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Savings Debate Intensifies Ahead of City Budget Modification


de blasio budget graph

Mayor de Blasio in a budget presentation (photo: NYC Mayor's Office)


Reading the tea leaves and heeding calls to be more prepared for an inevitable recession, the de Blasio administration has formed a new unit in its budget office tasked with coordinating additional agency savings, a move expected to be more formally announced in conjunction with the coming November budget modification.

City tax revenue growth has slowed, but a recession is not yet here, and may not be imminent. Though alarm bells have been ringing of late, city tax revenue shows modest growth of about 3.8 percent for the first quarter of fiscal 2017 compared to the same period in fiscal 2016 (July-September), which is in line with forecasts. Still, as the budget update session for the current fiscal year arrives, the de Blasio administration, the City Council, and outside budget watchdogs see warning signs.

The key questions are what exactly the City is doing to fortify finances and whether it will be enough when the city’s financial picture is indeed more bleak. Mayor Bill de Blasio, a Democrat, and this City Council have been exceedingly fortunate over their three years in power, as the city has been “flush with cash,” as one City Council Member memorably said at City Hall.

While the mayor has taken significant steps to build reserves, de Blasio has also overseen a drastic increase in city spending, with an operational budget now over $82 billion in the current fiscal year. And while he is taking additional steps -- like the formation of the new Citywide Savings Unit at the Office of Management and Budget -- it is not yet clear to what extent de Blasio will follow the advice of budget watchdogs like the Citizens Budget Commission and city Comptroller Scott Stringer.

“It’s the first quarter, so it’s hard to see to the end of the fiscal year,” said Maria Doulis, vice president at Citizens Budget Commission, an independent watchdog. Doulis said she is eager to see the November budget modification from the City, but that previous forecasts appear apt and it is not time to panic.

“We’re not yet in a recession, but there’s reason to be cautious, because non-property tax revenues are not growing strongly,” Doulis said. Indeed, property taxes are buoying several other flagging avenues of tax intake (see chart below). The city is in a solid place despite the increased budget spending, Doulis said, because of good reserves. Still, “Looking at [Q1 tax revenues], this argues very strongly for an increased PEG program, or savings program,” Doulis said. “The revenue figures argue for caution and restraint in spending.”

In brief, watchdogs want to see de Blasio identify additional savings and limit new spending. The big question for the November modification to the fiscal 2017 budget, Doulis said, is, “Will there even be a savings program?”

A PEG, or program to eliminate the gap, calls on city agency heads to identify a certain percentage or amount of agency spending for potential cuts, then leaves up to the Mayor and his budget office which recommendations to accept. Despite calls for such a program, de Blasio has resisted, instead encouraging his commissioners to find savings. The Citywide Savings Program that de Blasio has touted has been bolstered by re-estimates of hefty expenditure projections, not enough by real agency savings, watchdogs say.

There is still time to build up the city’s fiscal cushion to have resources necessary if revenues don’t meet projections, Doulis said. “It’s hard to call these things, but the last time around, Mayor Bloomberg started to issue calls for a very strong PEG before the recession had officially hit New York City,” Doulis said. “That’s the way you want to do this. That’s the way you want to approach this. You don’t want to hack away when you’re in freefall.”

City Comptroller Scott Stringer has said the city should have a “budget cushion” of 12-18% of its operational budget in reserves -- the current number is about 10%.

The de Blasio administration has steadfastly defended its approach to budgeting. At the announcement of the adopted fiscal 2017 budget in June, de Blasio told Gotham Gazette he was quite comfortable with the budget cushion in place, but that the City would continue looking for additional savings.

“At this year's FY17 Adoption, the Mayor promised to find areas of savings and we are making good on that promise,” de Blasio spokesperson Freddi Goldstein said in a statement. “We found savings in the preliminary, executive and adopted budgets and there will be additional savings in our upcoming November Plan. As always, we remain cautious with our forecasts and confident that NYC is in strong fiscal standing."

De Blasio and his representatives regularly say that reserves are at “historically” high levels, which is true, but the city budget is also higher than it has ever been, city personnel hiring has been expanded significantly over the past three years, and city pension obligations are greater than ever before.

The city general reserve is at $1 billion, far higher than past levels, and there are other savings set aside for the city’s capital plan ($500 million) and retiree health benefits ($4 billion).

The de Blasio administration is eyeing additional savings to be able to show the City Council and others at the November budget modification, the new Citywide Savings Unit, with a headcount of four, began its work in September.

“There’s nothing that suggests the overall forecast is at risk,” said Ana Champeny, Citizens Budget Commission director of city studies. OMB was fairly conservative with projections, she said. A de Blasio administration source noted that OMB’s forecast was more cautious than the City Council’s.

The Council recently raised its eyebrows in public fashion, a seeming warning shot ahead of the upcoming release and reaction to the November budget modification. A Wall Street Journal article published October 26 cited City Council data showing slumping tax revenue and citing a 1% drop in those revenues for April through August 2016 compared to the same period the year before.

This report prompted warnings about the city’s finances from the New York Daily News editorial board and New York Post columnist Nicole Gelinas, a budget expert. On the other hand, Greg David of Crain’s New York Business, another columnist and budget expert, wrote in response to a string of Journal stories on the city economy that no, a recession is not in fact setting in. David pointed out that after such robust growth over the past several years even a slight drop in revenue could be expected and is not cause for alarm.

According to a representative from the City Council’s finance division, it used April-August data because that was what was available at the time; the Q1 data -- which shows a better picture of 3.8% revenue growth year over year -- was not yet in.

At Gotham Gazette’s request, the de Blasio administration provided Q1 data (see below) on October 28.

Regardless of which tax revenue data is used (though experts agree a Q1 comparison is preferable), the story is generally the same, especially in conjunction with recent unemployment numbers, which show a slight rise: economic growth is slowing. While property tax revenues are strong and increasing, other streams, like personal income and sales taxes, are virtually flat, and transaction taxes have decreased (all Q1 FY17 over Q1 FY16). But, the difference between 'tax revenues are down 1%' and 'tax revenues are up 3.8%' is not insignificant, both in real economic meaning and political narrative.

The Council finance representative said that the office is currently performing its typical November forecast for the rest of the current fiscal year and beyond. This year’s forecast has been about the same as last year’s, the representative said, for about 3-3.5% growth in tax revenue. A Council spokesperson did not respond to a request for comment about the Q1 numbers or the new OMB savings unit.

A key risk factor identified by voices like The Daily News editorial board, Gelinas, CBC, and others, is de Blasio’s expansion of the city payroll by thousands of employees. “Instead of being on notice to demonstrate efficiency, agencies have been encouraged to spend,” the News wrote on Monday.

Gelinas has been warning about growing personnel costs over the course of de Blasio’s tenure, especially with regard to healthcare and pension bills. There is less risk for the City in the short-term on this issue, but big obligations will be due in the future. As mentioned, the city has retiree health benefit reserves, but in the case of a recession, Doulis of Citizens Budget Commission warns that that money should not be touched to fill operational budget gaps.

That’s part of why Doulis wants to see a PEG from de Blasio to boost general reserves, which can be tapped during recession. CBC also wants to see other cost-savings measures taken. “There is so much to do on procurement in terms of savings,” Doulis said.

“The City is really behind on procurement practices -- they’re not following general best practices in the ways the City buys things in general,” she said. The purchase of goods and services is “decentralized at agencies” instead of being under the watch of the Department of Citywide Administrative Services, or DCAS, where it should be, Doulis said. The City could be much more efficient, saving time and “$100 million right off the bat,” she said.

Goldstein, the de Blasio spokesperson on budget matters, did not respond to a request for comment on Doulis’ call for procurement reform.

TAX

FY17 Q1

FY16 Q1

%Y/Y

Property

12,767

11,930

7.0%

PIT

2,220

2,206

0.6%

Business

1,137

1,092

4.1%

Sales

1,652

1,659

-0.4%

Transaction taxes

651

775

-15.9%

All other*

696

755

-7.9%

TOTAL >>>>

19,123

18,417

3.8%


*All other includes CRT, Utility, Cigarette, Hotel, Other, STAR, Audits


Numbers are in the millions.

***
by Ben Max, Gotham Gazette
     

Read more by this writer.

Council Member Williams Forecasts End of Pledge Protest


williams seated peace

Council Member Williams (photo: William Alatriste)


City Council Member Jumaane Williams, whose sit-down protest during the pledge of allegiance at the Council’s stated meetings has created waves and elicited both support and criticism, said on Wednesday that he plans to again stand once Mayor de Blasio commits to an agenda for jobs for city youth.

On the sidelines of a rally by police reform advocates outside City Hall, Williams said he intends to continue sitting out the pledge of allegiance at the biweekly meetings of the full Council. “I do intend to continue,” he told Gotham Gazette, thanking his colleagues for the support they have shown him. At last week’s stated meeting on Thursday, most of the City Council, including Speaker Melissa Mark-Viverito, continued to stand after the pledge and then sang a verse of “Lift Every Voice and Sing,” known as the Black National Anthem. The song was meant as a display of unity, organized by the co-chairs of the Black, Latino and Asian Caucus, Council Members Ritchie Torres and Robert Cornegy.

Williams sat through the pledge and then rose to sing with his colleagues.

Williams’ demonstration began in September as a show of solidarity with professional football player Colin Kaepernick of the San Francisco 49ers, who knelt through the pre-game pledge of allegiance to protest racial injustice in policing. But the Council member’s message goes beyond that, he said, to larger issues that affect communities of color, including gun violence, education, and employment.

“When I initially did it, it was just out of frustration and I think the conversation is moving,” he said. “I think that’s what you want with these types of symbolic gestures,” Williams said. “I think that’s happened but I do want to make sure it is not just about policing. It’s about the disparate impact on all levels of life and resources that are lacking in these communities.”

Williams now wants to connect his protest to an issue he has been advocating for as a solution to injustice and inequity in communities of color: youth employment. In that vein, he wants to increase awareness about the city’s Youth Employment Task Force, a collaborative initiative between the City Council and the Mayor’s Office that was announced at the end of September. 

The creation of the task force, chaired by Deputy Mayor Richard Buery and Council Member Julissa Ferreras-Copeland, who chairs the Council finance committee, followed a successful campaign earlier this year by Council members to push for increased funding for the city’s Summer Youth Employment Program.

As a result of Council pressure, the administration agreed to fund 60,000 summer jobs for city youth. “Many of us have been pushing for universal youth jobs as a way to push back on the violence that’s going on that’s too heavily relied on the police to fix,” said Williams, “and I want to make sure that people know that task force is meeting.”

The entire task force has already met twice, with the most recent meeting on Tuesday, and is set to meet at least twice more. They have also had several smaller working group meetings, according to a spokesperson for the mayor’s office, as well as focus group discussions to develop recommendations on expanding the SYEP program as well as the Work, Learn, Grow program, which provides career training and paid employment to youth during the school year. The spokesperson said the task force’s preliminary recommendations would be presented to the mayor and City Council by the end of the year.

Williams said he expected that the task force will release its report sometime in January or February, before the mayor’s preliminary budget for the next fiscal year. After that he will look to end his protest. “I definitely plan on standing when that report comes out and the mayor fulfils his commitment,” he said.

At an unrelated September 28 news conference, when Mayor de Blasio was asked to weigh in on Williams’ protest and if he would consider participating in such a demonstration, he said he respected the motivations behind it but takes “a different view with absolute respect for others who disagree.”

“I absolutely respect everyone's First Amendment rights. And I very much respect what's motivating this protest because this issue has to be addressed,” de Blasio said. “There's a fundamental inequality in this country – it has to be addressed...I take the view that the Pledge of Allegiance and saluting the flag during the national anthem are about an affirmation of our democracy that is still evolving that needs to get better, that needs to be truer to who we are and what we're supposed to be. And, I think that is a message unto itself that we believe we can fix things. But I also respect others who have a different choice and that is an American value that people get to make that choice.”

***
by Samar Khurshid, senior reporter, Gotham Gazette
     

Read more by this writer.

In Unexplored Territory, City Council Members Bundle Campaign Donations


greenfield city hall alatriste

Council Member Greenfield and colleagues at City Hall (photo: William Alatriste)


The bundling of campaign contributions by elected officials for fellow candidates in New York City is not new or illegal, but it raises questions about an unexplored area of campaign finance law, especially as the City considers updates to the rules of its heralded campaign finance system.

In New York City electoral campaigns, individuals often lump together contributions from multiple donors to show their support for a single candidate. These bundlers, or intermediaries, as they are termed by the Campaign Finance Board, are monitored to ensure that they comply with the strict disclosure requirements. The act of bundling itself is recognized as a method of potential influence or a means to curry favor with a candidate. It’s not surprising to see real estate developers and lobbyists in the CFB’s bundler database.

Included among the bundlers, though, are even elected officials themselves. City Council members and members of the State Assembly have, in the past and in the current election cycle, bundled donations, throwing up questions about the city’s campaign finance framework that haven't been dealt with in the past.

Council members can bundle donations from others, donate their own personal money, or donate from their campaign accounts to other city campaigns. Members use these tactics to support current or potential colleagues, at times in apparent interest of advancing their prospects for the prized position of being elected Speaker of the City Council by fellow members.

For the still-young 2017 election cycle, two City Council Members have bundled contributions for other members and candidates. Brooklyn Council Member David Greenfield has collected $16,250 in total for four other candidates, all of whom are currently members of the City Council -- Karen Koslowitz, Mark Levine, Julissa Ferreras-Copeland, and Dan Garodnick. Garodnick is term-limited next year, but has raised money, it seems, for a potential future run for another position. Council Member Corey Johnson has also bundled nearly $15,000 for Carlina Rivera, legislative director to term-limited Council Member Rosie Mendez. Rivera is running for the seat Mendez will vacate, which neighbors Johnson’s seat in Manhattan.

“Councilman Greenfield is proud to support outstanding colleagues in government and believes it's appropriate to do so in the most transparent manner,” said Stephen Snowder, Greenfield’s communications director, in an email. Council Member Johnson was not made available for comment.

Greenfield and Johnson’s bundling is not novel. In the 2013 cycle, a number of elected officials were bundlers, although the practice is not widespread. For instance, in the last cycle Garodnick bundled $7,250 for Scott Stringer’s campaign for Comptroller and $1,500 for City Council Member Andrew Cohen’s campaign; then-State Assembly Member (now Congresswoman) Grace Meng bundled $4,000 for then-Comptroller John Liu’s mayoral campaign; there were other smaller bundles for as little as $75 for a candidate. In the 2009 elections, then-City Council Member (now State Senator) Simcha Felder was a prolific bundler, raising as much as $30,000 for six City Council candidates.

(CFB records show Greenfield has bundled before, when he was head of the Sephardic Community Federation, a few years before joining the City Council in 2010.)

The city’s campaign finance rules don’t cover the scenario of elected officials bundling funds for candidates; it is perfectly permissable. A CFB spokesperson declined comment but said the agency would consider the issue.

City Council Member Ben Kallos, chair of the Committee on Governmental Operations, was unsure of where bundling by elected officials would potentially fall in the city’s legal or ethical statutes. “It’s an area we haven’t legislated or really dug into,” he told Gotham Gazette. “Ultimately I think what’s most important is that people are able to see who is bundling, for whom, how much, and are able to see the influence that might come from that.” Legislation related to campaign finance falls under the purview of Kallos’ committee.

There is currently a package of eight such bills under consideration, including one that would prevent contributions bundled by those who do business with the city from being matched with public funds -- though it is unclear if City Council members or other city electeds would be classified as "doing business" entities. “I think that anytime there’s bundling, regardless of who it is, we don’t want to match that with public dollars,” said Kallos, who also indicated that those bills, which have been dormant for some time, might soon be voted upon by the committee, which would pave the way for a full Council vote and movement into law -- perhaps in time for the 2017 election cycle.

When asked if elected official bundling might be an area that needs to be examined from an ethical standpoint, Kallos responded, “I’ve been pretty cautious with my campaign account and I’ve always been concerned with how campaign accounts are used. On the state level they’re used for criminal defense, they’ve been used to pay for personal items, for personal trips, for vehicles. Ultimately I believe that campaign contributions and campaign funds should be used for electoral purposes.” 

From a good government perspective, while the practice is legal, it is questionable. “While I may find it somewhat problematic that they are currying favor with colleagues and/or other elected officials by becoming a bundler, there’s nothing inherently illegal or wrong about it,” said Dick Dadey, executive director of Citizens Union, a government reform group. “That elected officials are doing this now seems a bit unseemly because it’s really about amassing power in front of another elected official,” he added.

Council members eyeing the speakership of the City Council do use campaign funds to contribute to other candidates, as well as bundle for current or prospective colleagues. The City Council Speaker is elected by his or her fellow Council members. Council Members Levine, Ferreras-Copeland, and Johnson are all being discussed, among others, as candidates to be the next Speaker, which will be decided in January 2018, after the 2017 elections. It is unclear if Greenfield has his eyes on the speakership, though he is already a power broker in the Council as chair of the land use committee.

Dadey said it may be a simple show of support among colleagues in government and politics, and that they shouldn’t necessarily be treated any differently than private citizens. “In regulating this business, we have to be careful not to overregulate and solve a problem that may not necessarily exist,” he said. “This is an example where we’re assuming improper motives when there may not be any.”

But, Dadey does worry about the use of bundling to “curry favor” for a speakership bid. “I would like to think that the Speaker is going to be chosen not on the basis of who has raised the most money but who has the capacity, the talents and the insight to do it.

“No one raises money for a candidate for office without some understanding that they will be there when the fund-raiser needs them,” Dadey said.

***
by Samar Khurshid, senior reporter, Gotham Gazette
     

Read more by this writer.

Note: Gotham Gazette is an independent publication of Citizens Union Foundation, sister organization of Citizens Union.

Note: this article has been updated to clarify some of the language around bundling and to remove reference to Anthony Weiner, whose inclusion was related to a time before his scandals of the past several years, which nonetheless color any mention of the former Congressman.



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