PEP, February 2009: Bad news feared in city budget plan

By GREGORY N. HEIRES

In late January, amid a deepening national economic crisis, Mayor Michael R. Bloomberg was preparing to release the city’s four-year financial plan and preliminary budget for fiscal year 2010, which begins July 1.

Fiscal watchdogs, community groups, and public employee unions were anxiously awaiting Bloomberg’s economic plan as the latest gauge of how far the fiscal bloodletting will go.

When recessions hit, the public sector typically feels the pain after private businesses as layoffs and falling profits reduce tax revenues. The business failures, credit crunch and huge job losses of 2008 are now being felt nationwide by public employers, which have responded by laying off employees, freezing and deferring wages, furloughing workers, going to four-day workweeks, cutting back on health benefits and reducing their contributions to pension funds.

Ironically, as President Barack Obama plans for the federal government to lead the country out of recession with an $825 billion recovery package, economists warn that the widespread state and city cutbacks can only compound the economic downturn.
With New York City deeply dependent on the hard-hit FIRE (finance, insurance and real estate) sector, the national economic storm has become like a local hurricane, and it appears to be gaining strength.

In November, falling revenues continued to shred earlier budget plans and the New York City Council worked with the Bloomberg administration to address an anticipated $4 billion budget gap for next year as the local economy continued to implode.

An increase in the hotel tax, a 7 percent property tax hike, and cutting $300 million worth of public services brought the projected deficit down to $1.1 billion. The Council restored several million dollars of service cuts — including 127 caseworker positions that had been on the chopping block — and forced Bloomberg to release the $400 property tax rebates to homeowners that he had threatened to withhold.

But since November, fiscal monitors have warned that despite the steps taken to contain the crisis, the city continues to face a bleak outlook, with revenues falling further and faster as the economy sinks.

The New York State Financial Control Board and the Office of the State Deputy Comptroller project that the city’s annual revenues will fall hundreds of millions of dollars below the giant gaps it already anticipated in upcoming years. The New York City Independent Budget Office predicts that the national recession will be prolonged and that it will result in the loss of 250,000 jobs in the city.

DC 37 fights cuts
As the debate over the budget plays out in the next few months, DC 37 leaders and activists will fight proposed cuts, arguing that government shouldn’t reduce services when an ever greater number of people need help to cope with the economic crisis.

The union is preparing a “white paper” that will call attention to the city’s contracting out of $9 billion in spending for services and purchasing. It will highlight cases in which the city can save millions of dollars by having the work done in-house.

Working with its national union, the American Federation of State, County and Municipal Employees, DC 37 is pushing for the Obama administration to dedicate billions of dollars to helping cash-strapped states and municipalities maintain services and preserve public sector jobs.

The union and health care advocates are hoping the federal government will pick up a greater share of Medicaid costs, which put an enormous strain on the New York State and New York City budgets.

Obama’s plan calls for “creating or saving” 3 million jobs; Washington insiders say the “saving” refers to public employee positions.