The city’s Independent Budget Office just released a dour report on New York’s fiscal picture, projecting a cumulative $11.3 billion in budget gaps over the next two and a half years and $18.3 billion by mid-2012. Such figures would represent substantial shortfalls requiring major cuts and/or new revenues, given a city budget currently of about $60 billion.
The IBO report shows budget gaps far larger than the Bloomberg administration’s estimates released in November, with IBO projecting $6 billion less in revenue than the city did over the next three and a half years, according to the report.
“With additional projected budget deficits to be closed, it is likely that future gap closing plans will include substantial cutbacks in services,” the report said.
With the exception of the property tax (which Council Speaker Christine Quinn said this week she did not want to raise again), the bulk of city revenues mimic the economy and are highly dependent on Wall Street. Thus budget experts regard New York as a city that sees far greater peaks and valleys than the nation as a whole, with mountains of cash flowing in during the high times and budgets getting squeezed close to suffocation during the tough times.
All the while, the city’s expenditures are projected to keep growing, in large part due to rising pension obligations (and with Wall Street investments down, the pensions need hundreds of millions in additional city funds); debt service on account of the largest capital plan ever (the IBO report said that an announced scale back of the plan by $5.1 billion actually became just $1.6 billion, in part due to increased commitments for housing and economic development projects); and other fringe benefits including health care for city workers.
A rundown of some of the projections:
- A $4.3 billion budget gap in fiscal year 2010; $7 billion in 2011; $7 billion in 2012.
- Total city expenditures in the budget to rise by $10 billion in just two years (from $59.6 billion in fiscal year 2009 to $69.2 billion in 2011), while revenues grow by less than $3 billion.
- Real estate transfer taxes, which hit $3.3 billion in 2007, dropped to $2.6 billion in 2008. IBO expects them to fall further in 2009 to $1.6 billion, as the large commercial sales market has been an arid desert in the past two months especially.
- Property taxes to hit $14.4 billion in 2009, up 10.1 percent from 2008 (there was a 7 percent tax increase and property taxes are based on a property value averaged over multiple years, making them less sensitive to economic swings). The rise is expected to continue to $16.1 billion in 2010.
- Between April of 2008, when New York City hit its peak employment of 3.8 million, and the end of 2010, the city is projected to lose 242,700 jobs. IBO predicts employment will rise again starting in 2011.