Gotham Gazette

The Place for New York Policy and politics

Topics

Education, Housing, Health...And The 2007 Budget


Last year, one million New Yorkers - one out of every eight people in the city - visited a soup kitchenor food pantry because they were hungry. So it seemed like a reasonable question to ask why Mayor Michael Bloomberg cut $2 million in funding for these programs in a year when the city government has a $3 billion surplus.

The response from the Bloomberg administration to this question asked by City Councilmember Bill DeBlasio at one of the budget hearings completed last week, however, wasn't so straightforward.

Human Resources Administration Commissioner Verna Eggleston argued that it wasn't really a "cut." If the City Council wanted to allocate additional money like it did the year before, she said, it was welcome to.

Then, Eggleston said others - the state and federal governments and private charities - could pitch in money to feed hungry New Yorkers.

Finally, she argued that providing meals is just a small part of a larger fight. "I have found no scientific correlation between feeding someone and reducing poverty," she said.

DeBlasio never did get his answer, and the real issue was never addressed.

The number of people seeking food from soup kitchens and food pantries is up 40 percent from five years ago. But funding for these programs has remained the same. In the city's $52 billion budget, less than .01 percent ($12 million) is allocated to fund emergency food programs.

In the last few weeks, New Yorkers have heard and read much about new initiatives in the city budget:
• The mayor plans to hire 800 more police officers
• The State Legislature wants to authorize $11 billion for the city to build new schools
• And the city is hiring more caseworkers in the hope of preventing the death of another child like Nixzmary Brown, the 7-year-old who was killed by her stepfather.

How do the budget priorities match up to the concerns of everyday New Yorkers?

Children
Education
Crime
Health
Housing
Sanitation
Poverty

CHILDREN

In early January, the local news was dominated by the story of a seven-year-old girl named Nixzmary Brown, who was allegedly beaten, tortured and killed in her home by her stepfather.

In his preliminary budgetpresented in January, Mayor Bloomberg responded to criticism of the Administration for Children's Services by boosting funding for the agency's efforts to investigate allegations of child abuse and neglect.

The mayor committed increase spending by 20 percent - hiring 250 new case workers and creating a new system of tracking cases of abuse and neglect.

But even the mayor admitted that the changes and the additional funding may not be enough to prevent future incidents.

"What really happened with Nixzmary Brown is, her parents killed her," he said. "We as a society didn't recognize the danger the child was in and respond fast enough, obviously."

While child advocates have generally praised the decision to increase funding for this and other programs, like new foster care initiatives, they are concerned about cuts to other areas that they say will hurt children.

Overall, the budget cuts a total of $100 million for children's services including a decrease of $75 million in funding for day care - equal to about 9,000 slots - due to expectations of less state and federal aid, according to an analysisby the Citizens Committee for Children.

EDUCATION

For years Brooklyn's Midwood High Schoolhas had the dubious distinction of being one of the city's most crowded schools. About 4,000 kids jam into a building intended for 2,300. To accommodate the hordes, the school employs a complicated schedule with some kids arriving as early as 7 a.m. while other don't start school until late morning. For years, the city has promised "relief" in the form of an annex with science labs, libraries and other facilities that would free up space for classrooms in the main building. But relief has never arrived.

This year the city once again declared its intentionto build the annex - part of its five-year capital plan for schools. But the approximately $30 million project became enmeshed in the battle between the city and the state over how much money Albany should give the city to build, maintain and operate schools.

Since the Giuliani administration, the battleground for the education budget has shifted. In the 1990s, many education advocates saw City Hall as the villain. But even in tight times, the Bloomberg administration has cut deeper into the budgets of other agencies in order to spare schools. And this year the administration proposed a small increase. City Council members and education advocates would still like the city schools to have more money for smaller class size, universal pre-Kand improved school facilities.

Most lawmakers and education advocates expect the majority of the money to come from Albany, not from City Hall.

Despite the problems in the schools - high dropout rates, low achievement in middle schools and thousands of elementary school students who struggle with the most basic reading and arithmetic - this year's proposed operating budget for the city's more than 1,100 public schools offers no major new programs, cuts - or major controversies.

The mayor's preliminary budget for the 2007 fiscal year includes a $14.9 billion operating budget for the nation's largest public school system, about $148 million more than the current budget. Much of it will go to benefits for teachers as part of the contract with the teachers union. Other increases go to:


• school safety as the department hopes to hire an additional 286 school safety agents
• special education, where more early diagnoses of children with autism is contributing to a rise in costs
• and planning for more new small schools.

"Overall," Chancellor Joel Klein said at recent hearing on the education budget, "we expect schools to receive about the same level of funding as last year, unless they experienced changes to their registers, average teacher salaries, or special education enrollment."

The council seemed to accept this business as usual budget. At the hearings, no council member voiced strong objections, with most using the forum to express support for their favorite causes: Lewis Fidler calling for more gifted and talented programs, for example, and Simcha Felder asking the chancellor to consider selling off what the council member considers excess school buildings.

Although it seems unlikely, things could change before the adoption of the final budget on June 30. An analysis (in pdf format) of the Department of Education budget by the Independent Budget Office notes that the department has instituted a number of policy changes that could boost costs. These include the extension of the school day, generally for students needing additional help, as well as the opening of 36 new small junior and senior high schools and the expansionof translation services for parents who do not speak English.

The state legislature's proposed budget averted a possible showdown on the capital budget by setting up a plan to borrow $11.2 billion in funding for school construction and improvements over the next five years. The funding - if it materializes -- should allow the city to proceed with its five-year $13 billion plan(in pdf format) to build new schools and improve existing ones.

CRIME

The crime rate in New York City is at an all time low. The number of crimes has fallen nearly 25 percent since 2001; the number of murders, subway crime, and robberies are all down.

Keeping crime down is a priority for Mayor Bloomberg - and he is demonstrating that this year in his budget.

The mayorannounced that New York City will add 800 police officers and 400 civilians to the police department, which currently has 36,450 officers. It is the largest expansion of the force since 1993.

Bloomberg said the new officers are needed because the city is growing: 125,000 new residents have moved in since 2001 and an additional 200,000 new residents are expected over the next five years.

The addition of 1,200 employees will cost the city $33.8 million in the next fiscal year, doubling by the next fiscal year, and nearly tripling by 2010. The mayor also argues that hiring new police officers will help reduce overtime costs, which now total about $250 million a year.

But some question if hiring the new officers will affect the crime rate - more cops do not necessarily translate into less crime. New York City already has almost twice as many cops per resident as Los Angeles and almost six times the officers per square mile. And Washington DC has far more cops per resident than New York, but one of the highest crime rates of any large city. (For more, read Gotham Gazette's crime topic page)

And adding more police officers is not even guaranteed to reduce the cost of overtime. At City Council hearings, Commissioner Ray Kellytestified that hiring new officers does not mean that overtime costs will go down.

The mayor's critics say that the police department will have troubleattracting new recruits when the starting salary is only $25,100 a year. The number of applicants who signed up to take the February 2006 test dropped by 31 percent over last year.

And hiring more police won't change how many New Yorkers feel about the cops who patrol their neighborhood.

This year, the mayor wants to cut the budget of the Civilian Complaint Review Board, an independent agency that investigates police misconduct. The agency would lose 24 of its 184 investigators under the mayor's proposed budget.

This marks the third straight year that the Bloomberg administration has proposed such a cut in investigator staffing, but the City Council has stepped in and funded the 24 positions each year.

The numbers of complaints about police misconduct in the first few months of this year are up 14 percent. At the same time, it is taking longer to investigate claims of misconduct. In 2005, it took an average of 293 days to investigate a claim, up from 243 days in 2003. Police officers cannot be disciplined if more than 18 months have elapsed from the date a substantiated incident occurred.

HEALTH

In his budget two years ago, Mayor Bloomberg significantly increased the funding that the city dedicates to its 11 public hospitals. As part of that plan, there is $150 million in additional aid in this year's budget.

Still, the Health and Hospitals Corporation, which manages the public hospitals, ran a deficit of $573 million this year. It is expected to grow to $889 million by 2010.

Many hospitals in New York are struggling, and there are differing opinions about how to solve this problem. The public hospitals say the problem is the 435,000 uninsured patientsthey serve each year, knowing that if these patients do not pay, the hospitals themselves must absorb the cost of the care they provide them.

Within the hospital system and across the state, aggressive efforts to enroll people without health insurance have been successful. Still, the Health and Hospitals Corporation is hoping for a lot of help from elsewhere - it estimates that it will need $382 million in combined state and federal aid.

If the hospitals do not get the aid they are counting on, they will soon be unable to cover their expenses. This would mean the city might have to bail them out - or patients would have to deal with service cuts.

Also in the proposed health budget is the mayor's major new initiative to treat diabetes. He has allocated $1.2 million each year for the next five years to better track people with the disease and get them the help they need.

But critics say the mayor may be undermining his efforts in other areas of the budget.

In the parks budget, for example, the mayor wants to charge fees at six public recreation centers. However, a recent studyby the Independent Budget Office found that the fees discouraged New Yorkers from using the recreation centers. At 20 centers where the city instituted fees in 2002, membership fell by 13 percent in the first year after fees were imposed. The drop was steepest at the centers with pools, which now charge $75 a year; membership there fell by 22 percent.

The six centers where the new fees would be imposed are all in neighborhoods with high rates of obesity and diabetes, prompting some to question the mayor's priorities.

"We're all very interested in people's health, well-being and quality of life," Public Advocate Betsy Gotbaumtold the New York Times. "The city may see the fees as a way of increasing the revenue, but I don't think it's worth the price you pay to people's health."

HOUSING

A recent surveyfound that there are 62,773 millionaires in Manhattan, which sounds like a lot until it is compared to another statistic: the average price of an apartment in Manhattan is nearly $1 million.

So where do the 8.03 million other New Yorkers live?

The cost of housing is one of the primary concerns for city residents. Half of New York City renters pay more than 30 percent of their incomes for housing, and nearly a quarter pay more than half of their incomes for housing.

The city's housing crunch is particularly difficult for low-income New Yorkers who are finding that they have fewer options. As of April 2005, more than 128,000 were on a waiting list for federal Section 8 housing vouchers, the federal housing subsidy that helps thousands of low-income New Yorkers pay their monthly rent, and nearly 150,000 were on the waiting list for public housing.

Since he took office in 2002, Mayor Bloomberg has committed to building and preserving 165,000 new affordable homes and apartments by the year 2013 - what he bills as "the largest municipal affordable housing plan in the nation's history." The mayor has also made efforts to address homelessness and has created a rent subsidy program called Housing Stability Plus. In the last few years, Bloomberg has also offered homeowners a $400 rebate.

But criticssay the mayor is ignoring other critical housing issues.

For every new affordable apartment built, the city loses others as rent-stabilized apartmentsdrop out of the state-controlled system.

Bloomberg has not fought in Albany for the repeal of the Urstadt Law, which gives the state power over rent regulations, arguing that the city can not afford to administer the system.

"Bloomberg seems perfectly content to preside over the demise of the rent regulation system," Michael McKee of Tenants and Neighbors, a statewide tenants' coalitiontold Gotham Gazette. "I don't think he has any inkling of how important it is to the future of the city. And his failure to fight to reverse the phase-out of rent regulation is going to prove deadly to the city."

SANITATION

Few New Yorkers think about garbage in the city except when their street or sidewalk is littered with it, or they get a ticket for not separating out their recycling.

But each year the cost of dealing with the 50,000 tons of trash the city produces each day increases - and it adds up to hundreds of millions of dollars that could be spent on things like education, health care, housing - or even returned to residents in tax cuts.

This year the mayor and the City Council are supposed to agree on a new plan for disposing of the city's garbage. So far the debatehas focused on how to get it out of the city (barge vs. truck), which neighborhoods should handle the trash (ie, South Bronx vs. Upper East Side), but it looks like dealing with the garbage will only get more expensive.

In 2007, the city has budgeted $294 million for waste export, $16 million more than last year.

POVERTY

Twenty percent of all city residents - 1.8 million people - live below the poverty level. And there are signs that poverty is growing worse every year.

There are dozens of government programs - job programs, food stamps, homeless shelters, and public health insurance - that all meant to address this issue. But overall funding for services for the poor is not increasing.

When city government officials talk about poverty, they often focus on one statistic - how many people are on the welfare rolls. By that measure alone, things are getting better in the city. The number of people receiving public assistance in New York continues to drop. Currently, about 405,000 people receive benefits, down from 462,000 in 2002.

However, this doesn't mean more people are getting jobs or making enough to live day to day.

New federal welfare to work requirements could present additional problems for New York City this year.

The Department of Human Resources Administration estimates that the state could be fined up to $237 million for failure to meet welfare-to-work requirements; New York City would have to pay up to two-thirds of this amount.

Another challenge is getting people to use the food stamp benefits they are entitled to. Currently, 1.1 million New Yorkers are on food stamps, up 37 percent since 2002. However, the United States Department of Agriculture estimates that another 300,000 people are eligible.

"These numbers do not mean that New York has widespread starvation as now exists in places like Ethiopia or North Korea," said John Charles Dwyer of the New York City Coalition Against Hunger. "But it does mean that 1.2 million New Yorkers are skipping meals, reducing portion sizes, choosing between food, rent, utilities, and health care."

RELATED ARTICLES:

The 2007 New York City Budget

 

The Mayor's Underwhelming Budget For 2007 by Glenn Pasanen  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hiding Behind the Numbers


New Yorkers recently learned that the syphilis infection rate is down nine percent in the city, while the cost of asphalt is up $6.82 a ton. It takes 2.4 minutes less now than it used to for the average person to get help on the phone for a parking ticket. The Staten Island Ferry is increasingly late.

They learned all this from newspaper reports in the Staten Island Advance and the New York Times about a document called the Preliminary Mayor’s Management Report.

But what New Yorkers did not learn is that it costs $278 million more a year to dispose of the city’s garbage because the Fresh Kills landfill closed – bolstering the argument by critics who questioned the wisdom of closing it in the first place.

They also did not learn why it is taking longer for the fire department to respond to fires, why more people are dying in fires, or how the mayor plans to address the problem.

And they did not learn why the police department is spending more money (nearly $4 billion a year) and paying more in overtime ($400 million a year) even though there are fewer police officers on the force.

The mayor's management report is supposed to be one of the central ways to measure the performance of city government. And, by law, the report is supposed to be a tool to help lawmakers decide how to spend the city’s $50 billion annual budget.

While Mayor Michael Bloomberg has been praised for bringing new technologies and a business-like approach to city government, his administration is particularly stingy when it comes to sharing vital information with the public, and his approach to the mayor's management report is a prime example.

For all of the numbers and data that do come out of the mayor’s office, much of the most important information is not available, making it difficult for New Yorkers to assess how well the government is doing its job, and the direction it is setting for the future.

MEASURING THE CITY

Since 1977, the mayor has been required by the City Charter to issue two reports each year designed to measure how responsive city government is to the people it serves:

• The Preliminary Mayor’s Management Report (released in February) evaluates each city agency’s performance over the first four months of the fiscal year and presents goals for the future.

• The Mayor’s Management Report (issued in September) examines how each agency actually performed over the fiscal year.

Each mayor has used these reports in differing ways.



A new approach to government accountability -- officially called "performance assessment" but more colloquially, compstatmania -- compiles, analyzes and interprets statistics in order to spot trends, gaps and overlaps in city services. It's not magic -- it's hard work, and follow-up. In this series, Gotham Gazette looks at this approach to improving city services.

Ed Koch used it as a kind of report card, issuing “C’s” to commissioners that he did not think measured up. David Dinkins painted a picture of New York City's growing social problems in an effort to win state and federal aid. Rudolph Giuliani made a grand show of his presentations, describing with dozens of graphs and charts how the city had become a better place under his leadership.

Mayor Michael Bloomberg, by contrast, has trimmed the report to about a third of its previous size, put information online rather than in a large print book, and spends little effort on drawing attention to it.

In February, when he released his most recent Preliminary Management Report -– which provides information from July to October of 2005 -- Mayor Bloomberg said that his administration has an “excellent record of achievement” and “continued strong performance in the delivery of city services.”

In other words, he highlighted the good news and downplayed the bad news.

The good news in the report is that:

•The number of murders is the lowest since 1963
• Felony crimes are down 4 percent
• The average police response time is six seconds faster
• 93 percent of city streets are “acceptably clean”
• The number of pothole repairs increased by 5 percent
• 97 percent of troublesome trees were removed in 30 days
• New cases of childhood lead poisoning declined by 9 percent
• And the number of children in foster care is at the lowest point since 1987.

The bad news is that:

• Only 53 percent of high school students graduate in four years
• The average fire department response time is 14 seconds slower
• 22 people died in fires, eight more than the same period last year
• 54 people died in traffic accident, six more than in the same period last year
• It took more than 6 hours on average to respond to a broken elevator complaint in public housing, 1 hour more than last year
• The Staten Island Ferry is slower
•And lawsuits against the city are up.

One of the most important statistics, Bloomberg said, is that citizens have unprecedented access to government through the 311-call line, which is being used by more New Yorkers every month. During the four months time examined by the report, the city received 4.2 million calls, three quarters of which were answered in 30 seconds or less.

While the 311 data is a potentially valuable source of information on city services, the Bloomberg administration fails to share the information with other elected officials, the City Council, or local community boards, which are charged with monitoring the well-being of their particular neighborhoods.

Overall, the Bloomberg administration has cut agency budget and performance data to the bone, arguing that less is better. Sometimes less is simply a lot less.

USEFUL INFORMATION OR OUTDATED EXERCISE?

So what are average New Yorkers to make of all of this data? And is it an accurate and helpful snapshot of the city government?

In the past, Mayor Bloomberg has argued that the report is not very useful.

In 2003, he even asked his charter revision commission to look into whether or not it should be eliminated. After a series of hearings, the mayoral commission came to the conclusion that the Preliminary Management Report is:

• Outdated and rooted in “mid-1970s thinking”
• Not an effective means of assessing or improving performance
• And a waste of money.

The commission placed an initiative on the ballot to eliminate it.

Opponents of the plan to kill the report, like the New York City Council, argued that it was one of the few ways to hold city agencies accountable.

On Election Day, voters rejected the measure -– and so Mayor Bloomberg continues to issue the report begrudgingly.

“Although at one time the city was a trailblazer in performance reporting,” a recent report from the Independent Budget Office states, “the lack of linkage between performance data reported in the [preliminary mayor's management report] and elsewhere, and clear spending information, makes it difficult for citizens, elected officials, and even agency mangers to know what they are getting for their money and to evaluate alternatives.”

CRITIQUING THE MAYOR’S NUMBERS

There are a number of problems with the Preliminary Mayor’s Management Report in its current form.

1. Missing Numbers – Millions for Garbage

One problem of the report is that it does not break down budget figures to show how each agency spends its money.

For example, the Department of Education section reports that between July and October of 2005 the agency spent $4.3 billion on education, about $422 million more than the same time last year. Overtime costs are also up from $1.5 billion to $2.2 billion for the same period.

But the report makes no effort to explain how the money is being spent, why overtime costs have increased, or if there are plans to spend more or less over the rest of the fiscal year.

In other places, the mayor’s report simply omits some crucial financial information.

For example, in the current report the Department of Sanitation section does not say that roughly 25 percent of the sanitation budget goes to contractors since the closing of the Fresh Kills landfill by the Giuliani administration. According to the Independent Budget Office’s analysis, $278 million goes to seven private vendors through waste-export contracts that move the waste out of town.

The administration does not provide this information because the money is paid to private contractors – and that kind of information is reported in another document called “Agency Procurement” that comes out once a year.

The mayor’s report also does not say a word about the administration’s long-term plans to deal with the rising costs of the current waste disposal system even though the mayor and City Council are supposed to agree to such a plan this summer and even though the charter mandates that each agency present goals for the next year.

2. Confusing Measurements – Graduation Rates

In other area’s, the administration presents a dizzying array of categories of measurement – or “indicators” - that obscure what is really happening.

For example, the Department of Education reports that only 53.2 percent of high school students graduate in four years, which is down from 54.3 percent the year before. The number of students that graduate in seven years (67.6 percent) is also down from the previous year.

But this year, the Department of Education has now added a third category: “Students Graduating High School Within 4 years OR Still Enrolled in School for a Fifth Year.”

By combining two groups of students into one category, the administration can claim that 84.8 percent of students are “on track” to graduate or earn their Regent’s diploma.

“This indicates that more students are opting to stay in school at least an additional year to work towards graduation,” the report states.

Some experts disagree.

“This misinformation is devastating,” writes Daniel Losen of the Civil Rights Project at Harvard Law School in an article for Gotham Gazette. “How can we know if we are doing better if we do not get an accurate reading of where the issues lies? It also affects where resources are allocated. We are not going to spend enough if our focus on the problem isn’t sharp, and we can’t see what’s really going on.”

3. Few Answers – Unexplained Fire Deaths

The Preliminary Mayor’s Management Report also offers few explanations for why certain things may occur.

For example, 22 people died in fires between July and October, eight more than in the same time last year. The fire department’s response time is also 14 seconds slower; it takes an average of 4 minutes and 37 seconds for the department to get to a scene.

The mayor said the response time was due in part to an increase in house fires. And the report states only that the department “has taken steps to reduce the key components of response time.”

The information raises more questions than it answers.

What has led to the increase in response times? Were the deaths concentrated in specific boroughs or neighborhoods? Are slower response time linked to the six firehouses that the Mayor Bloomberg closed in 2003? Does new fire equipment that needs to be purchased? Does the department need to hire more firefighters?

In previous reports, at least the administration attempted to answer some of these questions.

“There used to be footnotes that offered explanation of why an indicator may have gone up or down,” said Preston Niblack of the Independent Budget Office. “We lost some of that when it was reorganized [under Bloomberg].”

A NEW APPROACH

Instead of scrapping the report or continuing the annual exercise in its current form, some experts are pointing to ways that the Preliminary Mayor’s Management Report can be made into a useful tool.

One idea is to return to one of the original goals of the report, which was to link the data from each agency to help make decisions about how to allocate funds. The Independent Budget Office recently issued a budget analysis that tries to create more clear connections between how the city spends money and the results that it gets in return.

For example, in the Independent Budget Office’s report on the Department of Health, one can see that the mayoral administration has spent more money for the prevention and treatment of tuberculosis, an increase from $32.1 million in 2005 to $43.5 million in 2006. And in turn, the number of cases of tuberculosis is down (from 124,695 in 2005 to 122,239 in 2006), and the Department of Health is treating a higher percentage of the confirmed cases in the city.

While it is tricky to draw clear connections between the amount of money the city government spends on a particular effort and the results, the approach can be a productive look further into what government is – or is not – doing well.

“You have to be careful and dig deeper before you make conclusions,” said Niblack. “But it should help people to start asking the right questions.”

The Independent Budget Office has also shown just what can be done to create clear, accountable budgeting, using the city’s own data.

Another suggestion is to require the administration to conduct “citizen satisfaction surveys” as part of the Preliminary Mayor’s Management Report. These surveys, which could track different responses by age, race, gender, and other socio-economic categories, could help bring a more customer service-oriented approach to city government. Last year, City Council considered legislation that would institute this change – and is likely to revisit the issue again in the future.

A third suggestion – which has been adopted by other cities and states - is to combine the two management reports with the mayor’s budget proposal into one document that would clearly lay out the mayor’s financial requests for each agency in terms of past and current performance and future goals.

This would allow the City Council, which is charged with holding public hearings on the budget, to monitor more carefully how taxpayer dollars are being spent.

"The Charter clearly intends the [preliminary mayor's management report] to relate performance measures to proposed budget appropriations so that the council… can consider what agencies have accomplished or produced with the resources allocated, and the effect of budget proposals, during the budget process,” a City Council report on the issue concluded. “Otherwise it falls far short of achieving its intended purpose.”

Mayor Bloomberg could break down agency budget information by program and provides sufficient new performance data that would enable an analyst -- or any interested New Yorker-- to measure results. Until that happens, this administration remains a $50 billion operation apparently unwilling to address management accountability.

RELATED ARTICLES:

Mayor’s Management Report for 2005: Thinner, Less Useful (October 2005)

The Mayor’s Management Report Skimps On Information About Education And Everything Else (October 2004)

Shrinking Accountability: Proposed Changes To The Mayor's Management Report (October 2003)

Editing Out the Facts (October 2002)

Guide To The Mayor's Management Report (October 2002)

Glenn Pasanen, who teaches political science at Lehman College, has been in charge of Gotham Gazette's finance topic page since 2001.  

 

Proposed Arts Budget, A Destabilizing Deja Vu Dance


City Hall counts on the cultural sector to attract tourists, provide arts education, stabilize neighborhoods, and to make New York City an attractive place for creative people who work in industries as diverse as fashion and Web design. Mayors are often the first to trumpet the cultural attractions as one of the unique attributes of the city.

It would be great to say the opposite is true as well –- that cultural organizations count on City Hall as a reliable partner in its funding process. Unfortunately, yet again, that is not the case. Instead we are being treated to a destabilizing, deja vu dance.

The Bloomberg administration is once again proposing a decrease in funding for the Department of Cultural Affairs next year -– a reduction of more than $37 million from the current year, to $102.2 million, according to the Independent Budget Office. This represents the largest proposed cut in two decades.

This latest budget leaves the members of the Cultural Institutions Group or CIGs (the 34 cultural groups in city owned buildings) with cash subsidies roughly equivalent to 1989. The remaining arts groups are getting funding slightly above 1987 levels.

One of the mysteries of this administration is the steady decline in cultural affairs budgets proposed by Mayor Michael Bloomberg. In his first budget, he recommended $110.4 million. Some in the cultural sector have interpreted this downward pattern to mean that Mayor Bloomberg is not convinced that public dollars should be used to fund cultural programming.

Capital funding plans show a slightly different pattern, but are heavily influenced by both Borough President and City Council commitments and by projects that are often not completed within a single budget year. Actual spending from the city funds in 2004 was $98.5 million. That increased to $140 million in 2005, and is projected at $130.5 million for the forthcoming budget. Future projections decrease this funding, however, to only $10 million by 2010.

More telling than future projections in this instance is the reality that in 2002, city funds for capital expenditures for cultural affairs was the far higher $208 million.

Experienced budget watchers tell the cultural groups that these administration proposals mean little, since the City Council has almost always restored the cuts. Unfortunately, that “almost always” is not grounds for fiscal planning by cultural groups, and in fact, restoration to the non-Cultural Institution Groups has not always taken place. This pattern of proposed decreases, followed by budget negotiations that restore some or all of the cuts, destabilizes the cultural sector more than any other activity under the control of elected officials.

A loss of funding due to a sudden economic blow, such as September 11, is also destabilizing, but a deliberate continued pattern of proposing cuts only to agree to last-minute restorations as the fiscal year ends is an entirely different matter. It is clear that cultural funding is simply a pawn in the ritual budget dance of Mayor versus City Council.

It is for that reason that so many in the cultural field are angry, not only at the current mayorÂąs treatment of cultural funding, but at both his predecessors. The rhetoric about the value of the arts to the city is not matched by the budget reality.

Under the Bloomberg administration, this destabilizing impact has been carried even further, however, by a re-definition of what budget watchers refer to as baseline funding. Simply put, baseline is the amount of money an organization had before the Mayor, Borough President, or City Council added any special one-time initiatives.

The Bloomberg administration now characterizes all funding added to its proposed budget as one-time initiatives, and has defined baseline as whatever it proposes regardless of prior commitments. In the past, if baseline was cut in a mayoral budget, the restoration of those funds was treated as ongoing, not one-time funding. For example, an organization that was baselined at $7500 when Mayor Bloomberg took office was first reduced to just over $6000, then increased slightly, then decreased again slightly, and is now looking at an another decrease. Any money the council puts in the budget for that organization is entirely a one year effort. The notion of a restoration process is essentially gone.

For the majority of cultural groups in the city, this budget dance has produced a steady decrease in funding over several years. For the 34 members of the Cultural Institutions Group, the unique partnership they felt they had with the city is deeply eroded as their funding levels become increasingly erratic.

The question is why if the cultural sector is so valuable, this budget dance goes on? Budget deficits are not the reason; the Bloomberg administration is projecting a very large surplus this year. The only logical conclusion is that cultural activity really does not matter all that much to mayors, regardless of the speeches, which leaves the City Council increasingly taking on the mantle of leadership in cultural funding.

Related Article

Independent Budget Office Review Of The 2007 Preliminary Budget For The Department of Cultural Affairs Norma Munn is chair of the New York City Arts Coalition

City Commission for Economic Opportunity


Mayor Michael Bloomberg announced the appointment of 32 civic leaders to the New York City Commission for Economic Opportunity, a public-private initiative charged with devising strategies to increase economic opportunity and reduce poverty in the city.

The commission's objective is to devise cross-sector, public-private solutions and to create a coordinated, citywide agenda for increasing economic opportunity and financial independence. The commission will look at the most effective way to harness already existing city services and couple them with new economic development initiatives to give more New Yorkers the chance to rise out of poverty.

The Co-Chairs are:

Geoffrey Canada is the President and Chief Executive Officer of the Harlem Children's Zone, Inc., a pioneering, non-profit, community-based organization that works to enhance the quality of life for children and families in some of New York City's most troubled neighborhoods. Mr. Canada is a renowned advocate for children and a sought-after speaker on issues such as violence, inner-city education and community redevelopment. He has been cited in many media reports, including being selected as one of "America's Best Leaders" by U.S. News & World Report.

Richard D. Parsons is Chairman of the Board and Chief Executive Officer of Time Warner Inc. Since becoming Chief Executive Officer in 2002, Mr. Parsons has led Time Warner on a path of sustainable growth. In 2005, Institutional Investor magazine named him the top Chief Executive Officer in the entertainment industry. Mr. Parsons serves on the boards of Estee Lauder and Citigroup. His civic and non-profit commitments include Chairman Emeritus of the Partnership for New York City, and service on the boards of Howard University, the Apollo Theatre Foundation, the Museum of Modern Art, and the Museum of Natural History.

Commission Members

Dr. Larry Aber is a professor of Applied Psychology and Public Policy at New York University. From 1994-2003, Dr. Aber served as Director of the National Center for Children in Poverty at Columbia University. His current research focuses on how social policies toward low-income families affect family income dynamics, parenting processes and children's health and development; and school-based strategies to enhance the social-emotional and cognitive-academic learning of low-income children.

Diane Baillargeon is the President and Chief Executive Officer of the Structured Employment Economic Development Corporation (SEEDCO). She previously served as Deputy Commissioner for Policy Management in the New York State Department of Social Services and as Deputy Administrator for Policy and Program Development at the New York City Human Resources Administration.

Dr. Lilliam Barrios-Paoli is the Chief Executive Officer of Safe Space, an organization working to protect children and adolescents in New York City. Previously, Dr. Barrios-Paoli served as Senior Vice President for the United Way of New York City. She also served in New York City Government under Mayor Koch and Mayor Giuliani.

Stanley Brezenoff is the President and Chief Executive Officer of Continuum Health Partners, an organization that unites four distinguished voluntary teaching hospitals in a network that allows each to benefit from the rich resources of the other. Previously, Mr. Brezenoff served as First Deputy Mayor under Mayor Koch and Executive Director of the Port Authority of New York and New Jersey.

David Chenis the Executive Director of the Chinese-American Planning Council Inc., (CPC) and is the founding Chairman of the Board of Directors of the Chung Pak Local Development Corporation. He is also a member of the board of the Chinatown Partnership Local Development Corporation and served as a Commissioner on the 2004-2005 New York City Charter Revision Commission.

Florence A. Davis is the President of the Starr Foundation. The Starr Foundation makes grants in a number of areas, including education, medicine and healthcare, human needs, public policy, culture and the environment.

Jamie Dimon has been Chief Executive Officer of JPMorgan Chase & Co., since December 31, 2005, prior to which he had been President and Chief Operating Officer since July 2004. Prior to its merger with JPMorgan Chase he had been Chairman and Chief Executive Officer of Bank One Corporation from March 2000 until July 2004.

Michael Fishman has been a union leader for more than 25 years, and was re-elected President of the Service Employees International Union, Local 32BJ in August 2003 for a second three-year term. Local 32BJ represents more than 85,000 property service workers – window cleaners, superintendents, doormen, maintenance workers, cleaners, porters and security officers – in New York, New Jersey, Connecticut, Pennsylvania, Delaware, Maryland and Washington, D.C.

Dr. Floyd H. Flake is a former U.S. Representative and currently serves as the senior pastor of the 10,000 member Allen African Methodist Episcopal Church in Jamaica, Queens. During his 21-year pastorate, Allen has become one of the nation's foremost Christian churches and non-profit corporations. In the U.S. Congress, Representative Floyd Flake earned a reputation for bipartisan, innovative legislative initiatives to revitalize urban commercial and residential communities.

Dr. Ester R. Fuchs is a professor of Public Affairs and Political Science at Columbia University. Professor Fuchs's main research and writing interests are in the areas of American government and policy, political parties and elections, urban politics and policy, including fiscal policy, New York City politics, and statistical analysis. Previously, Professor Fuchs served as Special Advisor for Governance and Strategic Planning to Mayor Bloomberg and Chair of the 2004-2005 Charter Revision Commission.

Fatima Goldman is the Chief Executive Officer of the Federation of Protestant Welfare Agencies (FPWA). At FPWA, Ms. Goldman serves as the chief spokesperson on behalf of the City's most vulnerable. She is responsible for leading the 80+ year old organization in maintaining core services to member agencies, such as emergency financial assistance, advocacy, training and technical assistance.

William A. Goodloe is President and Chief Executive Officer of Sponsors for Educational Opportunity (SEO), a nonprofit organization based in New York City, with offices in London, England. Since its founding in 1963, SEO has enjoyed remarkable success in providing college preparation and career development service to more than 5000 students of color from ninth grade through college graduation. From 1996 through 2001 Mr. Goodloe was executive director of the Inner-City Scholarship Fund, and previously served as vice president of the Center for Youth Development.

Colvin Grannum has served as president of Bedford Stuyvesant Restoration Corporation since March 2001. Restoration is the nation's first community development corporation, founded by United States Senators Robert Kennedy and Jacob Javits in 1967. Prior to joining Restoration, Mr. Grannum served as a founding director and the Chief Executive Officer of Bridge Street Development Corporation, a faith-based not-for-profit community development corporation affiliated with Bridge Street African Methodist Episcopal Church in Brooklyn, New York.

Paloma Hernandez is the Chief Executive Officer and President of Urban Health Plan, Inc. Urban Health Plan is dedicated to rendering primary and specialty health care services in a personalized and family oriented manner, with an emphasis on prevention through education and the provision of state of the art services.

David R. Jones has been President and Chief Executive Officer of the Community Service Society of New York (CSS) since 1986. Prior to joining CSS, Mr. Jones served as Executive Director of the New York City Youth Bureau, and from 1979 to 1983, as Special Advisor to Mayor Koch. Mr. Jones was a member of the transition committee of New York's Mayor-elect Bloomberg.

Carter McClelland is Chairman of the Board and Chief Volunteer Officer at the United Way of New York City. Mr. McClelland also served as the Chairman of Corporate Investment Banking at Bank of America Securities LLC until January 2, 2006.

Ronay Menschel is Chairman of the Board of Phipps Houses. She is also a Trustee of Phipps Community Development Corporation, the human services and community development affiliate of Phipps Houses. She was President/Chief Executive Officer of Phipps Houses from April 1, 1993 to October 1, 2001. Prior to joining Phipps Houses, Ms. Menschel served as Deputy Mayor and Executive Administrator, respectively, of New York City from 1978-1982, and as a member of the Metropolitan Transit Authority Board from 1979-1990.

Gail B. Nayowith is the Executive Director of the Citizens' Committee for Children of New York, Inc., an advocacy organization that provides a voice for poor and vulnerable children and children with special needs. Ms. Nayowith also served as a key member on the Family Homelessness Special Master Panel in 2003-2004.

Dr. Judith Rodin became president of the Rockefeller Foundation in March 2005. She is the first woman to lead the Foundation, which works to expand opportunities for poor people and to help ensure that the benefits of globalization are shared more equitably. The Foundation works intensively in Eastern and Southern Africa, Southeast Asia, and North America and makes grants and programmatic investments averaging $140 million per year. Dr. Rodin is former president of the University of Pennsylvania. During a decade of service to the University, Dr. Rodin guided Penn through a period of unprecedented growth and development the transformed its academic core and dramatically enhanced the quality of life on campus and in the surrounding community. Previously, Dr. Rodin was on the faculty of Yale University and served as provost from 1992 through 1994. Rodin serves on the boards of several prominent nonprofit organizations and corporations and has authored or co-authored eleven books.

William C. Rudin serves as Chairman of the Association for a Better New York. He is the President of Rudin Management Company and has been highly involved in real estate, business, philanthropic, and civic activities in New York City.

David Saltzman is the Executive Director of the Robin Hood Foundation, which targets poverty in New York City by finding, funding and strengthening the most effective poverty fighting programs to maximize results.

John A. Sanchez has been Executive Director of the East Side House Settlement since 1989. Prior to joining the East Side House Settlement, Mr. Sanchez served as Executive Director of Catholic Big Brothers of New York. He has held executive positions with United Neighborhood Houses, the Federation of 38 settlement houses in New York City, Hudson Guild, a Manhattan based settlement house, and the Community Service Society.

Dr. Alan B. Siskind is Chair of the Board of the Human Services Council. He is also the Executive Director of the Jewish Board of Family and Children's Services. Previously, Dr. Siskind served as the President of the Coalition of Voluntary Mental Health Agencies and was a member of Mayor Dinkins' Commission for the Foster Care of Children.

Monsignor Kevin Sullivan, Ph.D. is the Executive Director of the Catholic Charities of the Archdiocese of New York, a federation of more than 100 organizations that seeks to uphold the dignity of each person as made in the image of God by serving the basic needs of the poor, troubled, frail, and oppressed of all religions.

Mindy Tarlow is the Executive Director of the Center for Employment Opportunities (CEO), a large New York-based nonprofit corporation that provides employment services to men and women returning from prison and detention facilities. Prior to joining CEO, Ms. Tarlow spent close to ten years at the New York City Office of Management and Budget where she ultimately served as Deputy Director in 1992. Ms. Tarlow guided many criminal justice projects during her tenure in government including co-authoring the Mayor's Safe Streets, Safe City Omnibus Criminal Justice Program.

Merryl Tisch is co-chair of the New York State Board of Regents' Committee on Elementary, Middle, Secondary and Continuing Education. Ms. Tisch is also a chairperson of the Metropolitan Coordinating Council on Jewish Poverty and serves on the executive committee of the UJA Federation of New York.

Maria Torres co-founded the Point Community Development Corporation in 1994, a nonprofit organization dedicated to youth development and the cultural and economic revitalization of the Hunts Point section of the South Bronx, and currently serves as its President and Chief Operating Officer. Prior to founding the Corporation, Torres participated in the South Bronx Summer Project, and helped to form La Marqueta and the Neighborhood Internship Bank.

Jeremy Travis became the fourth President of John Jay College of Criminal Justice on August 16, 2004. Prior to his appointment, President Travis served four years as a Senior Fellow affiliated with the Justice Policy Center at the Urban Institute, and was nominated by President Clinton and confirmed by the Senate to direct the National Institute of Justice, the research arm of the U.S. Department of Justice.

Reverend Terry Troia is the Executive Director of Project Hospitality, which was founded in 1982 as an outreach arm of Brighton Heights Reformed Church in Staten Island. Some of Project Hospitality's ministries include several emergency overnight shelter facilities and Hospitality House, a residence for homeless women and children.

Nancy Wackstein serves as the Executive Director of United Neighborhood Houses (UNH), the federation of New York City settlement houses and community centers. Prior to her work at UNH, she served as Executive Director of the Lenox Hill Neighborhood House, a multi-service settlement house on Manhattan's East Side and as Director of the Mayor's Office on Homelessness and SRO Housing under Mayor Dinkins.

 

 

Erin Brockovich in Greenpoint


If the community meeting in Greenpoint a couple of months ago to discuss the 50-acre underground oil spill in the neighborhood looked like a scene out of the movie, “Erin Brockovich,” it didn’t hurt that Erin Brockovich was addressing the crowd -- not Julia Roberts, but Brockovich herself, the actual fighter against corporate pollution.

"I'm here to get people motivated," she reportedly told the 60 or so residents at the Swinging Sixties Senior Center. "Absence of information means lack of choice."

It is new information about the oil spill that has motivated local activists to make new choices in the long-time struggle over the oil spill -- including a new Brockovich-like class action lawsuit.

An Oil Spill Larger Than The Exxon Valdez

Residents of Greenpoint do not need a reminder from the president about our nation’s costly oil addiction. Greenpoint is to oil trafficking what the Bowery is to drugs and alcohol -- a neighborhood still recovering from its wild past one day at a time.

Oil had been unloaded onto, and stored in, this Brooklyn neighborhood since the days of John D. Rockefeller and the Standard Oil monopoly. Most of the oil terminals and refineries that filled the southern banks of Newtown Creek are long gone. But the hangover remains.

In 1978, during an aerial survey of the creek, a Coast Guard helicopter detected a floating oil plume that eventually led to the discovery of a 17 million gallon underground oil spill. Traced back to storage tanks at an old Mobil Oil terminal just below Greenpoint Boulevard, the spill, composed largely of crude oil along with some refined product, had worked its way down to the water table, creating an oil-covered lake roughly 40 feet below street level that spread out over more than 50 acres beneath industrial and residential properties.

“We’re talking about an oil spill larger than the Exxon Valdez,” says Basil Seggos, chief investigator for the environmental watchdog Riverkeeper, Inc., alluding to the 1989 oil tanker that dumped 11 million gallons of crude oil into Alaska’s Prince William Sound.

Stalled Clean-Up

So far, that recovery process has barely reached the half-way point. Although cleanup efforts started in the early 1990s, they didn’t really take off until 1995 when Mobil engineers completed construction of a underground pump and pipeline system along Meeker Avenue. Since then, ExxonMobil, inheritor of the Mobil system, British Petroleum, owner of an adjacent terminal site, and ChevronTexaco, former owner of an 11 acre terminal site that has since been converted into a warehouse facility, have extracted a combined 8.7 million gallons according to a state Department of Environmental Conservation Web page devoted to the cleanup effort.

Recovering the remaining eight million gallons could take another 20 years, at least, according to a January 25th town hall meeting featuring representatives from ExxonMobil, ChevronTexaco and the New York State Department of Environmental Conservation.

Possible Toxic Contamination And A New Lawsuit

Beyond that, there is the question of secondary contamination. After Department of Environmental Conservation tests failed to detect dangerous levels of gaseous methane in soil samples taken around the site, Riverkeeper commissioned its own tests last summer. Seggos says the samples turned up not only high levels of methane but also toxic levels of benzene, a carcinogen.

That discovery has cleared the way for an entirely new development. Girardi and Keese, a Los Angeles law firm best known for its association with the 1996 class action lawsuit that became the basis for the 2000 film “Erin Brockovich,” signed on as legal representative for a group of Greenpoint residents who have sued ExxonMobil. It was in a bid to recruit additional plaintiffs that the firm flew in Brockovich, a consultant on the case, to address Greenpoint residents at the December community meeting.

Stan Alpert, principal of the Alpert Firm and a local consultant to Girardi and Keese, says the case will follow the lines of recent “toxic tort” cases in that the spill, in the process of crossing property lines, constitutes a form of chemical trespass for which local residents who can prove a decline in health or property value may soon be able to gain restitution.

Rockefeller’s Revenge, or The Rise Of The Toxic Tort

Pioneered by Brockovich and Girardi in their successful $333 million lawsuit against Pacific Gas & Electric, a suit alleging that the California utility knowingly released a deadly form of chromium into the environment, toxic torts have matured quickly over the last decade, thanks to two major trends: weak government regulation of polluting industries, and corporate consolidation.

In the case of Greenpoint, weak government regulation has created a situation in which ExxonMobil and other companies have been allowed to drag out the clean-up process, thus magnifying the number of people affected by the spill. Currently, ExxonMobil and British Petroleum are performing their share of the clean up based on a series of consent orders negotiated with the Department of Environmental Conservation. According to the consent orders, each company has accepted responsibility for violating state laws forbidding the discharge of oil into groundwater and local waterways. They have also accepted the total cost for remediation. What they have not accepted, however, is the liability for damages caused, a concession that, if forced, might have led to brisker clean up and reduced exposure.

Corporate consolidation, meanwhile, has created a situation in which determining ownership of the land, refineries and storage tanks -- a process that in 1979 might have meant going through the records of a few dozen major corporations -- now boils down to going through the records of three major corporations: ExxonMobil, British Petroleum, and ChevronTexaco. Call it Rockefeller’s revenge: Ninety-five years after the breakup of the Standard Oil monopoly, the subsidiaries formed by that breakup have rejoined to the point that plaintiffs can pin liability on a manageable set of corporations.

Whether or not attorneys do succeed in pinning liability on ExxonMobil depends on whether a local jury is willing to associate local cancer rates in Greenpoint with oil-based carcinogens. The neighborhood’s two-century history as a center of heavy industry all but insures that ExxonMobil attorneys will have plenty of other causal factors to cite.

The Mess Continues

In the meantime, the company sticks by its pledge to clean up the mess.

“We’ve been here since 1979,” says ExxonMobil spokesman Brian Dunphy. “I think it shows we’re committed to mitigating the site.”

For Alpert, however, the 27 year stretch between detection and 50 percent cleanup merely confirms that neither ExxonMobil nor the state are in much of a hurry to see a tough job through. Alpert credits Riverkeeper and last summer’s soil sampling as the true impetus for both the civil lawsuit and the town hall meeting held by the Department of Environmental Conservation.

The department “dragged its feet from 1978 to 1990, and from 1990 to 2006,” says Alpert. “Only in 2005 when Riverkeeper comes along and does these tests and finds explosive vapors in the soil and toxic levels of benzene, do they wake up. Even when they wake up, they put a lawyer up in the meeting who sounds like he’s speaking on behalf of the oil companies. Something is wrong with that set of facts.”

Maureen Wren, a spokeswoman for the Department of Environmental Conservation, says her organization isn’t in the business of defending oil companies. It is in the business of informing citizens on the state of the cleanup process. “The purpose of the meeting was to enable individuals to ask questions and learn more about the cleanup activities,” Wren responded via email. “DEC representatives explained at the outset of the meeting, and several times during it, that no questions related to company responsibility or other litigation-related issues would be entertained because of time restrictions and ongoing negotiations and lawsuits with the parties.”

Wren says her agency will continue to hold meetings on the topic in future months in an effort to give Greenpoint residents additional chances to learn more about the clean-up process.

 

The Mayor's Underwhelming Budget For 2007


Things are going well for Mayor Michael Bloomberg. The city has a surplus of more than three billion dollars, an amount that could grow much larger before the current fiscal year ends on June 30th. And then, when the mayor declared that he will use the surplus in what he calls a financially responsible manner in his proposed new budget for the coming fiscal year, he was praised by both fiscal experts and editorial writers.

Let mine, then, be a voice of dissent. Bloomberg’s financial plan for the coming year is underwhelming, with only one big budget idea, a baffling one at best -- the transfer of $2 billion of the surplus into a “Retiree Health Benefits Trust Fund.”

Yes, the mayor does deserve credit for raising the possibility of a new policy for surpluses. From 1997 through 2001, Mayor Rudy Giuliani surpluses averaged $2.3 billion, but they simply became “one-shot” revenues for the next year, hiding the underlying budget imbalances. The 2001 “one-shot” in fact created a huge problem for Mayor Bloomberg when 9/11 and a recession exposed the risks in this roll-over strategy.

But Bloomberg’s surplus last year was about $3.5 billion. Why didn’t he pursue this new policy then? Why now? And why is he promoting this new idea when there are better ones that have been proposed by members of his own administration?

Why A Health Fund?

Bloomberg has said that he has two reasons for creating a new reserve health fund for city retirees. One is long-term budget stability, the other is in order to comply with a recent rule change of the obscure Government Accounting Standards Board. But that seems far from the whole story.

For one, the accounting rule does not take effect for two years and even then only requires the city to account for its long-term benefit liability – in other words, to show what the city will owe its retirees in the future, not to create a fund, nor in fact to take any other specific budget action.

As for helping long-term budget stability, there are more obvious ways to achieve this – establishing a more stable and progressive tax code is one. But the health fund idea could very well short-circuit a broader discussion of such other ways.

That, cynics could suggest, might be the point of it. Education advocates might see the health fund as a way for the city to be able to cry poverty when the Campaign for Fiscal Equity case is finally settled, and the plan to improve city public schools requires not just funding from the state, but from city coffers as well. City labor unions may see this reserve fund as a way of parking funds so that they are out of reach, part of a “politics of scarcity,” providing leverage for the city in the next round of labor negotiations.

What Happened To A Rainy Day Fund?

It is puzzling that the mayor does not suggest a “rainy day fund,” the usual way of transferring surpluses. The mayor’s own charter revision commission heard a lot of testimony about such a fund. The commission’s August 2005 final reportnoted , “A rainy day fund can provide a source of funds to mitigate negative budget impacts created by changes in the economic cycle. Further, a rainy day fund can provide an accepted mechanism to spread repayment, over a period of time, of a deficit in a particular year.”

But the commission decided it would be legally difficult right now to create such a fund and deferred the idea to another time and another commission, even though it acknowledged “there may be, among the fiscal experts external to the city, a consensus that a rainy day fund is generally a good financial tool for fiscal stability.”

If a rainy day fund is not possible under current state law, then how does a retiree health fund, with arguably the same purpose as a rainy day fund, pass muster? And what is the city council role? One would assume the council would have to sign off on the plan.

What Happened To Property Tax Reform?

A health fund is not the only area where the preliminary budget does not address the full implications of mayoral policy. The mayor promises another round of $400 rebates to residential property owners (a loss of over $250 million), but he doesn’t mention what looks like a big change in the structure of the property tax.

The latest preliminary assessments of city properties have quietly created, in the interests of equity, yet another population of specially-treated owners, according to a recent article in the New York Times. ("Even as Homes Soar in Value, Some Will See Tax Bill Slashed" by Josh Barbanel.) The owners of rental buildings, co-ops and condos with 10 or fewer units have seen their assessments lowered. The estimated cost to city coffers is $90 million.

The intent sounds admirable: equity among, in this case, owners of small rental buildings and units in small co-op and condo buildings. But there are many questions. Does this require new legislation? Does this promote equity across classes? Does it create new inequities? Does it in fact create yet another new class of property in a system that is already Byzantine?

Moreover (as I wrote earlier about property tax reform) , co-op and condo abatements introduced in the 1997 (on a temporary basis, but still in place), were also sold in the interests of equity, but also created a big loss in revenues. Why must equity be equated with a net loss of revenue? As with the proposed health fund, from a public interest point of view there should be a wider public discussion about alternative policies. Why not, for instance, a revenue-neutral property tax reform? And why not a simpler property tax system that has only two classes – residential and commercial?

When Will We See Budget Transparency?

One other general problem with the preliminary budget is the lack of detail about its few budget initiatives. In the beleaguered Administration for Children’s Services, for instance, some $16.5 million of new spending is cited for 2007 (less than one percent in a $2.2 billion agency). But the program areas where the money goes are only vaguely identified, such as $5 million “to expand oversight” in the “intensive family services unit.”

Contrast this with the information available on that same agency from the Independent Budget Office. The Administration for Children's Services is one of 16 city agencies that the budget office has analyzed in an effort to connect dollars spent with results achieved, in its newly-released Programmatic Budget Reviews. Its 32-page presentation of budgeting data for the Administration for Children's Services breaks down that agency's $2.2 billion in spending into 26 program areas. So, we learn that the family preservation program has 211 employees, and the program is spending $9.3 million this year. Not only that, the Independent Budget Office shows five performance measures for the program that measure such results as average caseworker caseload (2.4 in 2004) over four years.

None of this information is available either in the mayor's preliminary budget, nor in the annual mayor's management report. Interestingly, again, the mayor's charter revision commission studied the inclusion of such information, in order to make the connection between budget dollars and agency performance more clear.

Nothing came of this, but the mayor could take the framework from the Independent Budget Office and build on it, in order to inform the public better about its government’s spending and performance.

Glenn Pasanen, who teaches political science at Lehman College, has been in charge of Gotham Gazette's finance topic page since 2001. 

The 2007 New York City Budget


When Mayor Michael Bloomberg delivered his State of the City address to the crowd crammed into the Snug Harbor Cultural Center on January 26, he laid out some ambitious ideas. He wanted to slash poverty, cut down on illegal guns flooding into the city from elsewhere, and launch development projects throughout the five boroughs to create 250,000 new private sector jobs in the next five years. And that was just the start.

“During the last campaign, I promised more than 100 initiatives that will keep New York moving forward,” he said. “Have I forgotten those promises? Not one. Will I honor them? You better believe it!”

When Bloomberg stood at City Hall last week to present his proposed budget for the 2007 fiscal year, which starts in five months, it was hard to find any of those initiatives amid all the columns of numbers. This was true despite one number in particular that stood out -- a surplus of more than three billion dollars.

Related Articles:
- Ending The Budget Dance, by Councilmember David Weprin
- The Underwhelming Budget For 2007, by Glenn Pasanen

With such a giant surplus and so many promised initiatives, the most remarkable thing about Bloomberg’s budget is what isn’t in it. It does not call for hiring hundreds of new city employees. It also does not ask for new tax cuts.

Instead, the proposed $52.2 billion budget that Bloomberg laid out last week (in video, and slide show, with accompanying budget publications) is long on what he called fiscally prudent measures. "These are the steps that we need to take to produce a budget that is realistic and responsible," the mayor said during his presentation, "one that keeps New York on firm fiscal ground now, and in the years to come."

THE SURPLUS THEN AND NOW

When blessed with budget surpluses during the 1990s, former Mayor Rudolph Giuliani hired new employees and instituted tax cuts. Eventually, this led to something close to economic disaster, when the economic engine slowed dramatically toward the end of his second term, and this was made far worse by the terrorist attacks of September 11, 2001. Having spent the surplus, there was nothing to fall back on.

Thus, when Michael Bloomberg succeeded Giuliani, the new mayor had to scramble to balance the budget by both cutting spending on city services and raising taxes. Three years later, with an improved economy and higher than expected revenues, the city had a surplus once again -- which, occurring during an election year, Bloomberg proposed spending on various goodies and a large tax cut.

This made fiscal experts unhappy. "Taking a $3.3 billion surplus and spending it all next year is pretty short-sighted," said Charles Brecher of the Citizens Budget Commission, a non-partisan budget watchdog group.

The election is over now, and for fiscal year 2007, which begins on July 1, 2006, the mayor says he wants to use "today's good fortune to address some of tomorrow's most troubling problems." He has allocated $1 billion of the current surplus to go to reducing debt over five years and another $500 million for deficit reduction. He wants to earmark $2 billion of the surplus toward a trust fund for retiree health benefits. (Currently, unlike for pensions, there is no money in reserve to pay for future health benefits. A new accounting standard requires that municipalities eventually create such a reserve, and Bloomberg calls the $2 billion a "downpayment" on it.)

Now, some fiscal experts are happy. “The mayor did an extraordinary thing,” said Diana Fortuna of the Citizens Budget Commission. “He’s getting out ahead of the curve here by proposing to allocate $2 billion to defray those costs. It’s a very prudent move. This defines why this is a good budget.”

(Not everybody agrees. See The Mayor’s Underwhelming Budget For 2007, by Glenn Pasanen.)

 

GOODIES IN THE BUDGET

Continued Tax Rebate
The mayor’s budget contains one conspicuous perk for taxpayers: the continuation of the $400 property tax rebate for the next three years.

Children
The fine print includes some initiatives Bloomberg had previously touted. During his State of the City address, he said the Administration for Children’s Services would get “$16 million in new initiatives that will improve oversight, ease caseloads and ensure coordination among all city agencies.” And indeed, there it was in his preliminary budget.

Diabetes
Bloomberg said he wanted to help address the city’s diabetes crisis by creating a diabetes registry. In his budget, Bloomberg set aside money for 14 staffers to begin this project.

Housing
Bloomberg also put $2 billion toward the $7.5 billion affordable housing program he discussed in his State of the City address. Presumably, that could go a long way toward his promise of building 15,000 new units over the next year.

Capital Budget
The capital budget, which is separate from the operating budget (and is funded largely by loans to the city), also contains money for some new projects beyond maintaining streets and bridges. Bloomberg earmarked:

-$265 million for parks and infrastructure at the new stadiums for the Yankees and Mets;
-$133 million to help turn the General Post Office on Eighth Avenue into Moynihan Station;
-$23 million for development of Governors Island;
-$16 million toward creation of electronic medical records for community clinics. In his State of the City address he asked for state, federal and private money to bring the total up to $100 million.

BADDIES IN THE BUDGET

New Fees
The budget contained some ways to increase revenue, including:

  • more than 100 new traffic agents issuing more parking and traffic tickets
  • increasing fees for some housing applications, charging nonprofits for fire inspections (which are currently free to them) and other jumps in city fees
  • charging fees at all Parks Department recreation centers, raising almost $2 million.

Albany and Washington
As usual, the city’s budget relies on money from state and federal governments. And the mayor argues that neither Washington nor Albany gives the city as much as it deserves, given all the taxes we send them. “New York City pays $11 billion more in state taxes than it gets back in funding despite being the economic engine of the state,” according to the mayor, and about $13 billion more to the federal government than it gets back. Bloomberg wants the state to give New York City an additional $250 million and the feds to contribute an additional $100 million.

Missing: Education Settlement
One thing is conspicuously absent from the budget: money for city schools from the Campaign for Fiscal Equity lawsuit, which would fund school construction and operating expenses. The courts have ruled New York City schools need billions of dollars more a year than they now receive, but the state has appealed the ruling.

But Bloomberg’s explanation for not relying on money from the Campaign for Fiscal Equity suit was simple: We do not have it yet and probably won’t get it this year because the case will remain tied up in court. “CFE has nothing to do with this budget,” he responded to a question from a reporter.

"Hidden Cuts"
There are other missing items,according to members of the City Council members -- $320 million in “hidden cuts" (reductions from current appropriations) to various city programs:

-about $40 million from city libraries;
-more than $20 million from senior programs;
-more than $20 million from cultural programs like art, theater and dance;
-$26 million from city educational programs like computer training;
-$53 million from the City University of New York;
-more than $45 million from youth programs;
-$45 million from the healthand mental health programs.

According to Domenic Recchia Jr., chair of the council committee on Cultural Affairs, Libraries and International Intergroup Relations, the Natural History Museum has already volunteered to take the brunt of a $1.8 million arts cut. He said the Metropolitan Museum of Art did the same thing last year.

“We will continue to fight to restore the services that are a priority for all New Yorkers,” said Finance Committee Chair David Weprin. This is an annual ritual in New York: The mayor proposes cutting some popular programs, with the apparent assumption that the council will negotiate a restoration of the cuts by the time the budget must be passed five months later. The strategy is evidently intended to keep the council from fighting for greater increases. Weprin and Speaker Christine Quinn have vowed to change this yearly “budget dance.” (See related article, The Last Dance?by David Weprin)

REACTION

When Bloomberg proposed his 2006 budget about nine months before Election Day, his political opponents were quick to attack it. Representative Anthony Weiner assailed the property tax rebate as an “election year gimmick,” while other Democrats called for more money for housing, schools and youth services.

But this year –- with Bloomberg still reaping the benefits of his re-election victory -– reaction was muted and largely favorable. “The reaction from the city's business community and those who follow the city's long-term fiscal health was nearly unanimous: He may not be political, but Bloomberg is certainly prudent,” David Saltonstall wrote in the Daily News.

Although expressing concern about future fiscal problems, City Comptroller (and probable future mayoral candidate) William Thompson issued a mostly favorable, if brief, statement: “The mayor has identified enhanced revenue sources and not sacrificed essential services,” he said.

However, Nicole Gelinas of the Manhattan Institute called on Bloomberg to reduce employee pension and health care costs – not just save money to cover them. “To get the budget on a sustainable path, the mayor must first acknowledge that there's lots of dirty work that must be done in Albany and in negotiations with (or against) municipal unions,” she wrote in the Post.

More controversy could emerge between now and the end of June, when the council must approve the budget. But for now it looks as if this year’s budget season will be unusually calm.

A WORRISOME FUTURE

Though the city is flush with money now, the mayor warns not to expect big surpluses in the future.

For one, the real estate market boom that has contributed so much tax revenue to the city is already starting to taper off. Prices for single-family homes are expected to fall by 10 percent over the next few years, and sales themselves are expected to drop by 14 percent. Revenues from real estate transfer taxes are also expected to level off.

What’s more, the city is notoriously over-reliant on profits and tax revenues from Wall Street. While bonuses were up again last year, profits are expected to decline for the third year in a row once interest rates are factored in.

Bloomberg warns that the city’s “non-controllable” or “non-discretionary” expenses -– costs the mayor says the city has little or no ability to control –- will become increasingly burdensome in years to come. Chief among these costs are “alarming” and “worrisome” Medicaid and pension obligations, and the money the city owes on funds it has borrowed. “Making a down payment on these costs now is the fiscally responsible thing to do,” he said.

These costs are the biggest contributor to a budget deficit that dogs the city year after year. Despite the good news this year, the mayor warns that a gap –- roughly $3.5 billion in 2008 and again in 2009 -– will loom over city finances in years to come.

As people live longer and health care gets more expensive, the rising costs pose a national problem. “Those are things that not only is New York City wrestling with, every municipality across the country is wrestling with and every company in the private sector is wrestling with,” Bloomberg said. “Nobody has enough money to pay everything.”

But the mayor was optimistic -- more or less: "I don't think people should be depressed; quite the contrary. We've shown we know how to get through tough times. We've shown that we are responsible. We are taking steps to make sure that we are preparing for the future. But the city still spends more than it takes in, in the billions of dollars each year."

 

 

 

 

 

 

 

 

 

 

Fiscal Forecast For New York City


The budget season has begun. Last week, Governor George Pataki announced his proposed state budget. Mayor Michael Bloomberg is expected to put forth a spending plan for the city soon.

While politicians will undoubtedly argue over the specifics of these proposals, the bruising fights over massive spending cuts or tax hikes of years past are unlikely to emerge this time around. In general, the city and state are in fairly good fiscal shape.

Recently, at a forum sponsored by New School's Milano School, several experts offered their views of the city's fiscal state now, how we rebounded from the financial problems of 2001 and 2002, and what we should do to keep the city in good fiscal health.

From Austerity to Surplus

By Ronnie Lowenstein

Related Stories:
Highest Credit Rating In History --Robert Kurtter

Preserving Economic Growth --Kathryn Wylde

How to Spend School Money --Randi Weingarten

Helping the City's Poor --Fatima Goldman

The city's fiscal situation has improved remarkably. Six months ago, when the city budget for this fiscal year was adopted, the city expected that there would be a gap for the upcoming (2007) fiscal year of $4.5 billion. It was a big number, there was concerns about how we were going to manage it. But lo and behold six months later the city is not looking at a gap of $4.5 billion anymore but something closert to the tune of half a billion dollars

That's not chicken feed, but in the larger scheme of things it is relatively small, less than one percent of total city spending. There is still a significant gap of about $3 billion for the following (2008) fiscal year, which is now a year and a half off. But that is down $1 billion from the estimate that was made last spring.

So in short, the news is genuinely good. Now I'm enough of an economist to never give you good news without giving you something depressing at the same time. So, I'd like to caution you that if there has been a roughly $4 billion improvement in the last six months, about half of that is due to accounting changes. These aren't tricks or fake, but they are changes that at least in the short term have had the happy side effect of making the city's fiscal situation better.

Another caveat is, of course, that there is always risk. And it is possible that some of the problems that the federal government is having will start to affect the city in the form of lower aid flows. The Campaign for Fiscal Equity suit [on school funding] will finally be settled. This would be good news for the city and its school children, but perhaps somewhat difficult fiscal news for the city to the extent that the city will be asked to contribute. But, overall, the news is genuinely good.

Past Misuse Of Surpluses

Back in the late 1990s, New York City budgeters acted as if the good times would never end. Every year was better than the next, every year we racked up a big surplus because tax revenues were greater than we expected them to be. We used that surplus to help fill the gap for the following year. That's not a great way to budget. It only works if every year is better than the next. And over time it inured people to large out-year [or future year] gaps. If a problem goes away every year, you start saying, "what's the problem?"

There wasn't a problem until 2001. The recession, both at the U.S. level and the local level, combined with the impacts of 9/11. The fact that we had no big surplus to help remedy the following year's gap put the city in a very serious bind. Over the course of two years, the gap was estimated at well over $6 billion, and the city had to resort to a number of measures to bring the budget back into balance. It raised taxes sharply. It cut back on spending, and it also borrowed over $2 billion long term to fund short-term operation expenses, the cardinal sin in public finance.

Saved By Three Revenue Sources

We have come a long way in a few short years. Once again this year and looking at the last two years, tax revenues are going to come in stronger than the Independent Budget Office or the administration has expected. That's due to three different revenue sources.

First, the real-estate transfer taxes. We all expected the market for real estate to cool off, and it has at least anecdotally. But those property transfer taxes and mortgage recording taxes that make up the transfer taxes are continuing to go gangbusters. For the first four months of the fiscal year, we have gotten well above what we had expected for the first six months of the fiscal year. Transfer taxes don't sound particularly important, but last year they brought in $2.3 billion, which was just a little bit more than we got from the city's general corporation tax. Even though they were insignificant as recently as the late 1990s, now they are a huge mainstay of the city budget.

The personal income tax is also coming in stronger than expected. One thing that's bolstering personal income tax collections is a very strong year on Wall Street. Bonuses are on track to equal their record levels of several years ago. Wall Street profits are also doing very good things for the business tax collection, so we're seeing much greater strength there than anyone had anticipated.

We expect that together, the real estate transfer taxes, the personal income taxes and the business taxes will bring in an additional $2 billion over what had been anticipated last spring. So if we've had $4 billion improvement since last spring, a little more than half of that is right there.

Spending Restraint

Another big factor in the city's fiscal fortunes is spending restraint. Spending by city agencies has been not entirely flat, but it has grown very modestly. I'm talking about the services that the city provides: educating our kids, cleaning the streets, providing public safety. We anticipate that spending for those city services, including labor settlement, will grow at an average annual rate of 1.6 percent between 2006 and 2009. That is much less than the rate of inflation.

This is a continuation of recent trends since the city's fiscal difficulties in 2001. There is virtually no growth in existing programs, and there are no major new spending initiatives.

"Non-Discretionary" Spending

By contrast, citywide spending, which some people call non-discretionary or mandatory spending, is expected to increase more rapidly. These are big-ticket items and have all been increasing rapidly, some at double digits. They are Medicaid, pensions, health insurance, and debt service. They have all been driving city spending.

Let me start with the debt service and health insurance. We expect debt service to grow at an average annual rate of 11 percent over the next several years. This is double-digit and the numbers are huge. We are anticipating that debt service will total over $6 billion in 2009. It is being driven by a larger and larger capital program for the city and is very difficult to control, particularly with rising interest rates. Without sharp cutbacks in the capital program, there are unlikely to be changes in that forecast.

Health insurance costs are also rising very rapidly. We see them growing at an average annual rate of 6 percent a year and reaching $4 billion in 2009.

In contrast to these two very big ticket items, some of the other non-discretionary citywide spending is beginning to moderate. Medicaid was the bane of the city budgeters in recent years, and although it is still rising and still large, we are at least starting to see some moderation in that rate of growth.

There are a couple of reasons for that. The city's share of the cost of Family Health Plus [a health insurance program for low income families] was absorbed by the state last year. In addition, the state has added caps on the increase in Medicaid spending that kick in 2007. Medicaid will reach a total of $5.5 billion in 2009. It's still really big. It's still growing faster than the rate of inflation but we're expecting that growth to moderate.

The other very interesting thing about Medicaid is an accounting thing. Now normally you don't think of accounting changes as being enormously exciting, but the switch to caps by the state on the rate of growth in Medicaid is necessitating a change in how the city and the state account for Medicaid. This means that, based upon the law that was adopted, the city is going to get a $450 million Medicaid windfall this year. It is already legislated, it is going to happen. And it adds to the good news on the Medicaid front.

There is also some good news on the pension front. Pension contributions have more than doubled since 2002 following several years of really bad returns. But those problems are largely behind us... We are beginning to see some of the better returns beginning to phase in and we are expecting that pension contributions by the city will level off. In fact, if trends go the way we anticipate, they will actually begin to decline in 2008.

Even bigger, however, is an accounting change. This has not been adopted yet, but it has been accepted at the local level and is awaiting state action. The change in accounting rules would change the way we schedule our pension contributions. It is going to stretch out the number of years under which extraordinary gains and losses are accounted. These are good, common sense things to do, and they have the additional side effect of having an impact on the city budget. If they are adopted in Albany, the city will have a windfall of about $800 million this year and over $500 million next year. That is going to be followed by some modest additional costs in 2008 and 2009 and thereafter. But the net effect of those pension accounting changes is once again a big positive for the city.

The pension accounting changes together with the Medicaid accounting changes gives you roughly another $2 billion in fiscal relief. So of the $4 billion we have had of good news since last spring, about half of it is genuinely stronger tax collections than we had anticipated. Another half of it is accounting changes and to some extent it is all made possible by continued spending restraint. So rather than having a $4.7 billion gap for '07, we're looking at a gap that's more like half a billion - a gap that is very, very small by comparison to gaps in recent years. Even that could change between now and the end of the fiscal year. The gap for '08 remains considerable, but is down significantly from what we have anticipated.

Changing Our Ad Hoc Approach To Future Gaps

The way we deal with our out-year or future gaps is relatively ad hoc. Right now while the memories of 2001 are so vivid in our minds, I think everybody - the administration, the City Council, the monitors - worries about those gaps and tries to come up with ways to deal with them before they come up and bite us. But that's not always going to be the case. And, if we're fortunate over time, the memories of 2001 will recede just as they did in the late 1990s and somehow those out-year gaps will look less and less pressing. The way to handle that would be to move from a system in which we deal with them in an ad hoc basis to something more systematic.

There have been lots of differing calls for how to do this. The comptroller has called repeatedly for the establishment of a rainy day fund. Others have discussed ways of routinely doing more pay-as-you-go capitol financing. You could take some of the surpluses and invest them in new technology. Doing so would increase productivity and help damp down spending growth over time. There are lots of different things to do, but the right time to worry about how to more systematically deal with the out-year debt is when the sun is shining.

The very fact that the city's fiscal situation is better means that there are going to be new pressures and new demands on the city. There are going to be lots of calls, rightly, for important things that the city needs to fund. Similarly, there are going to be a lot of calls for tax cuts. This is a very high tax place -- the highest taxed major city in the country -- and that has a major impact on competitiveness. So it is perfectly reasonable to say we should be worrying about tax cuts. How the mayor and the council address these pressures for increased spending and reducing taxes is going to largely determine the course of the city's fiscal fortunes over the next few years.

Ronnie Lowenstein is director of the New York City Independent Budget Office


NEXT: Highest Credit Rating In History --Robert Kurtter

 

Highest Credit Rating In The City's History


Related Stories:
The City's Finances --Ronnie Lowenstein

Highest Credit Rating In The City's History --Robert Kurtter

How to Spend School Money --Randi Weingarten

Helping the City's Poor --Fatima Goldman

I work for Moody's Investment Service, and we do credit ratings. Credit ratings play a very narrow role in the financial marketplace. They help to set pricing in the financial marketplace. Our role in this is kind of a narrow middleman role, yet our ratings seem to reverberate quite loudly throughout the general media as they are often viewed as sort of a Good Housekeeping seal of approval, even though that's really not our function.

We are independent. Our job is to do financial and credit analysis. We are a private company, we are for profit. And our ratings only have value to the extent investors in the financial marketplace view them as being accurate and independent barometers of credit risk.

Just this week, the Dow for the first time crossed 11,000. This is being used as a kind of barometer of the economy recovering... Similarly New York City's economy has recovered since September 11 and the bursting of those stock market bubbles and finds itself in pretty good financial condition right now.

Above Average Credit Rating

In recognition of this in April we raised the city's rating to A1, which is generally viewed as a slightly above average rating. At A1, the city's rating is the highest it's been in our history of rating the city, which is probably about 60 years. It reflects the fact that, in our view, the city has recovered from September 11, which is arguably one of the most severe stress tests ever applied to any municipality around the country, until Hurricane Katrina in the Gulf Coast. New York City's economy recovered as a result of external forces nationally and internationally and as the result of good internal management. A lot of hard decisions were made by this administration, in terms of taxes and spending, to do the things that were necessary to restore budget balance.

When we do credit risk, the calculus that we look at can get quite complicated, but it boils down to something very simple, which is: When you set your priorities -- when elected officials decide what's important -- they raise enough money to pay for what they want to spend. To the extent they do, you're in balance. To the extent they don't, you run deficits.

Relying On The Financial Services Industry

The equation of course gets much more complicated because these growth rates are not always in sync. They are driven by different forces. And of course, in New York City, perhaps the most significant force they are driven by is the financial services industry. Though New York City is by no means a one-industry town, the financial services industry's direct and indirect effects disproportionately drive the city's finances. And the financial services industry can be highly volatile. New York City is a far better place for the fact that the financial services industry has chosen New York City as its home and remains here. But with that comes attendant risks for budget management and for fiscal policy. That risk is simply that the city must recognize the inherent volatility that its primary revenue driver creates and build buffers around that. It must also adopt conservative views in revenue forecasting and budget management generally --more so than other cities or other states around the country.

Now is the time to do this. The city's finances are in good shape, and it's a good time to build some of these buffers.

Challenges

Notwithstanding the city's very strong financial performance, it is important to note the city hasn't really fully recovered in all respects. Jobs remain about 200,000 below the peak, which occurred back in 2000.

And the city does face some significant out-year budget gaps, as well as some challenges that are not fully reflected in those gaps. One, of course, is the Campaign For Fiscal Equity [school funding] lawsuit, which for better or worse has been pegged at a cost of $5.6 billion. At this point there is no determination about how that is going to be paid for. The state -- the governor -- has indicated that in his view the city should pick up about 30 percent of that cost, which would be $1.8 billion. That's not factored into any of those out-year budget gaps at this point.

One other looming factor out there is another accounting change. It is the requirement to account for the accrued liability for retiree healthcare. It's going to be a very, very significant cost to New York City. That reporting requirement begins in fiscal 2008. That's still a little way off but it's going to require the city to set aside more money to fund that liability, which is a rapidly growing one.

To sum up: The city's finances are in good shape. There are significant challenges out there, and there is not as much money out there to fund all the desires as many of the interest groups would like. The city is probably going to continue to be in a tight budget mode despite the revenue surge it's going through and it probably would be prudent of the city to try to set aside more of these moneys as buffers because we have learned the hard way over the last 20 years that the financial services industry, which is the revenue bread and butter of this city, is prone to some pretty dramatic swings. Recovering from those swings can be very painful.


Robert Kurtter is senior vice president of Moody's Investors Service


Next: Preserving the Economic Growth, by Kathryn Wylde

 

Keeping the Economy Growing


Related Stories:
The City's Finances --Ronnie Lowenstein

Highest Credit Rating In History --Robert Kurtter

How to Spend School Money --Randi Weingarten

Helping the City's Poor --Fatima Goldman

The surplus $1.7 billion we expect to have comes not from tax increases but from real economic growth. The transfer tax, the real estate transfer tax, is due to a lot of real estate activity. That is a positive message. And our obligation is to look carefully at what's fueling that real economic growth in the city and to try to reinforce that.

Over the last 25 years, the securities industry has been responsible for more than half the growth in the New York City economy, so we start with the importance of maintaining New York as the world's financial center. But we have to so some things that are not quite as obvious.

One out of every ten private sector jobs in the City of New York is working for a foreign company. Our relationship to the foreign, international community is something that is deep, that is important and is unique for New York City as compared to the rest of this country. Often that puts us at odds with national foreign policy, trade policy, visa policy and is an important thing to keep in mind.

A second contributor has been a rebound in the travel and tourism industry, reaching record levels. It's creating the most new low-end jobs and entrepreneurial small business jobs in the city. That's something we have to think about how to reinforce

And in 2004-2005 there was a 4.9 percent increase in employment in the science and research sector, which is important to think about.

The threat in terms of the economy comes if we were to say, things are going well, so we'll institute new taxes to pay for additional spending. A threat right now beyond our control is the federal deficit. To the extent that the federal government has to cut back because of their huge deficit, that is going to flow into the city, leave us with some hard choices as the city budget has to pick up the essential services that we rely upon the federal government for.

The second issue is debt. The key to our economic growth is continued reinvestment and upgrading of basic infrastructure. Those are expenditures we have to make. Construction costs in the city have gone up 40 percent in the last two years. This is the challenge facing the redevelopment of lower Manhattan. This is why the Javits Center has got to be designed or refinanced, because the budget that we put together less than two years ago is no longer sufficient to build out the expansion of the Javits Center. So we have got a huge problem in terms of construction costs.

And finally anti-terrorism. The work that was done after 9/11 -- [Police Commissioner] Ray Kelly deserves a huge amount of credit -- really restored confidence. We have made an investment in security. But New York City remains by far the highest risk terrorist target in the United States.


Kathryn Wylde is president and CEO of the New York City Partnership


Next: How to Spend School Money, by Randi Weingarten

 



Print Friendly and PDF

Editor's Choice


Gotham Gazette: New York Voters Approve $4.2 Billion Environmental Bond Act
New York Voters Approve $4.2 Billion Environmental Bond Act
Gotham Gazette: 
New York City Voters Approve Racial Justice Ballot Measures
New York City Voters Approve Racial Justice Ballot Measures
Gotham Gazette: 
Housing Development in New York City Slows to a Crawl as Officials Debate Tax Incentives
Housing Development in New York City Slows to a Crawl as Officials Debate Tax Incentives
Gotham Gazette: 
City Council Examines Low Voter Turnout, Moving Local Elections to Even Years City Council Examines Low Voter Turnout, Moving Local Elections to Even Years