Gotham Gazette https://www.gothamgazette.com/component/tags/tag/2455 Wed, 21 Aug 2019 03:15:05 +0000 Joomla! - Open Source Content Management en-gb webmaster@gothamgazette.com (Webmaster) De Blasio's Budget Savings Plan Contains Few Real Efficiencies, Experts Say https://www.gothamgazette.com/city/8526-de-blasio-s-budget-savings-plan-contains-minimal-real-efficiencies-experts-say https://www.gothamgazette.com/city/8526-de-blasio-s-budget-savings-plan-contains-minimal-real-efficiencies-experts-say Mayor de Blasio city budget executive plan

Mayor de Blasio (photo: Michael Appleton/Mayor's Office)


Mayor Bill de Blasio’s much-touted budget savings program is not what he has made it seem.

After rapidly growing the budget over his first five years in office and resisting calls to find significant efficiencies at city agencies, de Blasio this year instituted his first “program to eliminate the gap,” or PEG, to achieve hundreds of millions of dollars in “savings.” But though the mayor boasted at his executive budget presentation of $916 million in identified savings over the current and next fiscal years -- including $629 million in agency PEG savings -- his budget has little by way of true city agency cuts to existing spending.

The mayor’s spendthrift approach has led to a $20 billion increase in the city budget since he took power, while savings and rainy day funds, though solid, have remained below optimal levels, according to budget experts. Exceedingly good economic times have allowed the mayor to spend somewhat lavishly on programs and personnel without having to make many tough decisions about cuts.

The city is also maintaining about $5.72 billion in reserves each year, though the mayor has not added to them this year and the City Council is pushing for an additional $250 million infusion.

The mayor’s latest spending plan, a whopping $92.5 billion executive budget proposal for the 2020 fiscal year, is no exception to his spending growth trend. And as de Blasio touts new savings, fiscal watchdogs are casting doubts and poking holes.

One in particular, Citizens Budget Commission, says city budget officials are misclassifying savings, passing off re-estimated spending and cost shifts as efficiencies at city agencies.

Instituting a targeted PEG for the first time this year, de Blasio required city agencies to make specific spending reductions through various means -- efficiencies, re-estimates of spending and revenue, and service reductions. The mandated PEG, with target amounts for each agency set by the mayor’s budget office, came after years of the administration relying on a Citywide Savings Plan, which had agencies offer voluntary savings, re-estimates, and revenue-raising ideas.

All told, the mayor’s executive budget estimated the $916 million in savings between fiscal years 2019 ($419 millions) and 2020 ($496 million). An analysis by Citizens Budget Commission, a nonprofit fiscal watchdog, of the overall savings plan shows that for 2020 the Mayor’s Office of Management and Budget identified about 62.5% of the savings from what it classified as agency efficiencies.

Melanie Hartzog, the director of the Mayor’s Office of Management and Budget, in testimony before the City Council at a budget hearing last month, stressed the “high levels of efficiency savings” at city agencies that were found through the PEG. That included service reduction for the first time under de Blasio.

“In Fiscal Year 2020, the first full year impacted by the PEG, efficiencies account for two-thirds of the savings. To achieve these savings agencies streamlined and improved practices, yet maintained service levels,” she said.

But CBC’s analysis shows that the estimate of efficiencies in the executive budget savings plan may be overblown. Agency efficiencies in fiscal year 2020 only accounted for about 20.77% of the savings, while re-estimates and funding shifts accounted for the bulk, about 66.4%, according to the analysis, performed by CBC’s Riley Edwards.

City Council Member Daniel Dromm, chair of the finance committee, echoed CBC’s concerns about finding true efficiencies at last month’s budget hearing, saying the Council “is struggling to understand the purpose of the PEG.” He noted, as CBC pointed out, that the PEG and savings plan together did not find sufficient efficiencies or recurring savings at agencies. He noted that PEGs are supposed to force administrations to find “true efficiencies and recurring savings.”

Dromm pointed out that the mayor has typically relied on the voluntary CSP instead of a PEG, during a period of healthy growth and positive economic conditions.

“Since the implementation of that program, the Council has been urging the administration to search for savings more rigorously because the majority of the program consisted of accruals, re-estimates, and increased revenue projections that would have occurred even in the absence of a savings program,” Dromm added. “So, when the administration announced a mandatory PEG this year, the Council was hopeful that the mayor was finally getting serious about reining in inefficient spending. Unfortunately, the result of the PEG is just more of the same.”

CBC experts point out that certain categories of savings that OMB classifies as efficiencies aren’t truly that, including swaps where state or federal funds are used in place of city funds or the hiring freeze that OMB says saved about $116 million across fiscal years 2019 and 2020. According to OMB, the hiring freeze involves permanently taking down 1,600 positions in the executive budget (many are currently filled and will be eliminated when they become vacant without affecting agency performance) after 1,000 vacancies were already eliminated in November. The freeze reduced net planned headcount growth this year for the first time under de Blasio and is meant to create savings every year till 2023.

“Because we’re dealing with positions that are already vacant, we consider that a re-estimate rather than an efficiency,” said CBC’s Edwards, in a phone interview.

CBC director of city studies Ana Champeny said this savings plan has largely been a “continuation” of past years’ plans. “There was a change in their approach in setting the targets for the agencies but they still haven’t delivered substantially more efficiency savings,” she said. According to CBC, these could be achieved through redesigning programs and shrinking or eliminating inefficient ones, as the mayor did by eliminating Extended Time Learning at Renewal and RISE schools; by using technology to improve operations; sharing resources across agencies; finding alternative service providers within or outside the public sector; and strengthening centralized management of cross-agency operations.

Champeny said the city should not stop looking for savings through re-estimates or funding shifts, which are “routine budget management that you would expect every administration to be doing. Our criticism is that there should be more PEG savings, more efficiency savings in addition to this routine budget and fiscal management.”

Ideally, efficiency savings in one year would equal about one percent of the city-funded budget, she said. “That’s about $700 million in one year, not across two years,” she said.

Nicole Gelinas, senior fellow at the Manhattan Institute, a think tank, concurred. “I think the PEG is pretty superficial in the context of this larger budget,” she said, noting that the executive budget increases overall agency spending by about $1.4 billion compared to the mayor’s initial proposal released in January, allowed by higher revenues than earlier projections. Those higher revenues “are giving them some room to increase spending while sticking to this narrative of savings,” she said. “Overall, agency spending is not shrinking by any means. It would be hard to call this an austerity program.”

“It would be good if agency spending pretty much kept pace with inflation, going up 1.5-2% a year,” she said.

Budget watchdogs have also repeatedly urged the administration to find long-term recurring savings rather than temporary ones. Gelinas pointed out that hiring freezes, in particular, “don’t last forever” as a source of savings.

“It’s kind of superficial because the mayor has increased hiring by so much already that it’s kinda time for a pause,” she said. “Hiring freezes are not very good management. This is the same problem at the MTA. If you need a new person to do something, you should hire that person. If there’s something that the government is doing that it shouldn’t be doing anymore, repurpose that person. But just a sort of general hiring freeze oftentimes means positions that should be filled aren’t being filled. So it’s kind of the opposite of efficient.” 

De Blasio has overseen a large increase in the city workforce, from about 297,000 employees when he took office to roughly 332,000 now. Still, he has budgeted for many more positions at various agencies that have gone unfilled each year, with many of those now “frozen” and the act of keeping them empty being counted toward savings.

OMB spokesperson Michael Greenberg said in a statement Tuesday, “Our aggressive approach helped us meet ongoing, fundamental needs, and balance the budget. We will continue to find ways to save money for New Yorkers in future financial plans.”

In a Thursday statement, after this article was published, Greenberg pushed back against the criticism from Gelinas and CBC. "The 2,600 positions we have permanently eliminated since November will lead to hundreds of millions of dollars in savings, much of it recurring annually, and agencies will provide the same level of service with fewer employees. Despite what others might say, this is the actual definition of 'efficiency savings,'" he said. 

Short of creating more efficiencies, the city risks major service reductions should an economic downturn set in. Even without a downturn, the city faces a budget gap of $3.5 billion in 2021 and $3 billion annually in the years after, according to its own documents. While those numbers are manageable and fairly typical, they become much more concerning if there is a recession.

“A recession could easily double or triple these out-year budget gaps that we already need to fill,” Champeny said. “Right now you have the ability to take the time and do a careful analysis of where you can make efficiency changes or improve your processes whereas if you’re cutting during a recession, you’re sometimes looking for quick savings and you’re not as precise and you’re going to have more negative impacts in services reduction.”

Gelinas added, “The city always depends on revenues coming in higher than expected and then because it says it conservatively budgeted, it has these extra revenues. So these budget deficits basically disappear. But that only happens if the city’s economy is doing well. If we do fall into a recession...then suddenly these are real deficits so you’d need a lot more than a billion dollars in savings in two years. So that’s when you really start to see layoffs and service cuts.”

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by Samar Khurshid, senior reporter, Gotham Gazette
     

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Note - This article has been updated with additional details about the administration's partial hiring freeze. 

Note - This article has been updated with additional comment from OMB spokesperson Michael Greenberg. 

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De Blasio's Budget Savings Plan Contains Few Real Efficiencies, Experts Say Tue, 14 May 2019 04:00:00 +0000
City Council Pushes Its Priorities at First Hearing on De Blasio's Executive Budget https://www.gothamgazette.com/city/8504-city-council-pushes-its-priorities-at-first-hearing-on-de-blasio-s-executive-budget https://www.gothamgazette.com/city/8504-city-council-pushes-its-priorities-at-first-hearing-on-de-blasio-s-executive-budget spk co jo exec bud

Council Member Dromm and Speaker Johnson (photo: John McCarten/City Council)


The New York City Council and budget officials from Mayor Bill de Blasio’s administration engaged in a familiar push-and-pull on Monday, at the first hearing on the $92.5 billion executive budget proposal for the 2020 fiscal year that begins July 1.

The Council, disappointed that many of its priorities were not included in the latest spending plan presented by the mayor, pushed for more funding and pointed to hundreds of millions in revenue available to the city, but officials from the Office of Management and Budget urged restraint as they emphasized the dangers of a slowing economy and insisted the Council’s revenue estimate was far rosier than their own.

De Blasio presented his executive budget last month with $300 million more in proposed spending than his preliminary plan released in February. The $92.5 billion proposal would mark yet another record high in city spending, up nearly $3.4 billion from the current fiscal year and about $20 billion from the budget that de Blasio inherited from former Mayor Michael Bloomberg.

The budget included, for the first time under de Blasio, a PEG (Program to Eliminate the Gap) that identified $629 million in savings in agency spending.

But the executive budget excludes funding for most of the items that the City Council had listed in its response, issued last month, to de Blasio’s preliminary budget plan, and Council members made their frustration clear at Monday’s hearing.

The Council found the executive budget “incredibly insulting,” said Council Speaker Corey Johnson, in his opening remarks. The Council had called for pay parity and wage equity for several categories of city-funded workers (including nonprofit human service providers, assistant district attorneys, indigent defense attorneys, and daycare workers), investments in a variety of social service and local programs, $250 million more in reserves, more transparency across the budget, and 100 percent “Fair Student Funding” to aid local schools.

Johnson noted that though most of the Council’s priorities were ignored, “The Administration saw fit to implement our ideas from the response for how to save money, and then took those savings to fund even more of the mayor’s priorities.”

Even requests that would have cost nothing -- for instance, more transparency for multi-agency programs such as ThriveNYC, and spending on the new ferry system -- were rejected, Johnson said.

He did, however, point to a bright spot in the negotiations with the administration. The Council had called for continuing $155 million in “one-shot” funding that is in the current fiscal year budget for various purposes -- adult literacy programs, summer youth employment, post-arrest diversion programs, social workers for homeless students, and more. After the Council’s push, the city added $77 million to restore some of those programs, but Johnson indicated that negotiations would be tough regardless.

“Typically, we try to get this budget adopted by the first week of June. I doubt that’s possible and I’m willing to wait until just before July 1,” Johnson said, referring to the start of the next fiscal year and the deadline for approving the budget. “This needs to be done the right way,” he added. Over the next few weeks, the Council will continue to examine the budget at agency-specific hearings where administration officials will testify, while public rallies are held and op-eds are written advocating for certain expenditures and private negotiations continue among stakeholders.

A central dispute of the hearing was over the amount of revenue available to the city from personal income tax collections, which came in higher than earlier projections. Through April, the city received $474 million more than initially estimated, which the Council repeatedly said should be put to use to fund their demands. But OMB Director Melanie Hartzog repeatedly pointed out that other tax revenue came in lower, and that actual revenues only increased by about $200 million.

“We continue to face uncertainty related to economic conditions at home and abroad,” Hartzog said in her opening remarks, pointing to a weak housing market and slowing consumption. She emphasized that much of the new spending in the budget was required because of $300 million in unfunded mandates and cost shifts from the state, and about $150 million in additional needs that were not factored in to the preliminary budget.

Council Member Daniel Dromm, chair of the finance committee, didn’t hold back in criticizing the executive budget’s approach towards the Council, pointing out that the Council had urged the administration for years to rein in costs, increase reserves, and find agency efficiencies. He noted that the PEG made cuts in areas where the Council wanted more spending, including cultural institutions, youth services, and senior centers.

“The PEG was couched in the context of a potentially worsening economic position for the city and the need for us all to tighten our belts in anticipation,” he added. “So what is truly baffling is that in light of this sentiment, the administration has chosen not to add even a single dollar towards our reserves.” That increases the likelihood, he said, that the administration will have to slash services when an economic downturn hits in earnest.

“It was a challenging budget,” Hartzog said, a position she had to repeatedly rely on as Council members pressed her on a slew of specific priorities, whether funding for social workers and guidance counsellors in schools, or support services for youth in the foster care system. She did however promise to work with the Council in finding more savings and to address their individual issues.

And the issues were many. Council Member Jimmy Van Bramer, chair of the cultural affairs committee, said $6 million in proposed cuts to cultural institutions were “disrespectful to this body.” Hartzog said they were “relatively modest,” noting that the overall budget for those institutions is about $139 million and that the administration wanted to avoid cuts in library service. 

Council Member Mark Treyger, chair of the education committee, lambasted the lack of funding for pay parity for universal pre-kindergarten teachers, Title IX coordinators, for busing for foster care students, for new school counsellors, to baseline Teacher’s Choice funding, and more education-related programs. “How can you say this is a schools-not-jails budget?,” he wondered, with apparent reference to the fact that the mayor’s updated capital budget plan, $117 billion over 10 years, includes billions in funding for jail construction as the city moves off of Rikers Island.

Council Member Helen Rosenthal noted that nonprofit service providers need at least $250 million more from the city or they risk fiscal insolvency. Hartzog, in response, noted that the de Blasio administration previously gave nonprofit providers cost-of-living-raises for the first time in years and that the administration is negotiating issues with the nonprofit sector. 

Council Member Barry Grodenchik, chair of the parks committee, said the parks and recreation budget “continues to go sideways,” and called for modest and targeted investments in parks infrastructure.

Council Members Carlina Rivera and Carlos Menchaca, co-chairs of the Council’s census task force, called for more funding for 2020 Census outreach, insisting that the $26 million over two years that the administration is funding is inadequate compared to the Council’s $40 million request. Hartzog said the amount was sufficient -- $8 million will go to community-based organizations, $10 million to a media outreach campaign and the rest to staffing needs -- particularly in tandem with $20 million in overall state funding, but said the administration was open to adding more funding if needed down the line.

Hartzog told Council Member Mark Levine that funding for so-called safe injection sites wasn’t included because the city was waiting for approval from the state health department.

The OMB director did agree to providing a measure of more transparency in the budget, and said her office had identified 34 new units of appropriation at the Council’s urging.

Hartzog similarly said the administration had made new “Capital Detail Data Reports” available online, in response to a request from Council Member Vanessa Gibson, who chairs the subcommittee on the capital budget. Gibson and others have critiqued the city’s ten-year capital planning process, insisting that it frontloads investments in early years and underfunds them in the second half of the plan. The ten-year capital plan reached $116.9 billion in the executive budget, of which 78% is planned for the first five years, Gibson noted.

But Hartzog said the city was working to distribute capital spending more evenly, with $3.9 billion redistributed from fiscal years 2019-2021 into later years. The administration has also proposed rescinding $2.3 billion pledged in previous capital budgets, she said.

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by Samar Khurshid, senior reporter, Gotham Gazette
     

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City Council Pushes Its Priorities at First Hearing on De Blasio's Executive Budget Mon, 06 May 2019 04:00:00 +0000
Preliminary Budget Hearings End with City Council Clamor for More Detail on Agency Cuts https://www.gothamgazette.com/city/8410-preliminary-city-budget-hearings-end-with-council-clamor-for-more-detail-on-agency-cuts https://www.gothamgazette.com/city/8410-preliminary-city-budget-hearings-end-with-council-clamor-for-more-detail-on-agency-cuts council holds prelim

OMB Director Hartzog testifies (photo: William Alatriste/NYC Council)


As usual, the City Council’s March agenda was mostly dominated by preliminary budget hearings, evaluating the mayor’s initial spending plan for the next fiscal year, which begins July 1. This stage of the city budget process started and finished with a general hearing held by the Council’s Finance Committee, along with its Capital Budget Subcommittee, with a series of more specific agency- and service-related hearings in between.

The preliminary budget hearings finished where they began, with Council Speaker Corey Johnson, a Manhattan Democrat, and other Council members looking for more details about cuts and efficiencies the administration of Mayor Bill de Blasio plans to make across city agencies. When he presented a $92.2 billion preliminary budget in early February, de Blasio said he was instituting a $750 million PEG (program to eliminate the (budget) gap), the first PEG of de Blasio’s tenure, during which a very healthy economy has allowed the mayor and Council to increase spending very quickly, while also keeping reserves fairly high.

But where will that $750 million come from? De Blasio and his top budget officials said they would give each agency, from the NYPD to the Department of Education, targets to meet and there would be more detail by the mayor’s executive budget, which is due toward the end of April. Yet City Council members want more detail now.

The PEG was brought on, the mayor said, because the city’s recent revenue collections have not met the Office of Management and Budget’s growth projections. The city collected $46.5 billion in revenue for the previous fiscal year, which was a 1.2% increase from the year before. However, OMB had forecasted a 2.6% growth rate.

At the City Council’s final preliminary budget hearing, Jacques Jiha, the commissioner of the Department of Finance (DOF), attributed this to the “weakness” in personal income tax collection (especially senior payments) and the “softness” of unincorporated business tax collection. Jiha also noted the recent inversion of the bond yield curve, which could signal a potential recession, as another sign that “the budget should be approached with caution.”

City budget director Melanie Hartzog later echoed Jiha’s cautionary tone, highlighting three “economic risks” that led to the PEG. She clarified -- and repeatedly stressed -- that OMB and economists are forecasting an “economic slow-down,” not a recession, amid a national economy that has appeared vulnerable in recent years. Still, she called such a slow-down “a substantial threat to the budget.” Second, she also attributed the slowing of city revenue growth to a decline in income tax collections, noting recent changes to the federal tax code.

Finally, Hartzog also discussed OMB’s expectations that state and federal contributions to the city budget would decline. According to Hartzog, the mayor’s executive budget will include cuts to health care and education programs unless the city can secure additional funding from the state. Also, while President Trump’s budget proposal would be detrimental to the city, OMB does not believe that it will pass through Congress. Hartzog said OMB would work with the city’s congressional representatives to secure federal funding.

Council Finance Chair Danny Dromm, a Queens Democrat, said that he hoped Hartzog’s testimony would answer questions that came up in previous budget hearings over the past month. Speaker Johnson summarized the previous month’s hearings by saying that “most agency heads were unwilling or unable” to discuss what would be affected by the city’s $750 million PEG. When Hartzog said that these details would appear in de Blasio’s executive budget, Johnson said that he was “incredibly frustrated to be stonewalled.”

Many questions that Council members had at the first preliminary budget hearing still went unanswered at the final preliminary budget hearing. Hartzog said that it was “too early in the process” for the Council to be given details about what particular cuts will be made at each agency. Agencies have submitted their preliminary drafts for savings, but the OMB still has to review those proposals. Similarly, Hartzog could not yet answer what percentage of the cuts would affect services and programs.

Dromm said that cuts to programs such as summer employment for students and adult literacy “will be a non-starter.” Johnson agreed that the Council would not support cuts that would affect “vulnerable New Yorkers.” He warned Hartzog, “I don’t want a level of game-playing” over cuts and said that it would “be a big waste of time.” Hartzog said that “neither I nor the mayor want to play that budget dance.”

When asked if she was confident that the city’s reserves would be able to prevent budget cuts to programs during a potential recession, Hartzog reiterated that economists were forecasting an economic slow-down not an economic recession and that she had confidence in the city “weathering an economic slow down” without programmatic cuts.

Hartzog appeared less concerned about the potential for a recession than Johnson. Like Jiha previously stated, Johnson noted that an inversion of the bond yield curve is usually an indicator of an approaching recession. Hartzog conceded that a recession was “certainly possible,” but said that economists were forecasting a slow down, which would not be as severe. She also took the opportunity to state that the city has “built up our reserves and continued to have savings plans” during economic growth periods.

Johnson brought up a Citizens Budget Commission report, which said that a recession could cause revenue shortfalls of $15-20 billion over three years. This would use up the entirety of the city’s reserves. When asked if the administration thought that more should be added to the reserves, Hartzog reiterated that the reserves were sufficient to weather an economic slow down and said that the city was planning to add to the reserves moving forward.

Johnson also called out a New York Post article that claimed the city “is careening closer to all-out financial bankruptcy.” Johnson called the article “irresponsible” and Hartzog concurred. “We think there does need to be a level of improvement in transparency,” Johnson said, suggesting that OMB should provide “best estimates” of future revenue reserves because of OMB’s tendency towards conservative estimates. Hartzog said she does not believe that would be necessary.

Between the testimonies of Jiha and Hartzog, Lorraine Grillo made her first appearance before a City Council committee as commissioner of the Department of Design and Construction (DDC). Grillo has also retained her role as head of the School Construction Authority (SCA), therefore leading the two main city agencies responsible for construction projects. Council Member Vanessa Gibson, a Bronx Democrat and chair of the Capital Budget Subcommittee, praised the SCA under Grillo’s leadership for its “strong capital delivery.”

Grillo told the committee that the varied scale of projects, which include everything from sewers to playgrounds, presented a challenge for the DDC, which she said “should not neglect smaller projects,” because many affect New Yorkers’ quality of life. She also expressed frustration that the state has not granted “blanket design-build authority” for the city’s capital projects, saying that it would streamline the capital delivery process.

Jamie Torres-Springer, the first deputy DDC Commissioner, said that the state’s granting of design-build authority for the construction of four community-based jails, which are planned to replace the Rikers Island jails is “a really important opportunity for the city “to demonstrate the effectiveness” of design-build. Grillo added, “but imagine if we could use it for all projects?”

Grillo also noted that there are “layers of policy and red tape” at DDC that SCA does not have. She has ordered an agency-wide review. She also pointed to the DDC’s Strategic Blueprint, which she labeled a “far-reaching plan” and “broad outline of improvements” with “common-sense fixes.” One area of improvement that she highlighted was front-end planning. The DDC has expanded its front-end planning unit and now works with agencies before they submit their project initiation requests. According to Grillo, “we are beginning to see a difference.”

With preliminary budget hearings over, the next steps in the city budget process are seeing the results of the new state budget, due by April 1, followed by the City Council releasing its formal preliminary budget response. Soon after, the mayor will release his executive budget plan, setting off another round of Council hearings as well as public and private negotiations.

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by Andrew Millman, Gotham Gazette
   

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Preliminary Budget Hearings End with City Council Clamor for More Detail on Agency Cuts Fri, 29 Mar 2019 04:00:00 +0000
City Council Pushes on De Blasio Savings Program During First Budget Hearing https://www.gothamgazette.com/city/8331-city-council-pushes-on-de-blasio-savings-program-during-first-budget-hearing https://www.gothamgazette.com/city/8331-city-council-pushes-on-de-blasio-savings-program-during-first-budget-hearing city council j mccarten premlim

(Photo: John McCarten/City Council)


City Council Speaker Corey Johnson appeared frustrated on Wednesday with the de Blasio administration budget at the Council’s first hearing to examine the mayor’s $92.2 billion preliminary budget proposal for the 2020 fiscal year, which begins July 1 of this year.

Mayor Bill de Blasio released his preliminary budget proposal last month warning of the “tough choices” the city faces as it heads towards an economic slowdown, with revenues already coming in lower than last year. For the first time since he took office, the mayor instituted a Program to Eliminate the Gap (PEG), which is meant to find the majority of $750 million in additional savings the mayor promised by the time the executive budget is released in April.

Nonetheless, the mayor’s budget increases spending by $3 billion owing largely to costs from new contracts with labor unions, education spending, debt service costs, and fringe benefits. There are few new initiatives that add costs, while the threat of state budget cuts and cost shifts continue to loom -- the state is in a tougher fiscal situation than the city. The de Blasio administration also did not include any additional allocations to the city’s reserves, which remain strong but not as robust as some watchdogs believe they must be in order to withstand a recession.

“The Council agrees that we need to be cautious but that caution needs to be exercised with precision,” Johnson said in his opening remarks at Wednesday’s hearing, worried about the possibility that the mayor’s PEG program could lead to cuts in social services. He criticized Melanie Hartzog, director of the Office of Management and Budget, for her lack of specific answers about the PEG, and expressed frustration that the mayor seemed intent on finding millions of dollars in such savings after years of having ignored similar calls from the City Council.

Johnson also noted that the mayor’s signature initiatives, such as universal pre-kindergarten, 3-K, and the ThriveNYC mental health plan spearheaded by First Lady Chirlane McCray “are flush with funding” and safe from the PEG, compared with the rest of the budget. “Just because a program or initiative is new, transformative, or a mayoral priority, should not shield it from oversight,” he said. “The Council is not a rubber stamp. Everyone else is being asked to tighten their belts, while a few key initiatives seem exempt.”

“Everything must go under a microscope,” he said of the PEG program, but insisting that the city should not take away funding from agencies “where funding is already spread thin and agencies are already struggling to meet their core missions.” He noted that, as a result of the city’s focus on particular priorities, other larger issues are ignored. For instance, the de Blasio administration has focused on affordable housing through the Housing New York plan but NYCHA residents continue to live in deplorable conditions, he said. “Inattention to issues considered secondary and to longstanding problems can lead to a remarkable phenomenon of governing by monitor,” he said. “There are now federal monitors for NYCHA, the FDNY hiring process, the city’s jails, and police reform, to name a few.”

Hartzog, the administration’s top budget official, acknowledged early on in response to Johnson’s questioning that the city may have to find additional savings once the state budget is finalized (it is due by April 1) and personal income tax revenues become clearer.

Of the $750 million savings target, she said $544 million constituted the PEG and was to come from agencies finding efficiencies and cuts (the rest will be achieved through continuing a partial hiring freeze the mayor put in place last year and through debt service payments). Those target amounts for individual agencies were released on Tuesday. They include, for instance, $123 million from uniformed forces including the NYPD, FNDY and others; Health and welfare agencies, including the Administration for Children's Services and Health + Hospitals, will have to find nearly $147 million in savings; The DOE and CUNY will have to identify $110 million; Agencies in charge of housing and economic development will have to find $52 million in savings; Another $40 million will have to come from infrastructure, libraries and cultural institutions; and several other agencies will together have to find about $70 million. Even the mayor's office will reduce spending, by about $1.6 million. 

But Hartzog could not specifically say where each agency would have to look, which frustrated Johnson. “If we’re gonna have a real hearing on these cuts and do our job of oversight on the city’s budget, we can’t have a conversation with you today about whether those cuts make sense or are valuable when you’re not giving us specific programs,” he said. “This is strange to me.”

Hartzog, though, emphasized that OMB was working with agencies on the PEG and would have all the information by the executive budget. “This is not anything new that we have done,” she said.

Tensions seemed to rise between Johnson and Hartzog at times, including when he suggested that top OMB officials don’t treat Council finance staff with respect and have long ignored the Council’s recommendations on finding new revenues and agency efficiencies. When Hartzog refused to state her opinion on the city’s dearth of funding for outreach efforts for the 2020 Census, Johnson asked rhetorically, “Why are we having this hearing?”

Johnson and his colleagues, Council Member Daniel Dromm, who chairs the finance committee, and Council Member Vanessa Gibson, who chairs the capital budget subcommittee, also raised concerns about the city’s ten-year capital strategy and the lack of planned investments in the latter half of the plan.

Dromm pointed to several expenses that were missing from the budget including discretionary Council funding, which was $391.3 million last year; additional costs for school bus services as the Department of Education is in the process of securing new contracts; several one-time education programs funded up to $122.6 million last year; and an overtime budget worth $1.3 billion, $400 million lower than the average overtime spending from the last five years.

“More than ever we need to keep growing our reserves to protect against shortfalls and painful mid-year cuts to vital services,” he said. “Indeed, we can’t afford not to.”

Gibson, whose subcommittee was created last year to specifically examine the problem-ridden capital process, said the administration “continues to fail to comply with the letter and the spirit of our charter” in providing the necessary documents about the capital budget. The $104.1 billion preliminary ten-year capital strategy is $14.5 billion more than the last ten-year strategy that was approved by the Council.

Hartzog did have one piece of good news about the city’s capital budget. She noted that Moody’s Investors Service upgraded the city’s general obligation bond rating, which would lower the city’s borrowing costs. Dromm later said the Council projected about $343 million in savings from that rating upgrade though OMB did not have its own projection.

But the strategy, Gibson said, includes several instances of “unrealistic planning,” noting that $75.5 billion or 72.6 percent of the ten-year capital strategy is outlined for just the first five years. For instance, it includes $853 million for NYPD facilities in the first three years and only $160 million for the same need in the next seven years. The capital budget also includes “significant excess appropriations” and does not track capital project spending or completion, Gibson noted.

“This issue is not new to this administration,” she said, though she did praise officials for reducing excess appropriations last year by $5.9 billion and adding new budget lines to give more clarity to the process.

Hartzog conceded that capital planning has been a challenge for the city but that the administration has been working to distribute capital expenditures across the ten-year plan. “We’re gonna continue to work on that so that you will see over time that the...out-years of the ten-year plan smooth out and it wouldn’t be as high in the first five years,” she said.

Comptroller Scott Stringer and officials from the Independent Budget Office (which released a report on the budget on Wednesday) also testified before the Council on Wednesday. Stringer, who released his own analysis of the mayor’s preliminary budget last week, continued to emphasize the need for a greater budget cushion by putting away more funding in reserves. “Given the uncertainty on the horizon, I am increasingly concerned that we simply have not done enough to hedge against the risks,” he said in his testimony.

The Council will continue to evaluate the preliminary budget over the next several weeks, with specific agency heads being called to testify, before the Council issues its response. The mayor’s updated executive budget in April will then go through another round of Council hearings before the final spending plan for the next year is adopted.

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by Samar Khurshid, senior reporter, Gotham Gazette
     

Read more by this writer.

Note - this article has been updated with PEG targets released by the mayor's office and to clarify that the PEG is meant to find $544 million in savings, not the total $750 million.

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City Council Pushes on De Blasio Savings Program During First Budget Hearing Wed, 06 Mar 2019 05:00:00 +0000
City Council Begins New Focus on Capital Budget, with Eye Toward Transparency https://www.gothamgazette.com/city/7554-city-council-examines-capital-budget-with-eye-on-transparency https://www.gothamgazette.com/city/7554-city-council-examines-capital-budget-with-eye-on-transparency vanessa gibson

Council Member Gibson (photo: William Alatriste)


As the New York City Council continues to examine Mayor Bill de Blasio’s $88.67 billion preliminary budget for 2019, a newly created committee under Council Speaker Corey Johnson is paying extra attention to the ‘other’ budget - the capital plan - the administration’s proposed spending on schools, parks, jails and other long-term infrastructure projects.

Over the last few weeks, the new Subcommittee on the Capital Budget chaired by Council Member Vanessa Gibson, under the purview of the Committee on Finance, has been conducting oversight of agency-specific capital spending and, on Tuesday, the committee turned its eyes to the administration’s overall $45.9 billion preliminary capital budget for 2019-2022.

That capital budget proposes authorizing $11 billion in new spending for the 2019 fiscal year alone. The city’s fiscal year begins July 1.

Separate from the proposed capital budget is the capital commitment plan. While the budget is set aside for all capital needs not previously allocated, the commitment plan accounts for the money the city actually intends on spending on capital projects in sum. At Tuesday’s hearing, Council Members analyzed the $79.6 billion capital commitment plan for 2018-2022, including $19.3 billion that would be spent for fiscal year 2019 (including funds rolled over from previous years).

“For too long, the majority of our attention, the public’s attention, and the advocates’ attentions has been on the expense portion of the budget,” said Speaker Johnson, in his opening statement at the hearing, referring to the city’s annual spending on operations, typically simply referenced as the city budget. “This has left mayoral administration after administration to manage the capital budget process largely without the rigorous review it deserves,” Johnson said, giving indication to why he created the new subcommittee. This is the first budget process since Johnson was elected speaker by his 50 Council colleagues.

Johnson, and several of his colleagues after him, criticized successive administrations for allocating a majority of funds in the early phases of years-long projects, rolling over unused funds, and lumping in dozens, if not hundreds, of projects under broad budget lines.

Gibson pointed out the glaring discrepancy between how much the city was appropriating for capital projects and how much was being spent each year. “This is certainly not a new phenomenon, this is not a new concept,” Gibson said, noting that between fiscal years 2012-2017, the city had on average appropriated $36.7 billion annually, planned to spend $15.3 billion on average, and spent only $8.5 billion.

“As always, we will approach the capital budget process with caution,” said Melanie Hartzog, director of the Office of Management and Budget, in her opening remarks Tuesday, emphasizing that the city was being careful about its spending on debt from infrastructure projects. Hartzog, recently promoted to the position by de Blasio, noted in her testimony before the Council the impact of the federal and state budgets on New York City, including proposed cost shifts for MTA capital to the city -- a proposal from Governor Andrew Cuomo that is being debated in Albany -- and the devaluing of a federal tax credit that incentivizes the creation of affordable housing. She also reiterated many of the new and ongoing investments made by the administration in traffic safety, flood mitigation, transit infrastructure, schools, affordable housing, economic development and public housing.

Hartzog said the administration has taken steps to provide more accurate assessments of capital needs, by investing at least $50 million for agencies to plan and review projects before funding is put toward them. The administration has also increased staffing at agencies with large capital needs to focus on project planning and management, she said.

A key factor in possibly speeding up capital projects, Hartzog said, is design-build, a streamlined process that would allow the city to solicit combined design and construction bids for infrastructure projects. To use design-build, the city requires approval from the state, where passage has been elusive thus far, though there is the possibility this year of authorization for specific projects. It’s one of many key issues that the de Blasio administration has been pushing in Albany as Cuomo and the state Legislature negotiate the state budget.

“Applying the design-build approach would shave hundreds of millions of dollars from the cost of projects and reduce completion times by 18 months on average,” Hartzog said at the hearing. The city wants design-build for projects like rebuilding a portion of the Brooklyn-Queens Expressway, major NYCHA repairs, and building out jail capacity to replace Rikers Island facilities, among others.

The hearing was by-and-large amicable and Hartzog repeatedly promised to work with the Council on improving its capital process, having ongoing discussions with Council Members about proposed projects in their communities and conducting more regular reviews of capital spending. But the Council could not extract concrete commitments on reforms they hoped to see.

Johnson pushed for a 15 percent cap on the difference between excess appropriated funds and the capital commitment plan, using an industry-standard ratio for budgeting capital projects. “Basically, the Council is annually presented with a capital budget to adopt that gives twice the authority to spend over what is planned...It’s my opinion that it is time for a new status quo,” he said.

Hartzog, however, said the administration has increased the level of spending in the commitment plan “significantly” and reiterated that they are working to “rightsize” agency-specific capital plans. She noted that the 15 percent contingency funding applies to projects and cannot be used as a standard for appropriations. OMB Deputy Director Charles Brisky also emphasized that contingency funding allows needed flexibility for projects and that examining the difference between appropriations and commitments could be misleading.

“If you think that there’s more to be done, we’re open to working with you and your staff to get that done,” Hartzog added.

Council Member Daniel Dromm, chair of the finance committee, focused his attention on how the city plans to raise funds for capital projects, and the debt it incurs in the process. He noted that though the city’s borrowing has largely hewed close to expectations, the administration continues to overestimate the debt it will incur down the line.

“This overestimation skews the picture of the city’s debt affordability over the plan and provides the administration a convenient source of savings for subsequent citywide savings plans,” Dromm said in his opening statement, referring to the administration’s voluntary savings program for city agencies, which the Council has criticized for an inadequate focus on creating actual efficiencies.

Hartzog pushed back, calling it a “little bit of an apples-to-oranges comparison.” Her colleague, Brisky, explained that city borrowing was for projects that are years into construction or had already been completed, while the commitments were for future projects. “That’s a little bit harder to project,” he said.

When Gibson pushed for more detail on individual capital projects, yet again the budget officials demurred. “Are you willing to commit with us to looking at...how we can itemize some of those budget lines to look at specific projects and delineate a little bit of the large, overly-broad general budget lines the Council has typically received?” Gibson asked.

Hartzog agreed, but added, “I will say that, and I’m sure you agree with me, what we don’t want to do is cause any delay in any projects getting done.” She cited the Department of Environmental Protection which has large pots of capital funding set aside for emergencies that are hard to predict.

Although fiscal monitors have generally praised the de Blasio administration’s handling of the city’s finances, the Council’s criticism tracks with reports by independent watchdogs that the city’s capital planning needs to be more efficient.

“Rightsizing and right timing the capital plan is necessary for a more effective and more transparent capital planning process,” stated a recent report by Citizens Budget Commission. “Reducing planned commitments in the early years of the plan to a more attainable level would require the City to clearly articulate its capital priorities and immediate needs. It would also facilitate improved tracking of capital projects and allow for more accurate projections of City borrowing.”

[Read: Under 'Threat' from D.C. and Albany, De Blasio Presents $88.67 Billion Preliminary Budget]

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by Samar Khurshid, senior reporter, Gotham Gazette
     

Read more by this writer.

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City Council Begins New Focus on Capital Budget, with Eye Toward Transparency Tue, 20 Mar 2018 04:00:00 +0000
City Council Begins Examination of De Blasio Budget Plan https://www.gothamgazette.com/city/7519-city-council-begins-examination-of-de-blasio-budget-plan https://www.gothamgazette.com/city/7519-city-council-begins-examination-of-de-blasio-budget-plan Speaker Corey Johnson podium

Council Speaker Johnon (photos: John McCarten/City Council)


City Council members pressed budget officials from Mayor Bill de Blasio’s administration for more transparency and a better accounting of spending and revenue plans at a Monday hearing on the mayor’s $88.67 billion proposed preliminary budget for the 2019 fiscal year, which begins July 1. It was the first hearing of what will be weeks of public discussions, and the first under the new City Council speaker and new Council finance committee chair.

“I want to focus on what will be a recurring theme of these hearings -- ensuring that the City budget is fair, transparent, and accountable to New Yorkers,” said Council Speaker Corey Johnson, in his opening statement, kicking off the series of hearings at which agency heads and top city officials will present to the Council their funding priorities for the next fiscal year while defending their programs and practices.

“For too long, administration after administration has presented the budget to the Council in a manner that makes it difficult for us to do our Charter-mandated duty of budget oversight and review,” Johnson said, decrying the “frequent usage of vague and over-inclusive units of appropriation” that make city spending hard to track, and the lack of measurable connections between budgeting and results.

Johnson also expressed concern about the ballooning of the city budget under de Blasio, noting that the city expects to spend as much as $95.2 billion by the 2022 fiscal year, and promised a “renewed focus” on the city’s capital budget. Johnson has created a special capital budget subcommittee for that purpose.

Over the course of several hours, the Council heard testimony Monday from representatives of the Office of Management and Budget and the Department of Finance, Comptroller Scott Stringer, and representatives of the Independent Budget Office. The hearing saw a few testy exchanges between Council members and new OMB Director Melanie Hartzog, indicative of the increased independence that Johnson has promised under his leadership. Members pushed hard when Hartzog gave them answers that they believed lacked sufficient detail and Hartzog, in turn, seemed to dig in when faced with repeated critical questions.

Council Member Daniel Dromm, the new chair of the finance committee, emphasized in his opening statement that the Council would have a clear eye on “accountability, performance and efficiency” in the upcoming budget hearings. “Even within an $88 billion budget, resources are scarce and our city’s needs are great,” he said. “With so many competing, worthy priorities, we owe it to our constituents to honestly evaluate all levels of the budget.”

Although Dromm noted that de Blasio had proposed little in the way of new spending -- $393.5 million in additional spending for the current fiscal year and $364 million for the next -- he said particular items called for increased oversight.

Among those are spending on homelessness, which has increased by $2.8 billion under de Blasio, including a $150 million baseline increase in the preliminary budget for shelters. “Obviously, the Council supports spending money in order to combat homelessness and to provide everyone in the shelter system with a safe and permanent home,” Dromm said. “But that does not mean that we will authorize the administration to spend carte blanche.” He said the Council had yet to hear a “clearly articulated strategy” on homelessness from the administration.

Dromm also questioned whether the mayor’s Citywide Savings Program (CSP), a voluntary program for city agencies, was finding “real efficiencies” and pushed for reporting by the administration on the CSP’s implementation in the annual Mayor’s Management Report.

“Our emphasis in the preliminary budget is caution,” OMB Director Hartzog told the Council, stressing that the $750 million in new spending across the two years in the budget was offset by $900 million in savings. Hartzog took over her portfolio two months ago after her predecessor Dean Fuleihan was appointed first deputy mayor by de Blasio.

In her testimony, Hartzog warned of nearly $1 billion in fiscal threats the city faces from the state and federal budgets that will affect everything from education and public safety to affordable housing, health care, and transit funding. “Facing great risks from both Albany and Washington, we respond with caution by adhering to the same foundational principles of fiscal management that we have in the past,” she said.

In keeping with past years, the city has set aside “strong reserves that serve as a buffer to the unexpected,” Hartzog said. The preliminary budget includes $5.5 billion in reserves, including $1 billion in the general reserve, $250 million in the Capital Stabilization Reserve, and $4.25 billion in the Retiree Health Benefits Trust Fund.

Hartzog touted the city’s “targeted, prudent investments” in the new budget, including the expansion of pre-kindergarten for more three-year-olds in the city, efforts to increase the city’s affordable housing stock, funding to protect tenants from construction harassment, increased capital funding for the New York City Housing Authority, spending on mental health services and the full rollout of the NYPD’s body camera program, among others.

Hartzog also said that funding for DemocracyNYC, a voter engagement program announced by the mayor in his State of the City speech last month, would be included in the executive budget which is released after the Council has held weeks of hearings and had an opportunity to respond to the preliminary spending plan.

It was clear early on that Johnson did not intend to take it easy on the administration, jumping straight into property tax reform as he questioned Hartzog. The mayor had promised action on property taxes in January but has yet to make any policy moves. Despite repeated pushing from Johnson, Hartzog was similarly noncommittal. “As the mayor said, you’ll hear more from us very soon,” she said, without providing a concrete timeline.

In several instances, when Council members expressed disappointment with the funds allocated to certain programs and agencies, Hartzog promised to have ongoing conversations with them. But, at Dromm’s urging, Council members avoided going deeper into agency-specific questions, a break from previous years when members grilled top budget officials on various aspects of city government. There will be specific agency budget hearings beginning Tuesday.

One issue that several members returned to, however, was the city’s spending on housing homeless New Yorkers in cluster sites and emergency hotel shelters. Hartzog repeatedly told members the city could not delineate that spending, owing to constant updates and reestimates of costs related to homelessness spending. Johnson noted that the preliminary budget included a $169 million increase in baseline funding for shelters, but with few results to show for it.

“It’s concerning to the Council that we keep adding hundreds of millions of dollars on an annual basis but we haven’t seen a significant decrease in the homeless population,” Johnson said to Hartzog at one point.

Johnson also failed to get a commitment from Hartzog on providing more units of appropriations in the budgets for city agencies that lack detail and transparency. He noted, for instance, that the Department of Corrections has one budget line for jail operations, despite running several jails across the city. Hartzog said she could not commit then and there to creating more units but promised to work with the Council on its concerns.

Other members followed Johnson’s lead, some forcefully pushing their priorities that included funding for the summer youth employment program, increased contracting for minority- and women-owned businesses, senior services, health coverage, and more.

Council Member Rory Lancman, a vocal critic of the de Blasio administration, raised the issue of funding for the ailing MTA and scandal-ridden NYCHA. “They are two areas where the mayor has to some degree or another, I won’t say abdicated, that’s too judgmental, but has offered the view that they are either not his problem or the origin of the problems lie elsewhere,” Lancman said.

Hartzog tried to float arguments that de Blasio has put forward -- that the state should fund the MTA and new MTA revenue streams should include “lockboxes” to keep the money in the city, and that the administration had made unprecedented investments in NYCHA in the absence of federal and state funds. Lancman, though, cut Hartzog off and insisted she focus on the budget before them.

Although tensions did not boil over, it was obvious that the Council was not pulling its punches. Johnson acknowledged as much at the end of his round of questioning. “It’s never personal,” he told Hartzog. “It’s just doing our job.”

Comptroller Scott Stringer, who testified in the afternoon, praised the mayor’s budget proposal for including more funding for the expansion of 3-K for All, capital funds to repair and replace NYCHA heating systems, and for closing the first jail on Rikers Island.

But Stringer had a warning for the Council and the administration. “I am concerned that we are beginning to see warning signs of a slowing economy,” he said, emphasizing as he has done for years that the city needs to set aside more rainy day funds. “More than ever, our spending decisions must be data-driven and evidence-based. We must ensure that no dollar is going to waste,” he added. Two signs he pointed to were significant job losses in the last quarter of 2017, after years of sustained employment growth, and a reduction in the city’s cash balance -- from $5.4 billion in fiscal year 2017 to only $1 billion in the current fiscal year -- from slowing growth of non-property tax revenue.

Stringer had clear prescriptions for the city. He has called for a “budget cushion” between 12 and 18 percent of the city’s operational budget, while the city’s reserves currently stand at only 9 percent or $8.5 billion.

“A more robust savings program is critical to building up our reserves and reducing the likelihood of cutting city services down the line,” he said. “But it is not enough to find a few efficiencies here and there. It’s time to start applying a much more rigorous test to our spending – are we getting real results for our investments?”

He also reiterated that he would be closely examining the budgets and expenditure of city agencies on his “watch list” -- the Department of Homeless Services, the Department of Education,2 and the Department of Correction. “Let me be very clear here in saying that I wholly agree with, and share, the mayor’s goals of reducing homelessness, improving our public schools, and closing Rikers,” he said. “But we must ensure that we are working toward these goals as efficiently and effectively as possible. Because as things stand now, I’m concerned that we are in a weaker position than we should be.”

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by Samar Khurshid, senior reporter, Gotham Gazette
     

Read more by this writer.

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City Council Begins Examination of De Blasio Budget Plan Mon, 05 Mar 2018 05:00:00 +0000