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New York Post

 

Treading Water

February 18, 2011

By Nicole Gelinas

PRINTER FRIENDLY

Mike's budget has no real fixes

Mayor Bloomberg unveiled his 2012 budget yesterday. It suffers from a massive deficit -- of real solutions.

In his speech, the mayor noted that New York has recovered from the credit bust faster than the rest of the country, putting us “in a much stronger position” than other cities. Our supercharged recovery has helped Bloomberg to close a $4.58 billion budget deficit -- a gap of 9 percent of city spending -- for the fiscal year that starts in July.

Wall Street is back to boom-era profits, thanks to the Federal Reserve’s never-before-seen zero percent interest rates, which let financial firms borrow nearly for free. The Street is supposed to earn $20 billion in 2011 -- nearly as much as it did in crazy 2006.

Thanks to this I Love New York stimulus, Gotham will take in more than $2 billion more than expected in taxes -- and save another $600 million on borrowing costs, thanks to those lower interest rates.

That free money takes care of nearly 60 percent of our deficit -- and some extra federal money for Medicaid, plus moving a bunch of other stuff around and some “internal operations” efficiencies, leaves a “mere” $1.5 billion gap.

But Bloomberg is threatening to close that gap with big cuts -- shedding 6,000 teachers, closing 20 fire companies and slicing things like child-care subsidies and museum grants. He’ll shave 10 percent off future infrastructure investments, too.

The cuts will bring the total that the mayor has pared from planned spending to $5.2 billion annually since Lehman Bros. blew up -- no small feat. Yet actual city spending is still rising -- it just would have gone up more without them.

This year, city spending jumped 11.5 percent -- even though some departments (including police, fire, sanitation and parks) will see their operations spending fall. Why?

First, there’s education. The city’s own-funds spending on the schools will rise by a whopping 22.8 percent this year -- from $6.4 billion to $7.9 billion.

That’s because Albany is yanking $1 billion here -- even as the feds, done with stimulus, are pulling back $900 million.

But that’s a risk that Bloomberg took. This year, New York will spend $22 billion on education from federal, state and city funds -- up from $11.6 billion when the mayor took office.

New York City chose, for example, to hike teacher salaries by nearly 50 percent over the last decade and increase the education workforce by 16,360 people. Today, we spend $17,923 per student -- 69 percent more than Seattle and more than twice as much as Houston.

For most of that time, the state helped out with extra money -- but it was always a risk that someday the state would pull back, leaving us holding the bag and with no flexibility to cut salaries or lay off less productive teachers.

Now the city is doubling down on its bet. As the mayor put it, “We’ve moved money from everything else over to education.”

Bad move. The mayor should say that, after having doubled the budget, it’s time to make sure we’re getting results on what we’re already spending -- and time for the teachers union and Albany to offer some real concessions, unless they want to see 20,000 fewer union votes instead of 6,000.

The second reason for real cuts at the NYPD and other core agencies: Overall costs for pensions, employee health and debt are going up 18.2 percent this year.

As the mayor said, pensions “are why the budget keeps going up more than anything else.” Indeed -- they’re up nearly 500 percent since Bloomberg took office, to $8.4 billion. Health-care costs will rise 7.9 percent this year, to $6.3 billion.

So why is the mayor’s pension “reform” plan so modest? He wants Albany to change the law so that new civilian workers must work ’til 65 to get their guaranteed payouts -- when he should be asking Albany to push new civilians into 401(k)-style pensions.

Plus, the mayor wants to negotiate pensions directly, rather than leaving them up to Albany. But in the past, he’s had little success wringing concessions from unions via talks, or even trying. This goes for the employee health-care part of the budget -- which the mayor is already free to negotiate with unions.

Unless the mayor fixes education and employee costs, he can’t fix debt -- which will cost $5.4 billion this year, up 11.4 percent. Since we spend so much of our cash on benefits, we have to borrow to build or fix anything -- even if, as seems inevitable, we slash infrastructure investment more than the 10 percent cut the mayor already plans.

Original Source: http://www.nypost.com/p/news/opinion/opedcolumnists/treading_water_avIXgizFxSbSJdIjZPem2J

 

 
 
 

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