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Bloomberg said his budget plan closes the $2 billion budget gap, but warned that the estimates put the budget deficit at $3 billion in fiscal year 2014.

Bloomberg's plan calls for the elimination of 20 fire companies — as it did last year before the Council restored their funding — and cuts to the arts.

Council Finance Chairman Domenic Recchia said this year those targeted companies will be just one of several categories of budget cuts the Council has to weigh restoring.

"The libraries we put in $60 million last year — this year we are facing $75 million with the libraries, $41 million in the culturals," he said.

The City Council will also take a closer look at the mayor's proposed cuts to  pre-school, day care, after school programs and social services.

The mayor said one of the biggest hurdles to balancing the budget is ballooning pension system. For the first time this year, he said, the total cost of pension and fringe benefits for uniformed services will cost more than the salaries for that workforce.

Bloomberg's initial budget proposal is traditionally the opening salvo in a lengthy series of negotiations between policymakers, elected officials and advocates. The final budget must have the approval of the City Council.

Education

The mayor said he is sparing teachers again and does not foresee any layoffs next fiscal year. He pointed out that the city is reducing spending in all areas except education. The city is also seeing an increase in state education funding for the next fiscal year.

“I am less stressed already,” said Schools Chancellor Dennis Walcott. But he added that there will still be budget challenges.

The city does not plan to restore any teaching positions lost through attrition, nor will it restore positions cut to school aides last year. Walcott said the Department of Education will also be looking internally to reduce costs, such as with transportation.

Last year, the mayor's initial budget plan called for cutting thousands of city teachers. The layoffs would have been the city's first public school pink slips since the economic crisis of the 1970s. But the final budget reduced the teaching force only through attrition.

City's Economic Heath

The city will reap a major one-time windfall through the sale of 2,000 yellow taxi medallions, which are expected to fetch $1 billion.

 The mayor said the national economic recovery is lifting city revenues. Tourism remains a bright spot in the city's economy, and the real estate market is gradually improving (26 large office buildings valued at $100 million or more were sold in 2011, marking a return to the normal range). But the European debt crisis and declining profits at major U.S. banks will likely result in layoffs for some of the most highly paid New Yorkers in 2012. Overall, wages in the city will rise only slightly, the mayor predicts.

About one in four dollars spent by the city comes from property taxes. For the coming fiscal year, the mayor expects property tax revenues to rise 5.6 percent, to $17.8 billion.

Economically sensitive taxes such as personal income tax and sales tax are an even greater source of revenue, accounting for one dollar in three that the city collects. In fiscal 2012, the Mayor anticipates these taxes to bring in $24.3 billion, an increase of 3.7 percent.

Through the year 2016, property tax revenues are expected to increase more than 3 percent year-to-year. The increase in economically sensitive tax collections is by defnition harder to predict, but Bloomberg puts in in the 2.4 to 4.9 percent range (YTY) through 2016.

Even as the economy recovers, Bloomberg is predicting state and federal aid to the city to remain more or less frozen, at around $20 billion each year through 2016.

Social Services

The mayor did not give specifics about cuts to child care in his budget address, but advocates complain his proposal would cut thousands slots for city-subsidized daycare, Head Start and pre-kindergarten. In addition, thousands of slots for after-school programs are slated to end.

The city is currently restructuring its early childhood learning programs in an effort to improve their quality.  But advocates argue, it’s also vastly reducing the number of families the programs will serve.  “Promoting school reform efforts while disinvesting in early childhood education is not credible,” wrote Public Advocate Bill De Blasio in a letter to the mayor.

Health Care

As with other areas, the city under the proposed budget would continue to decrease spending on health-related services. The Department of Health and Mental Hygiene — which operates a small number of clinics, but is largely focused on fighting chronic and communicable diseases, inspecting restaurants and administering everything from death certificates to pet licenses — would see its budget decline from $617 million to $582 million, a 6 percent drop.

The Health and Hospitals Corporation, the nation’s largest public hospital system, is largely paid for by the state and federal governments through the Medicaid system. The mayor is proposing cutting the city’s subsidy to HHC by 9 percent, from $75 million to $68 million.

With reporting by Bob Hennelly, Yasmeen Khan, Ilya Marritz, Fred Mogul, Cindy Rodriguez and the Associated Press

Alex and Michael Explain the New York City Budget from The New York World on Vimeo.