Last month, Mayor Michael Bloomberg fueled what Paul Krugman has described as "a recurrent fantasy about a Bloomberg third-party candidacy that will save America" when he presided over the convention of new political group dubbed No Labels.
"No Labels," of course, implies a nonpartisan, non-ideological effort, but, whatever progressive positions Bloomberg holds to on social issues, the mayor's fiscal strategy over the last three years has come from a standard conservative political playbook: reduced services -- especially in education and human services -- criticisms of city unions, expanded privatization and regressive tax policy. In his State of the City speech on Jan. 19, Bloomberg reiterated these positions. He called for smaller government. He took aim at public employee unions, pledged to chip away at seniority privileges and scale back pensions. And he vowed not to raise taxes.
The speech came only days after the City Council, having gotten some items restored, signed off on Bloomberg's latest budget-cutting modification, his ninth in the past three years. A substantial 10th slice is likely with the release next month of the preliminary budget for fiscal year 2012. What these serial budget cuts make clear is that New York, once a laboratory for national liberal policies, is conducting an experiment in urban conservative policy.
The current strategy is very much at odds with that of the first-term Bloomberg administration. The mayor's response in November 2002 to the fiscal crisis following 9/11 and the accompanying recession did resemble a" No Labels" strategy. For instance, its emergency $6 billion budget-cutting plan was split equally between much higher taxes and service reductions. It was nonpartisan and apolitical, based on shared sacrifices from all New Yorkers.
The focus on cuts in education and human services next year looks premature in terms of the city's actual fiscal condition. According to the Independent Budget Office's December Fiscal Outlook, New York City is in surprisingly good shape. It has lost fewer jobs than projected, and increased city revenues, not acknowledged in the city's November plan, will add $525 million to the current fiscal year budget, $790 million in fiscal 2012, and an average of $2 billion in each of the following two years.
That helps create a $1.7 billion surplus this fiscal year and shrinks the city's projected budget deficit for 2012 to $1.1 billion -- a nominal figure at this date in a projected $67.5 billion budget. It also reduces the city's projected deficits for 2013 and 2014.
The Independent Budget Office's forecasts are a reminder that the city, in spite of billions of dollars in budget reductions, is reducing the pace of growth of spending, not actual spending. From 2011 to 2014, city spending (including state and federal funding) will grow from $65.1 billion to $74.6 billion. Admittedly the city still does not know m=how much the state will reduce its funding for schools and general aid. That, the Independent Budget Office, concedes, is a wild card in its predictions.
The IBO projections, indeed, are more optimistic than those of state and city fiscal monitors. The State Financial Control Board December staff report on the November modification makes the bleakest, worst-case projection. It finds the fiscal 2012 deficit could reach $3.9 billion, with markedly higher amounts in later years.
In his latest effort to reduce the deficit -- whatever its size -- Bloomberg has increasingly underscored another conservative strategy -- privatization. The new deputy mayor for operations, Stephen Goldsmith, the former mayor of Indianapolis, is famous for privatizing city public services. His first public action, a published review of several city agency programs offered a rather blunt critique of current Bloomberg administration practices, but promised a $500 million savings with better management over the next four years.
Since then, the management news has not been so good, and Goldsmith has much to attend to beyond his role in the snow snafu in December.
One goal of privatization is saving money. In some cases -- most notably the CityTime payroll management project, which is more than 10 times over budget -- this goal clearly has not been met.
Yet concerns about contracting practices are nothing new. City Limits magazine, for instance, recently noted that it identified problems with the CityTime contract more than two years ago. It also quoted Lillian Roberts, executive director of the city's largest public employee union, DC37, as saying that the federal indictments in that case are "merely the tip of the iceberg and an outrageous example of the greed and corruption that are the result of an unregulated procurement process."
The city's efforts to upgrade and modernize its 911 emergency response system have been plagued by cost overruns and missed deadlines, with the city removing one contractor and in the midst of trying to get its money back from another. Last month City Comptroller John Liu rejected a $286 million contract for another 911 project.
The Daily News has been investigating the Department of Education's use of consultants and reported in January that, between 2008 and 2010, the department spent some $200 million on consultants. In 2010, more than 100 consultants got over $100,000 each, and close to two dozen received over $200,000.
The Independent Budget Office, which is doing a series of studies of the department, reported in a December blog, "What is Yellow and Rises at the Same Time it Falls," that school transportation contracting costs will exceed $1 billion this school year. In the last five years, it found, costs have risen by $115 million while ridership has fallen. Some reasons for the increase are unclear although non-competitive contracts and fewer contractors may be factors, along with higher gas prices.
City Comptroller John Liu added to the questions surrounding contracting with an announcement in November, entitled, "Trim Fat Around City Contracts Before Resorting to Layoffs and Service Cuts" that cites "$157.4 million in potential savings through audits of city agencies."
While private companies and organizations still get city contracts, some groups are being asked to bear the brunt of the city's budget problems. Over the past eight years, the administration's concept of sacrifice has narrowed considerably. The city comptroller's December report on the city's economy and finances, for instance, notes that the city’s budget cutting -- almost $600 million this year and over $1 billion in 2012 -- is nearly 90 percent service cuts and 10 percent new revenues.
According to the state comptroller's review of the November budget plan recently approved with some modification by the City Council, those cuts "would fall hardest on the city's schools and the neediest citizens." The city comptroller points out that cuts in education total $670 million over the 2011 and 2012 fiscal years and that the number of teachers is scheduled to be reduced by 5,398 in 2012, nearly 4,000 by layoffs and the balance by attrition. Teachers would represent 70 percent of all headcount reductions in city departments in 2012. (In contrast, there will be no reduction in uniformed police officers.)
The Mayor's Management Report gives little information about the impact of nine rounds of cuts on human services. But the four-year plan of the November modification is pretty clear about Bloomberg administration priorities: Over the next four years, children's services would be cut by nearly 6 percent, homeless services by 6.6 percent, and health and mental hygiene by over 7 percent. During this time, housing and libraries would lose 23 percent, cultural affairs 29 percent, and youth and community development 33 percent.
More than anything, else, though, the mayor plans to rely on pension reductions and labor concessions to rein spending. In his State of the City speech last week, he laid out a number of proposals for accomplishing this, including raising the retirement age for future non-uniformed city workers to 65, getting rid of a bonus for uniformed workers and allowing the city to negotiate pensions with the unions, something currently barred by state law. Bloomberg pledged not to approve any salary increases for city workers "unless they are accompanied by reforms in benefit packages that produce the savings we need to continue making investments in our future and protecting vital services."
That reflects what already was in his November plan. After several years of annual 4 percent increases, the mayor drew a line in the sand and said the unions will self-fund any raises, through productivity savings and/or benefit concessions.
Much of the uncertainty about future budget deficits comes from the unresolved negotiations with the city's unions. Contracts for a number of unions -- DC37, the police and firefighter unions, and the Communications Workers of America, which together represent nearly 50 percent of the workforce -- have already expired. According to the state comptroller, raises at the projected inflation rate would cost over $1 billion a year.
Further, the mayor has long delayed any settlement with the teachers and supervisors unions, who have been working without a contract. At stake in any final deal is, according to the city comptroller, nearly $900 million in this fiscal year and $800 million to $900 million in each of the following three years -- none of which is included in the November modification.
The new pressure on city labor echoes a national argument by many governors, including New York's Andrew Cuomo, that public-sector workers are over-compensated, and that taxpayers can no longer afford early retirement ages, rising pension costs and health plans that strike many who work in the private sector as generous. But Michael Powell in a recent New York Times article wrote, "A raft of recent studies found that public salaries, even with benefits included, are equivalent to or lag slightly behind those of private sector workers." (He did not offer figures for New York City alone.)
Perhaps the most significant indication of the mayor's recent shift to conservative political strategies is his rejection of income tax hikes. During the 2002 fiscal crisis, the mayor raised average property tax rates by 17.5 percent and temporarily increased personal tax rates for higher income people for three years, much as Mayors David Dinkins and Rudolph Giuliani did in the 1990s. Bloomberg also instituted a three-year, temporary sales tax increase.
The average property tax remains the same in 2011 (market valuation increases, however, have raised assessments, thus raising actual tax bills). The regressive city sales tax, recently raised to 4.5 percent, is at a historic high. The higher personal income tax rates on wealthier New Yorkers, however, reverted to lower rates in 2006, although the Independent Budget Office found no evidence that anyone left the city because of the tax increase -- one argument used by the mayor to explain his refusal to re-introduce higher rates.
The mayor has vowed to continue his no tax increase policy. "Let me be clear," he said in his State of the City speech, "we will not raise taxes to balance the budget." Increasing taxes, he said, "would undermine our recovery by driving people and businesses to lower-tax cities and states and deterring investment from overseas."
This decision not to raise taxes on the most affluent New Yorkers takes hundreds of millions of dollars off the budget table. The Independent Budget Office's Budget Options report last February noted that a modest tax rise -- still lower than the 2003-2005 rates -- on high-income New Yorkers would raise almost $500 million in 2011 and $678 million in 2013, approximating the education department cuts in 2011 and 2012. The rates would affect only the 8.4 percent of taxpayers with adjusted gross income over $125,000, who would pay an average of $9,500 more than they currently pay.
But the appeal of tax cuts for high-income taxpayers, as seen in the two-year extension of the Bush federal tax cuts for the nation's wealthiest, seems to outweigh any argument for shared sacrifice. This persists in spite of the fact that that, according to Citizens for Tax Justice, "the combined taxes levied by federal, state, and local governments in the United States are among the lowest in the developed world."
Incidentally, Citizens for Tax Justice reports that the extended personal income and new estate tax cuts in the December compromise will mean an average tax break of $120,726 for the top 1 percent of New York State taxpayers, those with an average income of $2.3 million. They will receive 43 percent of the total tax cut in New York State, while the average benefit for the 20 percent of New Yorkers with the lowest incomes, averaging $11,975 a year, will be $182.
Across the country and in New York City, these actions -- fewer human services, attacks on labor, lower taxes, privatization, growing inequality, less shared sacrifice – are the ingredients on a familiar political label: conservatism. Perhaps we should address -- rather than deny -- political labels, so that we can better understand what is happening.
Glenn Pasanen, who teaches political science at Lehman College, has been in charge of Gotham Gazette's finance topic page since 2001.
More city budget cuts are up for discussion, but the end of the chopping block is far from near.
In an attempt to close a projected $2 billion budget gap, Mayor Michael Bloomberg proposed another round of cuts last month, cutting hundreds of jobs by attrition and lay-offs. Among the hardest hit will be the Departments of Sanitation, Cultural Affairs and Health and Mental Hygiene.
These sorts of cuts are the "new norm" for the city budget, Citizens Budget Commission’s Senior Research Associate, Maria Doulis explained. “Things are looking really grim for the next year or year and a half.”
Layoffs, Doulis said, have been "a last resort" over the years, particularly in departments that provide core services, but the city has exhausted typical saving strategies like renegotiating contracts, "so now we're going towards real service cuts," she said.
And what’s more, Doulis predicts that before a 2013 budget is adopted this summer, the Mayor will announce another round of budget cuts.
Last year’s midyear budget cuts focused on cutting capital spending, with Mayor Bloomberg asking for a 20 percent cut in spending for construction and maintenance of city-owned buildings and infrastructure, but now, Doulis says the city is running out of ways to find savings and income.
The city had hoped to find $1 billion in revenue from the Mayor’s taxi medallion plan that would allow livery cabs to legally pick up street hails in the underserved outer boroughs and northern Manhattan. The Governor, who has expressed concerns about the bill from the start, has said he won’t sign the bill with its current compromising amendments. As of yet, he hasn’t outlined the changes he wants made to the bill. A statement from the Governor’s office on Tuesday said that “outstanding issues are handicap accessibility of livery cabs, the transferability of and market for livery permits, livery and yellow cab pickups at airports, lack of financial incentives to purchase handicap accessible licenses, and concerns regarding the effectiveness of Taxi and Limousine Commission enforcement.”
The statement also announced a Wednesday summit aims to finalize some sort of deal, but no solution has been announced as of press time.
If the bill isn’t resolved in Albany, the city’s expected deficit would increase by a third — bringing it up to $3 billion dollars.
The Governor’s announcement of the planned summit indicated that the unresolved issue was less about the city and the governor’s office, and more about the yellow-taxi industry’s worries that giving livery cabs medallions, which have been picking up street hails illegally for years, would devalue their pricey medallions.
“The issues are not primarily governmental ones among the Governor, the state legislature and the City. There are, however, remaining issues among the various stakeholders, business and advocacy groups whose interests must be reconciled," yesterday’s statement read.
As reported by Capital New York, the Bloomberg administration was not invited to the summit until well after its announcement.
City Council Financial Committee Chair Domenic Recchia said this hitch in the Mayor’s plan puts “some big holes in our whole outlook — we’re one billion dollars short.” Reached the night Cuomo refused to sign the taxi medallion bill, Recchia said he was bringing the budget home to search for more sources of income. “I don’t know where we’re going to find this.”
Recchia said that the Council would negotiate with the Mayor and some version of the proposed cuts would be approved by the City Council, though it is unclear whether or not the Council would have a hearing on the matter, which Councilwoman Letitia James has called for repeatedly.
James told Gotham Gazette that she particularly found fault in the cuts to an after-school program that serves children in low-income communities and to the department of Health and Mental Hygiene, calling both cuts “disturbing.”
“The best way to disclose all of these cuts and more is for the Council to hold an oversight hearing,” she said.
In a discussion on a Council bill that would add more oversight on the city’s contract spending during last week’s stated meeting, Councilman Charles Barron criticized the city’s contract spending and his colleagues for not addressing the issue during budget discussions.
"We should not sign off on a budget that has the kind of contracts you’re speaking so eloquently against today," he said, as his colleagues criticized high-prices for outside contractors doing work that critics say city employees could do. Since the Mayor took office, the city contract budget has grown by 70 percent.
Despite the huge gaps, Recchia added that “we have to stop nickel and diming the people of New York City,” referring to the fine and permit hikes the city has begun using to try and draw in revenue. The city also found income sources by raising restaurant fine enforcement, fingerprinting fees, and refinancing some debt.
But those fine hikes and other small changes represent a small portion of the city’s cost cutting measures, Doulis said.
“What they really did to generate savings in 2013 is that they refinanced some debt. That was one of the biggest sources of savings,” she said. “They've been trying to do that and shield the agencies from cuts, but it’s hard to see closing this budget without more cuts in addition to these.”
The refinanced debt will save the city $229 million in the coming year. Future cuts, Doulis said, will likely start eliminating core services more than ever before.
The Mayor’s cuts to the Sanitation Department have come under criticism, particularly in light of last year’s snow-removal disaster, but the Independent Budget Office’s Doug Turketsky notes that the majority of these cuts are cuts of attrition, as the Marine Transfer Stations the department would have staffed won’t be completed by 2013. He also added that there is a significant snow budget that covers winter weather costs.
The City Council voted unanimously yesterday to override a mayoral veto of the Outsourcing Accountability Act today — taking a stand against outsourcing and the mayor, too.
The bill, dubbed a “no-brainer” by Councilmembers, aims to save the city money and keep contracts with city workers. It was passed unanimously in October by the Council , but the Mayor vetoed it last month saying that it keeps the city from getting the best deal for their money.
“The bill asks, â€can the service be provided more cheaply by city workers?’” Council Speaker Christine Quinn said during the stated meeting. “If the answer is yes, why would we possibly contract it out?”
The bill 624-A will require the City to perform cost benefit analyses for some outsourcing contracts, give public notice of planned service contracts to allow for more competition and bidding, and if possible at a cheaper rate, award the contracts to city employees.
The vote continues the Council’s departure from their ordinarily cooperative relationship with the Mayor, which was kicked off last week when Quinn announced that the Council would sue the Bloomberg administration over a policy requiring people to prove their homeless status before receiving shelter.
Quinn, who is leading this move, is a likely mayoral candidate in the upcoming election; Bloomberg has seen as approval ratings slip as his third term drags to a close.
The city has come under fire this fall for a lack of oversight in city contracts, leading to fraud and hiked prices. The Department of Education was overcharged by at least 6.5 million by an outside firm, the city’s special commissioner of investigation recently found. And who can forget the notorious CityTime, a payroll system which was supposed to prevent fraud, but ended up costing the city $760 million dollars and leading to a federal criminal investigation?
The Bloomberg administration has argued that private contractors can deliver services more cheaply than city workers, though Quinn is quick to note that the bill increases oversight, it doesn’t stop the city from hiring private companies if indeed the service comes cheaper.
When he vetoed the bill, Bloomberg said that adding such an oversight process creates inefficiency and red tape. “My administration has sought to work with the Council to strike the proper balance between accountability and efficiency in the City’s procurement process,” the Mayor wrote in a statement. “Unfortunately, this bill goes further than past efforts and crosses from the questionable to the clearly unwise and impermissible.”
Bloomberg has also questioned such a bill’s constitutionality, which may bring the whole matter to court, though a mayoral spokesman wouldn’t comment on that yesterday.
The vote was among the first legislation passed in the recently renovated Council Chamber, which has been upgraded and preserved as part of a larger $119 million dollar City Hall renovation.
“The roofs are no longer falling in,” Council Speaker Christine Quinn said with a laugh inside the Council Committee chamber, where she recalled plaster had fallen from the ceiling during Committee meetings earlier this spring.
The Council used a temporary gathering space in the Emigrant Savings Bank Building for the past five months.
The Council Chamber itself, amongst other upgrades, has refinished and polished wood paneling and new curtains (which lack the binder clips Quinn said had held them before — “Nothing says dignified government like a binder clip,” she said with a laugh.) The building is also being brought up to code, extending an elevator to the third floor to make it handicap accessible, and installing a sprinkler system. It is the first significant construction of City Hall in more than a half-century; renovations are expected to be complete by 2012, in time for the building’s 200th anniversary.
“Speaking of Green…” Quinn quipped, referring to the new green paint in Council offices below the Chamber, the city will be getting â€greener’ thanks to several pieces of legislation passed in today’s stated meeting — notably, the Council approved the first Energy Neutral school. The school, which will be built on Staten Island in the Rossville/Woodrow section, will have 444 seats and will open in 2015.
Three other code additions will also keep the city from polluting its water, land, and air: the first prohibits water used to rinse concrete off equipment at construction sights from being disposed in the sewer system; the second will increase the use of recycled asphalt, and the third requires additional filters in heating and air conditioning systems in new buildings.