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New York Post

 

DC Can't Save Us

January 05, 2009

By Nicole Gelinas

PRINTER FRIENDLY

LAST week, Deputy Mayor Kevin Sheekey argued that Caroline Kennedy was the only acceptable choice to be "desperate" New York's new senator because "New York has a huge budget gap. That means giant cuts... We need help from the new president," who was a beneficiary of Kennedy's political support. "Our future depends on it."

Let's hope that Sheekey's boss, Mayor Bloomberg, soon realizes that even the highest-voltage political star is no solution to the city's budget mess.

Consider what state Comptroller Tom DiNapoli reported just before the holidays: If you take out the effects of big surpluses leftover from Wall Street's boom years, New York City will spend $4.3 billion more than it will take in this fiscal year—a whopping 10 percent of city-funded revenues.

It doesn't get better: For the year that starts in six months, that operating deficit will grow to $7.2 billion, or 17 percent of city-funded revenues. And the actual cash deficit by this July—after we've finished using the last of those huge, huge, credit-bubble-era surpluses—could reach $3.5 billion, much higher than the $1.3 billion that the mayor is projecting.

But the real drop-dead time is 18 months from now. By July 2010, New York could face a real cash deficit of $8 billion, or 13 percent of total spending and 18 percent of city revenues.

Here's what makes that figure particularly chilling: At the peak of the '70s fiscal crisis—when the city actually lost control over its own budget to outside administrators—the city's deficit, as a percentage of total expected spending, was "merely" 14 percent.

Yet this is no real surprise, because city spending, adjusted for inflation and population, is 22 percent higher than it was back then—and most of the increase came in the last half-decade, on Bloomberg's watch.

Worse, this projection already includes the extra cash from the recent $1.3 billion property-tax hike, as well as estimates of $1 billion-plus in projected budget cuts—plus a cash extraction out of what was supposed to be a long-term "benefits trust" for future retiree health-care costs.

It's almost jaw-dropping that the mayor, faced with these projections and with no hope of a return to a bubble-era "normal" on Wall Street, has made things worse.

City workers' salary growth, for example, is set to rise 13 percent between now and our drop-dead year—largely because the mayor late last year voluntarily entered into labor contracts granting hefty raises to both civilian and uniformed workers. The cost of higher pay adds nearly $1.7 billion to the drop-dead-year deficit.

Plus, the city-funded workforce has grown by more than 12,000 people in the last three years—so even the 4,556 job cuts that Bloomberg projects won't bring us back to 2005.

Then there's what Bloomberg always calls the "uncontrollable" parts of the budget. DiNapoli expects the city's pension costs to grow to more than $7 billion a year by 2011, up from about $1.5 billion in the late '90s. Health-care costs for public-sector workers, too, will rise from the $1 billion to $2 billion neighborhood in the late '90s and early 2000s, to more than $4 billion a year in 2011.

No amount of Kennedy magic dust will fix these problems—the solutions must come from within ourselves.

First, the mayor, during his budget speech this month, should say publicly that these deficits just can't be closed with across-the-board budget cuts to things like police without severely endangering the city's quality of life. Sure, we've got to wring efficiencies out of the city' vast workforce—but the numbers are just too big for that alone to do the job.

Instead, the mayor must make outsized cuts in education spending, whose city-funded budget has ballooned at nearly 10 percent every single year since Bloomberg took office—without commensurate results in achievement.

Unfortunately, much of that increased spending came in the form of contractually guaranteed, six-figure teacher salaries—so cuts must come from staffing, instead. So, for now, Bloomberg should take the time to ensure that these cuts cause the least possible harm to students.

Then the mayor has to work with Albany to make real cuts to Medicaid—which consumes more than $5.5 billion a year in the city, without making New York any healthier than other states. (Here, our senators can help—by spearheading cost-saving reforms from Washington.)

Finally, Bloomberg must be strong on reforming pensions and other benefits.

He made a start on this in these pages last month, writing that he'd work with Albany to ask future city employees to 1) continue to contribute to their own pensions after 10 years of work and 2) become eligible for their pensions after 10 years instead of the current five. For future uniformed workers, the mayor also proposed to increase the number of years before retirement eligibility from 20 to 25 and to raise the minimum retirement age to 50.

But the mayor should be clear that this is only a very modest start. Public-sector workers are going to have to start paying much more, in the form of higher contributions and lower future benefits, to keep their guaranteed pensions and generous health benefits—which are simply no longer available in the private sector.

Yes, real changes to things like pensions won't deeply affect the budget for a while. But, in two years' time, bondholders are more likely to forgive New York its still-current problems if they can see that we've made real progress on future liabilities during the tough times.

If we don't start addressing our long-term problems and instead keep on dithering all the way to that July 2010 deadline—hoping that Washington will somehow save us - instead of solving our own problems while we still can, then New York will face the same ugly choices (or lack of choices) that we did in the '70s.

Original Source: http://www.nypost.com/seven/01052009/postopinion/opedcolumnists/dc_cant_save_us_147200.htm

 

 
 
 

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