City’s $3.3 Billion Surplus Hides Coming Storm

One could be forgiven for thinking the city’s financial condition is in pretty great shape these days. Recent articles about the local economy have been filled with cheerful words such as “recovery,” “surplus” and “surge.” When it was announced last month that the city would end this fiscal year with an unexpected $3.3 billion surplus, there was a distinct “happy days are here again” mood at City Hall, and some forced cheer among the Democratic Mayoral hopefuls. And the good news keeps rolling in: Standard & Poor’s has raised its credit rating of the city to an A+.

While Mayor Michael Bloomberg has done a superb job in handling the city’s finances, there remain long-term problems that warrant serious and immediate attention. The Mayor scored political points when he told reporters that the city ”can afford a little bit of relaxation” when it came to spending for the coming year, but the truth isn’t quite so cozy.

Last week, the nonpartisan Independent Budget Office predicted a deficit of $4.4 billion for the 2007 fiscal year. Because of a waning real-estate market, and the fact that several temporary taxes are due to expire next year, the budget office forecasts a $200 million decline in tax revenue. The alarming rise in Medicaid costs and municipal pensions will do the rest of the damage. It’s become time for the Mayor-and anyone who wishes to have his job-to offer a serious strategy for coping with a period of decreasing revenues and increased spending. As a spokesman for the budget office pointed out, “Based on our economic forecast, we’re not going to grow our way out of the large budget gap the way we did this year.” And a spokeswoman for the Citizens Budget Commission, a business-backed group, noted, ”The party’s going to come to an end quickly.”

It is essential that Mr. Bloomberg focus on paying down the debt and cutting costs as he and the City Council work out the details of his budget. It was just last year that the state’s Financial Control Board concluded that the city’s finances were “structurally unbalanced.” The Federal Reserve Bank of New York has cautioned that the city’s long-term financial health is far too dependent on Wall Street as a source of revenue through income and corporate taxes. And unlike in years past, we can’t count on any help from Albany or Washington. George Pataki’s atrocious management of the state’s finances may result in annual budget gaps of $11 billion in three years, according to some estimates. And George W. Bush has shown himself to be small-minded when it comes to understanding how a healthy New York City economy is vital to the country’s well-being.

The current Mayoral campaign is an ideal opportunity for the various candidates to present their plans for the city’s finances. Unfortunately, the Mayor’s new budget again contains a politically motivated $400 property-tax rebate for homeowners, which will cost the city $250 million annually. But Mr. Bloomberg has a solid record of fiscal prudence: He’s reduced the municipal work force by 18,000 employees, cut $3 billion from city agencies and increased taxes when necessary. He’ll need to continue to be tough and unsentimental as he confronts the coming storm.

CUNY Lures Intel Winner

Public education in New York is on a roll.

Last week in this space, we noted the recent success of the city’s fourth-grade public-school students in meeting and exceeding state literacy standards. Some of the most dramatic improvements came from the city’s poorest neighborhoods, a tribute to the students, parents and teachers-and an eloquent reprimand to those who insist that poor students ought to be held to lower standards than their more privileged peers.

Now we have reason to commend the city’s public higher-education system, the City University of New York. The Honors College at City College recently enrolled the nation’s most promising science student, David L.V. Bauer, a senior at Hunter College High School. Young David came in first place in the annual Intel Science Talent Search this year. As such, he could have gone anywhere- the Ivy League, or Stanford, or the Massachusetts Institute of Technology. The award came with a $100,000 scholarship.

David chose not one of the usual suspects, but CCNY’s Honors College-yes, a public school. What’s more, a public institution that, a decade ago, seemed to be floundering. Lower standards and diminished expectations had made a degree from City University nearly worthless, at least in the eyes of critics like Rudolph Giuliani and Herman Badillo.

Mr. Giuliani was determined to do right by CUNY’s students, even at the expense of infuriating professors. So he shook up the system, put new standards in place and appointed Matthew Goldstein as CUNY’s chancellor.

Just as Joel Klein has been a smashing success as chancellor of the city’s public-school system, Mr. Goldstein has turned around City University. With fourth-graders showing their stuff and City University once again attracting some of the city’s most brilliant minds, the future of New York looks bright indeed.

Mickey Tarnopol: Quintessential New Yorker

New York is a town of exceptional people, and certainly one of them was Michael Tarnopol, who died in Manhattan last week. A quintessential New Yorker who rose to the top of his profession, Mr. Tarnopol lived a wide-ranging and generous life. All who knew him were touched by his decency and loyalty. His warmth, exuberance and sense of humor will be sorely missed, as evidenced by the outpouring of love and friendship since his death.

Michael Tarnopol grew up on Long Island, graduated from the Wharton School of the University of Pennsylvania and soon became a rising star at Lehman Brothers, where he was known for his good judgment and savvy instincts. Bear Stearns took notice and hired him away. He continued his upward arc, rising to become the vice chairman of Bear Stearns and chairman of its investment-banking division.

At the same time, Mr. Tarnopol expanded his reach into philanthropy. He was diagnosed with cancer in 1994, and immediately gave his resources and time to cancer research. He was made a trustee of the Memorial Sloan-Kettering Cancer Center and the Prostate Cancer Foundation. In his philanthropic and professional lives, he was highly respected as a man who stood by his friends and his core values.

The Observer extends our heartfelt condolences to Mickey’s wife, Lynne, and to their children.