The Fiscal Dangers of Good News: Mayor Bloomberg Presents His Administrationís Budget

By Maurice Pinzon
Yesterday, as News Yorkers were scurrying to avoid the bitter cold, Mayor Michael R. Bloomberg was in City Hall proposing a $45.7 billion budget amidst a slightly warmer economic and fiscal climate. But Mayor Bloomberg also indicated that the underpinnings of New York City’s economic and fiscal recovery are as volatile as this winter weather.

Mayor Bloomberg said he was ìcautiously optimisticî because economic indicators showed that the City’s financial situation has somewhat improved and his administration has been able to close two consecutive budget gaps in the billions of dollars by ìdoing more with lessî and asking New Yorkers to pitch in by paying higher taxes.

That partnership, Mayor Bloomberg said, has brought the City out of the deep fiscal and economic problems he had inherited. But Mayor Bloomberg insisted that his administration would not let its guard down, because deficits are looming in future years and the economic exuberant boom years of the past will not repeat themselves. The Mayor spoke with the confidence of a person comfortable in business circles, someone who, through his own business expertise and his association with other business leaders, sensed that the underpinnings of the City’s recovery were very tentative.

In his presentation to reporters and his commissioners Mayor Bloomberg pointed to two essential but very different budget streams: One in which costs were contained under his control and another for which the City still pays, even though the mandate was established by the legislature in Albany and signed into law by the governor. These expenditures include Medicaid, pensions and fringe benefits, costs that seem to be in an ever increasing upward trajectory, creating a structural deficit every year in the City’s budget. These costs are essentially unmovable, like a building in the City’s was as it tries to operate more efficiently under rigorous budget discipline.

The services most people associate with municipal government and consider the responsibility of the Sanitation, Police or Fire Departments, are paid for by the part of the budget mostly under the City’s control. But the City’s budget and expenses also include the pension and fringe benefits enacted in Albany, and the mayor must figure out how to pay for them.

Diana Fortuna, president of the Citizens Budget Commission, agreed with this assessment in an interview with New York News Network. Ms. Fortuna pointed to the high budget costs incurred by the City but enacted by Albany. Uncontrollable costs she said could be attributed to the State. ìIt’s really Albanyî and how the legislature and the governor ìdole out good news. î But these ìgood newsî benefits are not supported by funding.

Mayor Bloomberg said the only way to keep the City’s budget balanced was to continue to contain the costs the City could control while ìgrowing itselfî out of the ìstructural deficitî by maintaining a high quality of life that continues to attract new projects to the City. One example the mayor gave was a proposed Brooklyn stadium designed to attract the Nets basketball team, a project that he said would generate development and jobs.

If former Mayor Rudolph Giuliani often acted as if he were the City’s police chief, Mayor Bloomberg’s presentation in the Blue Room at City Hall was reminiscent of a Chief Executive Officer, the CEO, reporting the budget of his corporation, a very public company subject to scrutiny. The mayor asked people to review his past accomplishments, his balancing of his administration’s first two budget deficits of $5 billion and $6.5 billion. He also wanted people to recognize that these events took place at a time of great economic duress and that his administration had managed to create an economic and fiscal climate in which property values were increasing, crime was still dropping, and companies are engaged in discussions for new projects in New York. Indeed, the mayor characterized New York City as having unprecedented strategic advantages.

At one point Mayor Bloomberg referred to the City’s accounting system as rigorous and public, as if to contrast it with the private sector’s accounting methods. The mayor delivered an extensive and clear presentation to reporters and his commissioners in a televised presentation the public could see on TV.

Mayor Bloomberg highlighted his $400 property tax rebate to homeowners. This part of the presentation did not seem consistent with his assessment of the City’s tentative economic rebound, its limited power over its budget responsibilities and his need to go to Albany and Washington, D.C. to request more funding.

The mayor, however, seemed reluctant to talk about any budget cuts. The cost reductions to his budget were a result of better agency management and therefore would not impact services, he said. But when Mayor Bloomberg was asked whether the budget cuts he had proposed in last year’s budget were still in place, he initially sidestepped the question.

Then again this move may just be part of the annual budget dance. According to the City’s accounting methods the mayor’s cuts from previous years are not technically budget cuts if they are not part of the base budget. And so the City Council is left with something to do in its budget hearings – restore the services and take credit for their restoration.

Even though Mayor Bloomberg said in his budget presentation that ìwe are a compassionate society and we cannot walk away, no matter what budgetary problems we have,î advocates and the City Council insisted last year’s $300 million in budget cut holdovers would negatively affect needy New Yorkers.

City Council Speaker Gifford Miller initially responded to the new budget by saying that the mayor should talk to ìthe parents that are going to lose their child care,î parents who care about the ìteacher’s choiceî program and ìsummer jobs program,î and people ìwho get weekend meals.î Speaker Miller said these services were in danger of being eliminated.

The Citizen’s Committee for Children, an advocacy group, compiled a list of $110 million in service cuts that it said would negatively impact children, including reductions to child care and youth programs, and the closing of children’s health clinics.

Executive Gail B. Nayowith from the committee issued a statement that said, ìAs the fiscal climate brightens and political pressure mounts to roll-back taxes, we urge restraint and consideration of the need to maintain vital services for children.î She added, ìTiming is everything and the question is whether the city can afford to cut taxes this year and at the same time move forward with significant cuts to children’s services.î

Speaker Miller, however, did not say if he would oppose the mayor’s proposed tax rebate in order to preserve the services he thinks should be protected. He said the City Council would have to review the budget before he could make that determination.

Ms. Fortuna from the Citizens Budget Commission said she did not think the property tax rebate the mayor was proposing was such a good idea, in light of the still uncertain budget picture and uncontrollable expenses from Albany.

Comptroller William C. Thompson, Jr. also had a few concerns. In a statement his office released he said, “The Mayor’s plan is based on a great deal of optimism. I am concerned that it contains a number of substantial risks, such as the state’s assumption of MAC debt service and no contingency for collective bargaining. It also relies on significant state and federal support that may never be realized.”

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