What About That '$3 Billion Surplus' in NYC?

While you’re watched Letterman, Saturday Night Live, CNN, Iron Chef, Jeopardy! and many more shows this past week, you might've seen an ad from the United Federation of Teachers slamming Mayor Bloomberg for threatening to lay off more than 4,600 teachers while the city’s got a three billion dollar surplus, which you can see in the February 2011 Financial Plan.

But is Mayor Bloomberg really like Scrooge Mcduck swimming through the city’s mounds of gold coins?

To slice through the rhetoric, we picked the brain of Ronnie Lowenstein, director of the City’s nonpartisan, publicly funded Independent Budget Office.

“The use of the term surplus is unfortunate. In fact, that three billion dollars is the single biggest way that the city is going to be bringing its budget into balance for next year. So calling it a surplus that’s available for other things is I think misleading, even though that’s the terminology that the city has always used,” said Lowenstein.

New York City is required by law to balance its budget every year. That’s actually pretty unique — most other cities and states (including New York State) do not have to balance their budgets. But because of the city’s close call with bankruptcy in the 1970s, it is not allowed to leave a hole for the following year — if we did, there would be a withering punishment: the State would seize control of the City’s finances. To play it safe, the city is careful to ensure it has a “surplus” every year, in good times and in bad.

“One thing that’s notable about this administration and Council, is when times were really good, during the boom, they took some of those extraordinary surpluses and didn’t use all of them for the following year, but rather moved some of them further into the future, and those accumulated surpluses really helped the city early in the downturn keep going,” Lowenstein said.

So from City Hall's standpoint, the “surplus” in the ad is already spoken for — it’s slotted to fill a hole in next year’s budget. “You could use that three billion dollars for something else—you could use it for a tax cut—but you would have to do something else to bring next year into balance, and it’s as simple as that,” Lowenstein said. Basically it's a zero-sum game—the City has the option of spending the surplus now, but then they’d have to make it up with taxes or cuts, somewhere else.

In a sense, the enforced balance sheet restricts New York City, but it’s also saved us from the dire situation that say, Albany finds itself in right now. “Albany has one of the weakest budget balance requirements of any state,” Lowenstein noted.

She said the fact that New York State doesn’t keep surpluses to roll over from one year to the next is part of the many problems that led to it falling into a black budget hole. “The very fact that the city has to bring its budget into balance meant that it couldn’t keep pushing the problem into the future, or as our budget director would say, ‘kicking the can down the road.’”

There’s no getting around the fact that budgets are political documents and a statement of values. New York City’s needs are endless and the mayor does decide what cuts to make, where, and the decision to cut teacher jobs was a decision. Furthermore, it's likely Bloomberg proposed a slew of cuts just as Albany nears its budget deadline for political leverage. It’s kind of like the Mayor saying to Albany, ‘Hey, if you don’t give us money, even more teachers will lose their jobs.”