PEP, March 2003: The triple budget whammy

By GREGORY N. HEIRES

Proposed federal, state and local budgets have aimed a triple blow at the working people of New York City. Recent layoffs at the Dept. of Education and pink slips pending at the School Construction Authority as PEP went to press have already signaled dire fiscal times for public employees.

About the only good economic news out there is that the city will end the current fiscal year with a surplus and that the 18.5 percent property tax hike approved in December will provide a steady stream of new revenue.

But with the city facing an estimated $3.5 billion deficit in fiscal year 2004, Mayor Michael R. Bloomberg is pressing municipal unions to agree to $600 million in labor savings — or face 12,000 layoffs (see 'City demands deep givebacks').

In Albany, despite an anticipated shortfall of $11.5 billion next year, Gov. George E. Pataki refuses to consider tax increases. Instead, he is calling for deep service cutbacks in next year’s state budget, which includes tax cuts. Reductions of state jobs through attrition are all but certain, while the specter of layoffs is looming.

And at the federal level, President Bush’s budget blueprint provides scant fiscal relief for the city and state. Critics believe the Bush plan will actually deepen the economic downturn here. “Years of tax cuts are coming back to haunt us,” said Assistant Director Michael Musuraca of the DC 37 Research and Negotiations Dept.

“Combined with the loss of revenue from Wall Street, the 9-11 attack and the weak economy, these cuts have put state and local governments in their worst fiscal straitjacket in decades,” Mr. Musuraca said. “Unfortunately, the most politically expedient way for elected officials to deal with this crisis is through service cuts and layoffs. That is happening nationwide.”

Under Mr. Bloomberg’s financial plan, the city aims to cut $64.1 million in fiscal 2003 and $487 million in fiscal year 2004 – on top of November’s $1 billion. Virtually no agency is spared. The four-year plan would reduce full- and part-time positions from 360,000 in December 2002 to 355,000 in June 2004.

Job and service cuts could be far worse, because the $44 billion budget for 2004 banks on a number of highly uncertain items: a revised personal income tax that covers commuters (worth $1 billion), $675 million in state assistance and $200 million in federal aid. In early February, DC 37 Executive Director Lillian Roberts went to Albany to urge state legislators to approve a new commuter tax.

Mr. Pataki’s proposed $90.8 billion budget for the next fiscal year doesn’t deliver assistance sought by Mr. Bloomberg. Some budget monitors say Mr. Pataki’s plan will cost the city another $2 billion. Among the most significant state budget items that would inflict pain on the city:

a $470 million reduction in school aid
a $165 million cut in welfare money
an $81.7 million, or 12 percent, cut to four-year city universities, which could lead to a $1,000 tuition hike

In addition, Mr. Pataki rejected the city’s request that the state absorb $200 million of its $4 billion in annual Medicaid expenses. Mr. Pataki’s budget also requires local governments to increase their contribution for hospital stays and clinic visits from 25 percent to 37 percent. That would add millions of dollars to the city’s Medicaid bill.

Worsening the fiscal misery, Mr. Bush has refused to offer the state and city any assistance to address their deficits. The administration considered, but ultimately rejected, a proposal to allocate $10 billion for that purpose.