signature mental health roadmap that spends about $250 million per year. “There are ways to go through and be more efficient, but I can't cut my way through the four plus four plus four billion dollar budget gap deficit that's been outlined,” he said, referring to the several years in a row of projectd $4 billion-plus budget gaps.

McGuire has said he would support some higher taxes on the rich but has so far been noncommittal about how much. He said high earners like himself are willing to make a tradeoff of paying high taxes, and even increased taxes during a crisis, but only as long as it is still worth living in New York City for all of the positives. “While I can go and have a conversation with the...high income and high tax payers, I gotta be really delicate about how I balance it,” he said. “So yes, we're all going to have to pay a little bit more. But I also have to make sure that the streets are safe, and that there’s quality of life.”

‘No one in this race for mayor has had to do this kind of financial work’
As comptroller, Stringer has spent seven-plus years examining the budget and recommending fiscal practices to the mayor and City Council. On Wednesday, he took some credit for the mayor balancing his latest budget, which is required by state law. “The reason we have a balanced budget is because the mayor listened to a lot of the recommendations from the comptroller's office,” he said.

Stringer said he would have a plan already in place for the budget when he takes office and would find efficiencies at city agencies the same way he cut 5% of spending in the comptroller’s office. “I didn't have to lay off one person, I wouldn't do that. And I didn't reduce the work of the comptroller's office,” he said. But he spent more time discussing the city’s troubled economy and provided vague explanations for how he would achieve budget savings as mayor. He is a supporter of the Invest in Our New York package, but declined to say how much new tax revenue he thinks the city should seek from tax changes in Albany. “It really remains to be seen,” he said, while giving fairly muted support for the package.

“No one in this race for mayor has had to do this kind of financial work with [the city Office of Management and Budget] to get us to a balanced budget in the midst of a pandemic,” he said of his experience.

He also did not say how much some of his campaign promises would cost, such as a Green New Deal for NYCHA and free tuition at CUNY community colleges.

Stringer has for years been in support of finding more savings in the budget, though he did not say if he supports a PEG, but said “we should continue to have recurring savings.” He did say he would back rainy day fund deposits.

He also said the size of the municipal workforce seems appropriate where it currently stands. “I think we're at a good place where it is now,” he said, noting that it has come down about 10,000 employees recently as the city has sought to control costs amid the covid fiscal crisis. “I don't think the issue is trying to put more people on the unemployment line. I think we can find those consulting contracts and the egregious waste of spending in places like [Department of Education] administration and the like.”

‘We also need a longer-term strategy that reimagines and reinvents how city government functions’
Part of Donovan’s argument for mayor is that he has built the types of relationships in Washington that would be extremely beneficial to the city. He again touted those connections on Wednesday as he insisted that he could work with the Biden administration to secure federal aid for the city in several forms, not just through the stimulus package. “There is nobody better positioned to do that,” he said.

Donovan said federal funding would likely help fill most of the city’s budget gap and could be used over multiple years. The more “immediate steps” that he promised though included a hiring freeze, savings through attrition of nonessential workers, and new revenue sources such as value capture funds created by infrastructure investments. He also said he would be open to supporting a temporary surcharge on the richest New Yorkers. “But we also need a longer-term strategy that reimagines and reinvents how city government functions but also really gets to the fundamental inequities in our income and property tax systems, but also in our city more broadly,” he said.

Donovan made a point to criticize de Blasio for presenting a “false choice” between borrowing funds for the city’s operating budget or needing to implement mass layoffs. Indeed, neight has happened despite the mayor’s dire warnings months ago, and both are expected to be avoided given the likely infusion of billions more in federal aid.

Instead of tax increases, which he said would be a mistake, Donovan said he wants to reform the property tax system. And he insisted that the city needs to invest in quality of life. “We need to be looking for real savings in things like homelessness and criminal justice that could actually not just save money but also ensure the systems achieve greater equity in the long run,” he added.

Donovan’s campaign platform includes an “equity bonds” proposal to provide $1,000 and up to $2,000 annually to every child born in poverty, to help them eventually afford college. He estimates it would cost $3.2 billion in the first year and about $1.9 billion in the second.

Donovan said he would work with Congress to fund part of it, while the city would fund it for existing students who would account for a third of the amount. He said he would raise those funds through a 50-50 split between city funding and philanthropy.

He said he would institute a PEG between “between 3% and 10% and to have multiple tiers of them so that we have break-glass scenarios if we need them for agencies.” He also supported rainy day fund deposits and reducing the size of the workforce.

He said he would give raises to city workers if he could find other savings in contracts through “consolidation of benefit funds, reduced prescription drug costs,” among other ways.

by Samar Khurshid, senior reporter, Gotham Gazette

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