Mayor Bloomberg Touts Balanced Budget While Warning Of ‘Ticking Time Bomb’ In Pension Fund

Mayor Bloomberg (Photo: Getty)

Mayor Michael Bloomberg revealed his preliminary budget plan for the final months of the current fiscal year and fiscal year 2013, which begins in July at City Hall today. While he touted the balanced 2013 budget that closed a $2 billion gap without tax increases, the mayor also warned of potential problems down the road if the pension system, which is not under city control, is not reformed.

“Right now, our pension system is fairly described as a ticking time bomb,” Mayor Bloomberg said.

Mayor Bloomberg’s budget is a $68.7 billion plan including $50.7 billion in funding from the city. The mayor repeatedly made the point New York has weathered the recession “better than most other places” and said his plan managed to avoid “painful steps” taken in other cities like bankruptcy and layoffs of teachers, firefighters and police officers. Mayor Bloomberg said his administration managed to balance the budget without raising taxes or making substantial changes to city services through “responsible spending cuts” to controllable city expenditures.

Under the mayor’s proposal, year-over-year controllable city expenses for fiscal year 2013 were trimmed by $437 million, a 1.9 percent drop from the current fiscal year. Expenditures not fully under city control, including health care, Medicaid, debt service and pensions rose by $2 billion, a 7.5 percent increase from the current year.

Mayor Bloomberg said the city’s pension costs have increased by six hundred percent in the past decade. Pension costs will increase $575 million for the remainder of fiscal year 2012 and fiscal year 2013. Mayor Bloomberg said the increased pension costs are due to the city’s Independent Actuary anticipating a one percent reduction in the rate of return for the pension fund due to the “uncertainty of the future economic outlook.” The city reserved $1 billion in fiscal year 2012 and fiscal year 2013 in anticipation of this change. This reserve funding enabled the city to take on the increased costs while still balancing the budget, however no more reserve funding is available for future budgets. Because of this, the mayor’s four year financial plan includes budget gaps of approximately $3 billion for fiscal year 2014, $3.5 billion for fiscal year 2015 and $3.4 billion for fiscal year 2016.

Governor Cuomo has made pension reform one of his top priorities for the coming year. Mayor Bloomberg, who went to Albany last week to testify about the issue before the Legislature, praised the governor for his efforts on pension reform and said they plan to work together on the issue.

“We are working in partnership with Governor Cuomo to defuse that time bomb,” Mayor Bloomberg said. “I think Governor Cuomo deserves real credit for making it a top priority this year, because we just don’t have much time left to fix the problem.”

Though no policemen, firemen or teachers will be laid off, there will be a reduction in the city’s workforce. Mayor Bloomberg said only “a small number of people” would be affected. The budget also cut funding to childcare and afterschool programs run by the Administration for Children’s Services and the Department of Youth and Community Development. Mayor Bloomberg’s budget does not include any new reductions in the number of firefighters, but the city is going forward with a plan outlined in 2011 to close twenty city firehouses. In the past, the mayor has defended the proposal by pointing out the fact much fewer buildings in New York are made of wood than were when many firehouses originally opened. Several of the politicians hoping to succeed Mayor Bloomberg next year quickly criticized the firehouse closures and childcare cuts.

Now that the mayor has unveiled his proposed budget, he and the City Council have until June to agree on a final budget plan. After the mayor’s presentation, Councilman Domenic Recchia, chairman of the Council’s Committee on Finance, spoke to reporters in the City Hall lobby. Though he said he’s still “examining” the mayor’s budget plan, Mr. Recchia said the cuts to childcare programs were the main element he initially found “disturbing.”

“The childcare issue is really disturbing. … What they’re doing is saying the pre-k children, the four-year-olds, they should be over to the Department of Education,” Mr. Recchia said. “Is the Department of Education going to open up new pre-k slots? Are they going to increase the number of pre k slots? That is the big question.”

Overall, Mr. Recchia said the mayor’s proposal seems to be an improvement on past budgets.

“It’s a work in progress. We’re going to have our hearings on this, we’re going to start in March. We’re just reviewing everything, but the devil’s in the details and I’m examining it all and we’ll see what happens in the weeks ahead of us,” Mr. Recchia said. “But it was better than what I anticipated. … It’s balanced, it’s fair, no teacher layoffs, which is a big win, no new taxes, and so, we’ll see where we wind up on this.”

Mayor Bloomberg Touts Balanced Budget While Warning Of ‘Ticking Time Bomb’ In Pension Fund