May 6, 2005
By E. J. McMahon
LISTENING to Michael Bloomberg present the fourth budget of his mayoralty yesterday was like listening to a man having an argument with himself.
The former CEO in the mayor's office made a strong case for doing more - much more - to downsize the city's exceedingly vast array of costly public services.
But the candidate for re-election didn't seem to get the message.
Bloomberg the pol naturally wants to highlight the good news about life in today's New York. And so the Fiscal 2006 edition of his annual Executive Budget slide show put plenty of emphasis on the city's record tourism activity and rising hotel-occupancy rates, declining office vacancies and low unemployment - not to mention the continuing drop in crime and the apparent resumption of the downward trend in welfare rolls.
But Bloomberg the no-nonsense CEO is congenitally incapable of blurring the bottom line. And so the mayor also matter-of-factly volunteered that "this city spends more money than it takes in, in an average year." Some $3.7 billion more next year, to be exact, once you adjust for all the gimmickry and lucky breaks the city has depended on to balance its budgets over the past few years.
The underlying structural imbalance in the city's financial plan has gotten $3 billion worse since Fiscal 2001 - as helpfully detailed by Bloomberg the media mogul in a Powerpoint slide that Bloomberg the pol would probably just as soon gloss over.
What about those powerful municipal unions - the cops, firefighters and teachers, principally - who are angling for much bigger raises than the 1.5 percent the mayor has budgeted?
"We would love to pay our municipal workers more," said Bloomberg the politician.
Well, then, a reporter asked a few minutes later, if the tax money is pouring in, why not give city cops the wage increase they're seeking?
"We can't afford it," snapped Bloomberg the CEO - who happens to be right.
Bloomberg the candidate was happy to trumpet the revelation that revenues for the 2005 fiscal year, which ends June 30, are now expected to come in a whopping $1.3 billion above the estimate of just four months ago. This enabled him to roll a bigger cash-flow surplus from the current year into the coming year - plugging a $1 billion gap and leaving a little extra for spending restorations and token tax cuts.
But in almost the same breath, Bloomberg the businessman pointed out that the revenue surge includes an unusual billion-dollar burst in transaction taxes generated by a super-heated real-estate market. New mortgage underwriting activity in the city is even now tailing off, he noted, and those taxes can be expected to subside to more normal levels over the next few years.
In reality, "there are no surpluses" in New York City finances, said Bloomberg the businessman. (The former prosecutor, Rudy Giuliani, in the fat years of the late 1990s, would never admit this weak point in his case.)
Indeed, despite this year's revenue growth, the projected budget shortfall for Fiscal 2007, the first year of the next mayoral term, has grown to $4.4 billion - New York City's largest projected "out-year" gap ever, at this stage in the budget process. The claim that such gap projections are meaningless "is not true," CEO Bloomberg said; the hole is real, and will have to be filled when the time comes.
Unfortunately, the businessman mayor isn't always so tough-minded. Unwilling to challenge City Hall's big-government status quo, CEO Bloomberg is all too willing to parrot the politician's alibi that most city spending is beyond his direct control and due to the "non-discretionary" costs of pensions, Medicaid and debt service.
But this is only partly true. While pension benefits are dictated by state law, they also reflect the number of employees the mayor chooses to hire and the amount he agrees to pay them. And while the Legislature in Albany shapes Medicaid programs, Bloomberg's own bureaucrats are the gatekeepers to the city Medicaid rolls, and his administration is proudly maintaining a massive public hospital system that is also the city's leading Medicaid provider. As for debt service, it ultimately is a factor of the city's capital budget, which Bloomberg the politician is pushing up to record levels.
With a tax base heavily dependent on personal and business tax revenues generated by the volatile financial sector, New York City is especially vulnerable to economic downturns and unpredictable disasters, man-made or natural, affecting financial markets.
The fiscal impact of 9/11 on the city government was exacerbated by spending growth trends set in motion by Giuliani's second-term budgets - and culminating in a 2002 plan balanced with prior-year surpluses. As Bloomberg the businessman can surely appreciate, the final budget of Bloomberg the pol's first-term presents the same sort of risk for the future.
E.J. McMahon is the director of the Manhattan Institute's Empire Center for New York State Policy.
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