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To Save N.Y.C.


To Save N.Y.C.

September 19, 2003
Urban PolicyNYC

DESPITE the rebound on Wall Street, New York City's fiscal problems are far from over. Even after two years of belt-tightening, city spending continues to grow at twice the rate of inflation. With unions stonewalling requests for contract concessions a city budget gap of $2 billion to $3 billion looms in the year ahead. In short, recent talk in City Hall of rolling back tax hikes was just that--talk.

What's next? In all likelihood, Mayor Michael Bloomberg will sketch out another round of budget-cut options, wrapped in ominous "doomsday" rhetoric. In response, the City Council will call on Albany to revive the commuter tax and send more aid from the state's empty treasury. And the basic problem--excessive spending--will remain unsolved.

But New Yorkers can put an end to this cycle by literally taking the law into their own hands. Using the initiative process, voters could amend the City Charter to permanently cap the growth in the city's budget and taxes. The idea has been floated at least once before. However, then-Mayor Rudolph Giuliani's 1999 attempt to win voter approval of spending and tax limitations was flawed in a number of respects.

With the economy booming, and after several years of relative fiscal restraint and tax cuts, 1999 was hardly prime time for a taxpayer revolt. Giuliani's fiscal provisions were included in a single ballot question with a dozen unrelated amendments on issues from gun control to procurement reform. The UFT and other municipal labor unions mounted a well-financed stealth campaign that resulted in a resounding defeat for the whole package.

Obviously, a lot has changed since then.

In the wake of more than $3 billion in tax and fee hikes over the last two years, the anger and frustration level among city taxpayers seems to be running high. But most City Council races in New York are so hopelessly one-sided that they offer no meaningful outlet for venting these feelings. That's where the initiative process comes in.

If enough signatures were collected to put the issue on next year's ballot, voters could dictate a charter provision with these three elements:

* The annual growth in city-funded spending (not including federal and state aid) shall not exceed inflation plus the rate of population growth.

* City tax rates shall not be increased and new taxes shall not be created without voter approval.

* At least half of any surplus tax revenues shall be deposited into a special rainy-day fund, and the rest used to retire long-term debt or pay directly for capital projects.

These provisions would not force cuts in spending on vital city services. Rather, per-capita city spending would rise with the cost of living, while tax hikes would be subject to the voters' veto, city debt would be reduced and the rainy-day account couldn't be touched unless it was really raining.

The message to city government: Enough is enough. Stop making excuses, and start living within your means.

If such limits had been in effect since fiscal 2000, the year after Giuliani's failed referendum, the city would now be spending at least $1.9 billion less (as shown in the graph). The post-9/11 revenue shortfall could have been covered with rainy-day funds. And the record property-tax hike of 2002-03 could not have gone through without voter approval.

To be sure, this would not have prevented New York from experiencing a fiscal crisis in the wake of the 2001 recession, the stock market collapse and the attack on the World Trade Center. But if limits had been in place a few years ahead of time, the crisis would have been less severe, and the 2002-03 budget gaps more manageable.

The "pain" of added spending reductions in the short term would have yielded more gain in the form of a speedier economic recovery than the city now seems now likely to experience.

It's too late to turn back the clock on the most recent spending and tax increases, but enacting a spending cap and tax limit in 2004 could make a huge difference in tackling the challenges that still lie ahead.

Slowly but surely, the city government's share of the economy would be reduced. And as the economy grew, New York's crushing tax burden could finally be significantly reduced, unleashing far greater growth.

Fanciful? Perhaps. But not unthinkable. With enough money and organization, you can fight City Hall--as shown by the Ronald Lauder-financed term limits initiative of a decade ago.

Then again, it wouldn't even be necessary for taxpayers to petition their way onto the ballot if Bloomberg was willing to do it for them. After all, the mayor has the power to appoint a commission to recommend charter revisions, as he has already done this year on the subject of political reform. There's nothing to stop him from naming another commission next year to propose spending and tax limits.

If passed, the charter amendment that finally brings New York City's budget under control might go down in history as "the Bloomberg law"--a fitting legacy for a mayor elected on the strength of his business background and implied commitment to avoiding higher taxes.