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Council Passes Budget, Taking a Bow for Saving Teachers, Fire Companies


new york city budget
Photo by courtesy of the Office of Mayor Michael Bloomberg
City Council Speaker Christine Quinn and Mayor Michael Bloomberg announced Friday night that they had reached a deal on the 2012 budget. The council approved that deal yesterday

As expected, the New York City Council yesterday passed a $66 billion spending plan for fiscal year 2012 that includes no teacher layoffs, keeps all fire companies open and does not raise taxes.

The council did not take its action until shortly after noon Wednesday -- some 16 hours later than originally planned. The vote, though, had essentially been a foregone conclusion since Council Speaker Christine Quinn and Mayor Michael Bloomberg announced an agreement Friday night -- almost exactly at the same time the State Senate passed same sex marriage -- that averted the laying off of 4,100 teachers and the closing of 20 fire companies, all of which Bloomberg had called for in his executive budget.

Council member after council member came to microphone to hail the deal and praise those who had helped craft it -- most notably Christine Quinn. Quinn, a likely 2013 mayoral candidate who gained stature during the budget negotiations, clearly enjoyed the praise.

This is, Quinn said, "not a perfect budget. It would be impossible to have a perfect budget when the city and our tax revenues are still feeling the effects of the recession."

In particular Quinn, Finance Committee chair Domenic Recchia and others applauded the council for reversing what they saw as some of the worst parts of Mayor Michael Bloomberg's executive budget. "There were so many bad things that were averted in this budget," Quinn said, crediting Recchia for much of that. "What we did in this budget was identify areas where the pain was too deep." "When the mayor announced the layoff of 4,1000 teachers, that was devastating news," said Robert Jackson, chair of the education committee. "Considering what the [mayor's] plan was asking, we've come a long way." Yet the deal reached was not without controversy -- and, for some, pain. It will mean some service cuts and an estimated 1,000 city workers will lose their jobs.

Budget Dance Redux

To reverse some of the proposed cuts, the budget, according to the mayor's office, takes advantage of $3.6 billion in funds left over from this fiscal year and $700 million from the Retiree Health Benefit Trust.

Beyond the teachers, the deal restores all or part of a number of programs, many familiar to those who have watched the budget negotiations between the executive and legislative branches in years past.

Most prominently it keeps open the 20 fire companies the administration had sought to shut. This marked the seventh time Bloomberg tried to close fire companies -- and the sixth time he has failed to do so. (He did close six in 2003.)

Many believe the administration thinks the department is too large -- a relic of days when buildings were wood and lacked smoke detectors or sprinkler systems. That said, shutting fire companies is sure to provoke outrage from the surrounding community and form City Council -- as it did this year.

"We are not going to close fire houses in a process that is exclusively driven by the bottom line," Quinn said on the council floor yesterday. But, she added, if people want to have a discussion that is "open and transparent" about response times and changing neighborhood needs "we can have that discussion."

Although some workers at the Administration for Children's Services will lose their jobs and childcare vouchers will see cuts, the budget restores almost $47 million to the agency, including 4,942 childcare vouchers, six childcare centers and 105 child protective workers.

Senior services, which did not fair as badly as many other social services in the mayor's budget, got back about $30 million of what was cut. This includes $3 million for case management, $1 million for meals on wheels, $800,000 for elder abuse programs and $14 million for senior centers and meals.

As usual, cultural organizations and libraries also recouped some of their cuts, with $61 million put back into the budget for the city's four library systems. The council will keep all city pools open -- reversing the planned closure of four -- and adds in $891,000 so people can swim for the full summer season.

"We did all this," Recchia said, "without raising taxes, without going further into our trust fund and most of all we didn't kick the can down the road."

The Pain Remains

Although the budget actually will be larger than the current year's -- $66 billion from last year's $63.1 billion -- it still features a number of cuts. In education, for example, the city will not replace 2,600 teachers who it expects will voluntarily leave the school system this summer, almost certainly class size to increase. While the administration has always dismissed the importance of class size, many advocates and teachers groups maintain that smaller class sizes boost learning, particularly for very young and low-income students.

Schools Chancellor Dennis Walcott has warned schools to expect an average budget reduction of about 2.4 percent -- exact amounts will vary from school to school. In addition to lost teaching positions, this could mean elimination of afterschool programs, tutoring help and parent coordinators in some buildings. Also apparently eliminated: a program to help teacher's buy supplies.

The budget involves some 1,000 layoffs, largely of members of DC 37, the city's largest municipal employee union. In a statement, union president Lillian Roberts assailed the cuts, saying that were it not for "billions .. squandered on 'scandal- ridden' private contracts and [Bloomberg's] failure to collect millions in taxes and fees" the firings and the accompanying service cuts -- would be unnecessary.

In casting the one dissenting vote, Councilmember Charles Barron assailed the budget for laying off as many as 1,200 city workers and for cutting aid to student at the City University.

Explaining his yes vote, Jumaane Williams said he believed the council budget "is better than what we had," but, he continued, "I don’t think it's a celebratory budget." Williams also expressed concern about the cuts in scholarship money.

Some 13 people protesting the cuts were arrested Thursday night when they tried to enter the council's office at 250 Broadway. And during yesterday's vote a small group of protesters twice disrupted the meeting with chants. "No cuts, no layoffs, no compromise," they said before being ushered out.

Dee Knight of New Yorkers Against Budget Cuts said that, while his group was pleased that layoffs of teacher had been averted, the budget still cuts public sector jobs at a time when he said, the city has a $3 billion surplus. In particular, Knight objected to cuts to libraries and the City University. "It's crazy and contemptuous," Knight said.

The Revenue Side

Under law, the city budget must be balanced, a challenge given declining aid from Washington and Albany and rising expenses for pensions and debt service. Almost all the discussion on eliminating any budget gap centered on cutting services rather the increasing revenues.

The budget passed yesterday did up a handful of fees, such as the cost of a taxi inspection. All together, these fees would bring in an extra $8 million. Despite that council Republicans, along with Peter Vallone, opposed some or all of theses measures.

"I don't believe we are in a position where we should be raising fees on anyone," Councilmember Dan Halloran said

The Pork Roll

In approving the budget, the council also OK'd member items -- also known as pork or earmarks -- for 2012. Listed in a document called Schedule C, they fill amounts to 650 pages amd total about $50 million for nonprofit and community groups across the city.

Four members got $1 million or more, according to an analysis by NY1, with Finance Committee chair Domenic Recchia getting to hand out $1.6 million.

The grants include a few thousands dollars to small groups, such as the Committee to Improve Carroll Park in Brooklyn, which got $3,000 to run a concert series for children, Animal Haven, which will get $4,500 to teach kids about animal care, Little League teams and senior centers.

At the other end of the scale, the Metropolitan New York Coordinating Council on Jewish Poverty, which has close ties to Assembly Speaker Sheldon Silver, apparently topped the list of recipients with at least $1.3 million.

In second place, the Daily News reported was the Ridgewood Bushwick Senior Citizens Council with more than $600,000, even though it has been the target of criminal investigations. That -- and allegations surrounding the groups founder, Brooklyn Democratic Party leader Vito Lopez -- was not enough to stop the Brooklyn delegation and Councilmember Stephen Levin, Elizabeth Crowley, Domenic Recchia and Erik Martin-Dilan, from allocating money to the group.

On Again Off Again Layoffs

This year marks the third year in a row that Bloomberg threatened to lay off teachers, only to retreat as the time for the ax to fall neared. Last year he averted the firings by imposing a salary freeze on teachers. Throughout the budget negotiation. he and Schools Chancellor Dennis Walcott adamantly rejected alternatives to the layoffs as the United Federation of Teachers, education advocates and some City Council members insisted the cuts were unnecessary.

In the end, it seems they were correct. The budget averts any layoffs through a combination of moves, including a suspension of teacher sabbaticals in the coming year, allowing teacher with no permanent assignments (those in the so-called Absent Teacher Reserve) to serve as substitutes and cuts to non-teaching programs in the Department of Education. According to the council, in essence, one third of the costs will be borne by the teachers and two thirds by the city. During the session yesterday, a number of members, including Quinn, thanked teachers union president Michael Mulgrew for his role in preventing layoffs.

As Bloomberg called for sweeping teachers cuts this year -- at one point venturing 25 percent of the teaching force would have to be slashed -- some accused him of crying wolf in an effort to get Albany to increase its aid to the city (that didn't work) and to change the last in, first out rule governing layoffs of teaching staff (that didn’t work either).

Now that Bloomberg retreated once again, some have questioned whether he ever was serious.

"Of course, he was bluffing, but we knew that," said Clara Hemphill, director of Inside Schools, told the Wall Street Journal.

Barron said that the layoff had been a "red herring' put forth by a "bully mayor." And in a statement released after the vote, Manhattan Borough President Scott Stringer said, "Let’s be honest -- the threat to lay off teachers was a political ploy from the get-go. "

James Oddo, the leader of the Council Republicans, agreed. "There is a lot of kabuki theater that does on between the mayor and the council" on the budget," he said.When asked earlier in the week whether he had hurt his credibility, Bloomberg reportedly responded with the familiar litany of what he sees as his accomplishments. "If that isn't credibility, I don't know what I could possibly do," he said the reporters.

Bloomberg also said the continued existence of last in, first out prompted him to accept the deal.

"Because we still have LIFO the consequences of laying off there would have been devastating," he said. "It would just not have been fewer people that provide a service; it would have gotten rid of some of the best and brightest that we've been able to attract, and it would also have caused chaos because of all the bumping requirements in the UFT contract."

Wait Until Next Year

The budget leaves a number of issues unresolved. Though the exact numbers vary, current projections see the city facing a deeper budget hole for 2013 than it did this year. In his statement announcing this budget, the mayor already looked ahead to what he forecast as a shortfall of nearly $5 billion for the next fiscal year. The Independent Budget Office foresees a smaller but still considerable budget gap of about $4.1 billion.

Given that teacher layoffs and fire company closing may well be in the mayor's budget next year, along with cuts to libraries and pools, some council members have already begun to call for higher taxes. As soon as the budget passed yesterday, members of the Progressive Caucus introduced a resulting called for the council to endorse extension of the state's millionaires tax.

Gov. Andrew Cuomo and Mayor Michael Bloomberg have opposed such a move and essentially taken the topic off the table. By moving now the members hope to get it back on.

"I hope next year we can stretch these parameters ... and research revenue measures that maybe this year were too late," Williams said. "There must be something better next year."

Budget Cuts Could Strangle Sputtering Recovery


The recent spate of indicators showing weakening in the economy is a reminder of the folly of government budget austerity as the best medicine. More than anything else, the economy needs more jobs. Businesses are not creating jobs because consumer demand, which accounts for two thirds of gross domestic product, is anemic.

Without consumer spending, businesses have no need to hire more workers. Budget cutting at the state and local government levels compounds the problem. Stubbornly high unemployment, evidenced in employment figures released late last week, in New York City reflects a faltering recovery. Historically steep state budget cuts enacted this spring will push joblessness higher in the months ahead. If the City Council accepts Mayor Michael Bloomberg's proposed budget cuts and layoffs, the city's job market will see the proverbial double whammy from an already weak recovery compounded by state and city budget cuts that worsen unemployment.

Why the Recovery Isn't Taking Off

While the Great Recession technically ended in June 2009, total employment continued to decline through the end of that year. Twenty-five million Americans are unemployed, discouraged or underemployed. Long-term unemployment is at record levels making this is the longest period of 8 percent-plus unemployment since modern record-keeping began in 1948. Unemployment remains over 9 percent. There are several reasons why this recovery has been tepid at best, and far weaker than previous recoveries since the Second World War.

American households, on average, are still saddled with high debt burdens, the result of a borrowing spree during the last expansion and the housing bubble. Families borrowed heavily in part to maintain living standards since the 2004-2007 expansion, the first during which wages were stagnant and family incomes did not rise. This continued a trend that began in the early 1980s, in which most of the income generated by national economic growth has been concentrated in the hands of the wealthiest 5 percent of the population.

Unprecedented mortgage foreclosure problems and the prolonged housing slump also have contributed to the weak recovery. A rebound in housing construction and the purchase of appliances and furniture normally provides considerable fuel for a recovery; this time the wrecked housing sector is a big anvil chained to the ankles of an already sluggish rebound. The continuing difficulty small businesses face in borrowing -- largely due to weak consumer demand and the unwillingness of many banks to lend -- is a third major factor behind the tentative recovery.

Finally, the recovery owes a good part of its snail's pace to the continuing budget pressures weighing down state and local governments. State and local governments account for 12 percent of the national economy -- one and a half times the federal government's share and slightly larger than the business investment share. Weak tax collections and the winding down of the federal stimulus leave state and local governments with the unenviable choice between raising taxes or cutting spending. Most states and localities faced with this have cut spending and laid off teachers and other public sector employees to balance their budgets. Those cuts have subtracted from growth in the economy and added over a half million people to the ranks of the unemployed.

The Economic Battleground

It defies comprehension to think that more unemployment resulting from consumer belt-tightening and government budget cuts will pull us out of our economic muck. Stephen Roach, formerly a leading economist for Wall Street giant Morgan Stanley, recently characterized debt-burdened and underpaid American consumers as "zombies" -- the economic walking dead -- whose constrained spending keeps the economy from firing on all cylinders. Yet Roach urged more belt-tightening on consumers. Many others among economic conservatives and the well-to-do try to shift blame for the economic crisis onto government or at least hammer away at the need to slash government spending.

This has become an epic economic battleground. On the one side, the burgeoning ranks of the out of work, the under-employed, the underpaid, the debt-burdened, and the millions trapped in a collapsed housing market seem to echo Langston Hughes' refrain, "Let (America) be the dream it used to be." On the other, the economically comfortable, who draw sustenance from a bailed-out financial sector and financial investments that enable them to seek profits from anywhere in the world, firmly feel that everyone else needs austerity.

New York City labor expert Ed Ott has a phrase for depriving working families of gainful employment: "economic capital punishment." You have to go back at least 80 years to the eve of the New Deal to find a period in this country when so much of the public discourse tacitly accepted such a prolonged period of extraordinarily high unemployment.

New York City's Less-than-Robust Recovery

As in many parts of the United States, high unemployment is no stranger to New York City. While the jobs recovery here has been in line with the nation’s overall, it is tepid at best and unemployment remains far higher than before the Great Recession. Fifteen percent of New Yorkers are unemployed or underemployed -- that's over 600,000 out of a workforce of 4 million. The average period of joblessness exceeds 40 weeks. Most of the drop in the unemployment rate in this "recovery" has occurred because discouraged workers have given up looking for jobs.

As Bloomberg noted when he presented his fiscal year 2012 budget proposal in early May, state budget cuts will take $6.8 billion in spending out of the New York City economy over the next year. In addition to cutting back on local school aid and threatening the jobs of thousands of teachers, the state budget cut support for the City University, the Metropolitan Transportation Authority, public assistance and tens of millions in contracts to social service providers serving low-income communities. And in curbing Medicaid spending, the state budget will reduce the flow of over $2 billion in federal Medicaid payments to local hospitals and health care providers. Thus, the recent state budget deal will drag down job growth and subtract basically a year's worth of federal stimulus from the city economy. Two steps forward, one step back. Recovery will have to wait.

While the mayor repeatedly blames the federal and state government for reducing spending, ironically his proposed city budget is cut from the same cloth. There has already been a reduction of 16,000 since 2009 in those working for the city or related agencies, including public libraries and the Health and Hospitals Corp. Bloomberg's budget proposes to add 6,000 teachers and 3,000 other city employees to the ranks of the unemployed. In addition, the budget proposal slashes spending on childcare, homeless rental assistance, and services for youth and seniors, and closes firehouses, libraries, childcare and senior centers. Even through enrollment in CUNY community colleges has grown by 26 percent since 2008, the mayor proposes they receive less city funding than they did three years ago.

In the face of the lingering adversity resulting from the Great Recession -- with rising poverty, ultra-high unemployment, record homelessness and demand for emergency food assistance -- the mayor's budget can only be described as austere.

Alternatives to Budget Austerity

The city needs budget policies that match resources to real needs. Is the city really getting value for the tremendous near-tripling in business tax breaks -- now close to $3 billion -- over the past decade, or for the $3 billion in contracting out for information technology, professional, clerical and maintenance services when city employees can more cost-effectively perform those services? Can the city afford $320 million in tax loopholes for hedge fund managers when that has the effect of shifting costs to low-income working families who can ill-afford to pay more for childcare?

Wouldn't it be far better to begin to shift the tide toward shared sacrifice with the comfortable elite contributing through progressive taxation to help their fellow city residents re-build their economic lives? Budget austerity is not the solution to our economic calamity, not in Washington, not in Albany and not in New York City. The city can't fight this battle on its own, but it should at least be fighting on the right side.

James Parrott is deputy director and chief economist of the Fiscal Policy Institute (www.fiscalpolicy.org). He has been studying and writing about the New York economy since he landed in New York City a quarter century ago.

Pension Proposal: A Fiscal Remedy for New York


Photo by Jorbasa
Under current rules, police can retire after 20 or 25 years of service and begin collecting a pension -- even at the age of 50 or younger.

Gov. Andrew Cuomo's proposal for pension reform is in the best interest of taxpayers and public employees. The plan would bring New York's pension benefits in line with those of other public employers, creating a more sustainable and affordable pension system, significantly reducing future costs and ensuring benefit obligations can be met. The proposal deserves support from legislative and union leaders.

While other states have neglected their pension funds, New York state and its local governments have historically funded their obligations. However, state and local budgets have been squeezed as the cost of pension contributions skyrocketed over the last decade. Between 2000 and 2010, pension contributions for state and local employers grew from 0.9 percent of payroll to 7.4 percent for civilian employees and from 1.9 percent to 15.1 percent for police and fire employees.

Contribution rates are projected to continue their growth for the foreseeable future, reaching 13.5 percent and 21.5 percent of payroll, respectively by 2015. These projections are low because the state opted to postpone making its full payments last year. It will need to make up these "borrowed" sums at a later date. In 2015, the contribution rates required to fully fund the annual obligation will be 20.9 percent and 27.1 percent of payroll for civilian and police and fire employees.

The problem is especially severe in New York City, where costs have quadrupled from $1.5 billion to $7 billion since 2002 and will continue to grow to $8.7 billion in 2015. Pension contributions have grown from 4 percent to 11 percent of the municipal budget – squeezing other priorities including education and social services. The thousands of layoffs proposed in the most recent budget are the clearest example of how growing pension costs force tough choices.

A Three-Part Solution

Tackling growing pension costs -- while ensuring retirement security for public employees -- requires broad thinking. Targeting fraud and eliminating double-dipping are important but on their own will not adequately address the problem.

The governor's proposal focuses on the features that make New York's pension systems costly -- even as compared to other public systems. The proposal makes three important changes to bring New York in line with other public employers.

First, the retirement age will increase to 65, the same age that retirees become eligible for Medicare. While uniformed employees still will be able to retire after 20 or 25 years of service, they will not receive pension benefits until age 65. Police and firefighters currently have no minimum age requirement; as a result, one-third of all New York City fire retirees and one-half of all City police retirees are under age 60. In localities outside New York City, over 80 percent of police and fire retirees in the last year were under 60, increasing the length and cost of benefit payouts.

As for teachers, they currently are eligible to retire at 57 and 55; 58 is the average retirement age for teachers in the state outside New York City.

Second, the plan would raise required employee contributions to bring them closer to national norms. Many New York state, city and local employees contribute only 3 percent of their earnings toward their pensions for only the first 10 years of employment. Only employees who opt for enhanced plans make larger contributions or contribute for a longer period of time. As a result, employer contributions to the pension funds exceed employee contributions by a ratio of 9 to 1. This proposal would require a 6 percent contribution from all employees for their entire length of service. The nationwide mean is 6.4 percent for state and local workers with a fixed contribution requirement.

Third, prospects for "pension padding" will be eliminated. Now the benefit is calculated using all wages -- including overtime -- for the highest three years of earning, giving public employees an incentive to rack up overtime at the end of their careers.

In the governor's plan, pension benefits will be calculated based on the highest five years' of earnings with maximum eligible wages capped at $179,000. Overtime pay will no longer be included in the earnings used to calculate benefits, bringing New York’s rules in line with 94 percent of other public employees nationwide. In addition, an "anti-spiking cap" will exclude extraordinary increases in income in any year.

Saving for the Future

Because pension benefits are constitutionally protected, the benefits of current employees and retirees would remain unchanged; the changes would only apply to future employees. As a result, the savings would be small initially but would grow to $93 billion for state and local governments and $30 billion for New York City over 30 years. The changes would create a more affordable pension system that would alleviate the pressures that rapidly escalating costs have placed on the structural balance of state and local budgets.

The proposal also would create a more sustainable system that ensures the retirement security of current and future workers. As experience in other states shows, when pension costs reach a breaking point, elected officials pay less than the required amounts, placing the solvency of the pension funds at risk.

New York has already started on this slippery slope. Rather than enact any additional gimmicks, legislators should support the structural changes proposed by Cuomo. This will reduce the costs of the pension system while ensuring pension benefits for state, city and local employees are not placed in jeopardy.

Municipal union leaders and their members should support these changes to the pension system. They, too, are taxpayers who have an interest in protecting vital services from drastic layoffs and other cuts necessitated by the whopping costs of fringe benefits. Pension benefits for current employees and retirees will be preserved, but the changes proposed for future employees will go a long way toward putting New York and its local governments on the road to good fiscal health.

Carol Kellerman is president of the Citizens Budget Commission, a nonpartisan civic group that seeks to promote the fisical health of New York state and city government.



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