WNYC's Bob Hennelly is an award-winning investigative journalist. While at WNYC he has reported on a wide gamut of major public policy questions ranging from immigration and homeland security to power outages and utility mergers.
Mayor Michael Bloomberg will unveil his budget proposal for next year on Thursday that will tackle what his administration has calculated is a projected $2 billion budget gap without raising taxes. But how big that budget gap actually is remains debatable.
A top Bloomberg budget official once said budgeting is all about managing expectations. And throughout the mayor's tenure he has done that masterfully, predicting dire consequences like teacher layoffs, that didn't materialize.
Mind the Gap
Ronnie Lowenstein with the City's Independent Budget Office said her agency thinks the Bloomberg Administration is overstating the budget gap for next year by $800 million dollars.
"The difference between our forecasts and the Administration's for the out years is even more striking. We see the gap as leveling off at $2 billion a year, where as they see it increasing dramatically each year," Lowenstein said in a phone interview.
IBO's tax revenue forecast for next year is also several hundred million dollars higher than the last Bloomberg administration estimate.
The IBO and the Bloomberg administration have identified common areas of concern:
• The continued rise in health care costs for retired city workers.
• Pensions costs.
• The increased cost of servicing the city's debts from past borrowing.
Building on Past Cuts
The current year's budget came in at $67 billion. Since 2007 the Administration has made 11 rounds of cost cuts that produced $5 billion in savings. The city's headcount is now at 294,000, down 18,000 from when the Mayor Bloomberg took office.
The recession continues to make for a very uneven recovery. This week the Wall Street Journal reported new construction slid 31 percent in New York City in 2011. And anticipated downsizing in the city's pivotal financial sector as well as potential blowback from the European debt crisis have to be baked into budget contingencies.
Bloomberg spokesman Marc Lavorgna said past mid-year cuts have helped avoid major service cuts and layoffs.
In a statement, Lavorgna said the mayor's budget for next year builds on his track record for mid-year budget revisions and cuts.
"The budget will remain balanced without any tax increases because we budgeted with foresight — saving resources when we could, and holding down spending while maintaining city services at or near record levels."
The Cost of City Employees
Mayor Bloomberg will also use $1 billion dollars from a trust fund earmarked to pay for the costs of covering health care for retired city workers to close the budget gap. The remaining $1 billion dollars in that fund will be applied to fiscal year 2014’s budget gap.
Carol Kellerman, with the Citizens Budget Commission, said escalating costs of covering retired city workers’ health care and pensions could force cuts to vital services in the years ahead.
The zeroing out of the retiree health care trust fund will only bring that day of reckoning closer, she said.
"We are continuing to have increasing costs for services that were rendered in the past really starting to seriously crowd police, fire, sanitation and education."
Kellerman said just as these "legacy costs" become more pronounced the City has to be prepared for less support from both Albany and Washington as they confront their own budget woes.
No doubt Mayor Bloomberg will use his annual budget address to reiterate his support for Governor Andrew Cuomo's push for a new pension plan for public workers that will be less generous than the one the current public workforce is covered under.
In 2002 when the mayor came into office the city spent roughly $1.3 billion to meet its pension obligations. This year that number will be closer to $8 billion dollars.
Forecast for Budget Negotiations
City Council Speaker Christine Quinn told reporters she was hoping that this year's budget negotiations between the mayor and City Council would not be as difficult as last year.
“I certainly hope we don't see the proposal of teachers’ layoffs again, which I don't think we will. I'd be very happy if we didn't have to battle firehouse closures. I don't know about that," she said.
The mayor and council have until July 1 to get to a budget deal. But before they can really roll up their sleeves and get to work, they will have to factor in results from the Albany budget process, which is supposed to wrap up by April 1.