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A City Savings Spree

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A City Savings Spree

February 16, 2004
Urban PolicyNYC

WHERE can a city turn for more cash when it already taxes practically everything that moves? The latest suggestions from New York's Independent Budget Office (IBO) point to gourmet coffee and cosmetic surgery, prompting well-earned snickers all around.

In fact, some of the money-raising ideas in the IBO's 2004 "Budget Options" report actually pass the laugh test.

For example, the report notes the city could raise nearly $12 million a year by repealing the property-tax exemption on Cablevision-owned Madison Square Garden.

Selling 1,000 medallions for a new breed of radio-dispatched taxicabs, another IBO-cited idea, could raise a quarter-billion while offering black-car convenience to the masses.

Adding more café and restaurant concessions to city parks and libraries would be a good way to raise $3 million or $4 million more (sparing us the silly, Seattle-style latte levy).

But the overall effect of the IBO's menu is to underscore the futility of attempting to balance Gotham's budget on the revenue side of the ledger. The big-ticket options - such as a stock-transfer tax, new business taxes and even higher personal-income-tax rates - simply boil down to different forms of economic suicide.

The mostly bad tax-and-fee ideas summarized in the first half of the IBO's report shouldn't unduly detract attention from the more valuable second half of the 76-page volume, which focuses on some of the many ways the city can save money.

These include such hardy perennials as a 40-hour work week for all city employees (worth up to $240 million); requiring city workers to contribute to their own health-insurance premiums (ultimately saving $255 million a year); elimination of police "wash-up" time (worth $70 million), and increasing the teacher workload by one class period a day (worth $470 million, even after giving a modest raise to teachers).

Other IBO ideas worthy of attention include:

* Cutting nearly $28 million in grants to well-heeled cultural institutions such as the Metropolitan Museum, while preserving their full operating subsidies.

* Increasing the productivity of firefighters without closing firehouses, through an increased work week ($40 million) or more flexible staffing arrangements ($65 million).

* Giving homeless shelter residents meaningful financial incentives to leave the city shelter system ($11 million).

* Shifting the pension to a defined contribution retirement plan, such as 401(k) plan, saving $85 million a year by 2007 - and more as time goes on.

* Reducing the city's contribution to the municipal labor unions' supplemental welfare benefit funds, which pay for such items as vision and dental care, by 10 percent ($77 million).

* Giving a $10,000 bonus to agency managers who succeed in cutting spending by 5 percent through increased efficiency. Assuming a 60 percent success rate, IBO suggests this would save $520 million.

The money-saving ideas cited in the IBO report, only some of which are mutually exclusive, add up to well over $2 billion when fully implemented. And they don't even exhaust the list of possibilities.

For example, the IBO report suggests restoring the 25-cent fare on the Staten Island ferry but doesn't explore the potentially more significant step of competitively contracting out ferry service to more efficient private operators (who might do a better job of running the ferry).

And why allow the unions to maintain separate welfare funds at all, when the same worker benefits could be provided more cost-effectively by having the city directly purchase them on a competitive basis, in the open market?

The problem, of course, is that most of these changes require the agreement of the city's unions. Rather than offering any of the productivity savings Mayor Bloomberg is seeking as his price for new contract settlements, labor leaders like Randi Weingarten may drag their feet for another couple of years in the hopes of electing a more compliant boss.

Meanwhile, however, the mayor needs to more relentlessly attack those portions of the budget he does control, such as the discretionary arts grants cited by the IBO and duplicative agencies, such as the $7 million Commission on Human Rights.

New York was the most heavily taxed big city in the country even before the enactment of $3 billion in tax increases over the past two years. And most of that burden already falls disproportionately on the most prosperous (and thus footloose) of the city's taxpayers.

"Botax" jokes aside, the city's financial problem is not insufficient revenues. The only realistic option is to reduce spending. And the sooner the better.