For those grown accustomed to reading news of New York City’s billion-dollar budget surpluses, and enjoying the tax cuts and service improvements that accompany flush times, the latest forecasts from City Hall serve as a reminder that the economic weather is always subject to change.
The city’s budget office is predicting deficits of $2.7 billion for fiscal 2009, $4.8 billion for fiscal 2010 and $6.5 billion for fiscal 2011. While budget director Mark Page correctly points out that “we still have ongoing economic growth in the city,” the new figures represent a stunning change from the last fiscal year, when the city saw a budget surplus of $4.4 billion.
Rather than ignore these troubling numbers and let his successor handle it, as many politicians would be tempted to do, Mayor Michael Bloomberg is doing some aggressive pruning. Last week he imposed a hiring freeze on city agencies, and told commissioners to come up with plans to cut their budgets by 2.5 percent this year and 5 percent next year.
These measures would save the city $500 million this year, and $1 billion next year. To understand the urgency of the situation, it may help to recall that the last time the Bloomberg administration had to make such broad reductions was in 2002, in the wake of the 9/11 terrorist attacks.
Mr. Bloomberg’s business background is serving the city well here. While he knows that he has no control over Wall Street profits—expected to decline by $6 billion from last year—and that he can’t do much about the local impact of the national mortgage crisis, he can demand fiscal sobriety from those who answer to him.
Some City Council members have recklessly declared they will vote to oppose the mayor’s belt-tightening. Fortunately, Council Speaker Christine Quinn is no fool, and is standing behind the mayor, noting, “We can’t pretend that we’re in fiscal times that are rosier than they are.”
It’s not just the decline in Wall Street profits that are causing tremors in the city’s economic base and creating the conditions for expenses to outpace revenues. The bigger culprit is the labor costs—salaries, pensions and health care benefits—that are built into union contracts for city workers. While the mayor has achieved admirable productivity gains from municipal unions, New York’s annual spending on its workforce is expected to hit a staggering $40 billion by 2011. Even if Wall Street profits were to experience another surge, and real estate transactions follow suit, the city’s upcoming costs will leave us vulnerable.
Fortunately, there are always ways to save money. Now is the time for the green eyeshade types who manage the city’s budget to burn the midnight oil. Every dollar saved now is less pain in the future.