With less than two weeks to go before the start of New York City’s 2012 fiscal year, Mayor Bloomberg insists he must eliminate 6,100 teaching positions and close 20 fire companies to balance the next city budget.
Municipal union leaders are equally insistent that Bloomberg is sitting on more than enough cash to prevent those cuts.
In a sense, both sides are correct.
It’s true, as Bloomberg says, that the city isn’t expecting enough revenue growth in 2012 to balance its budget without his proposed staff cuts, which will save up to $475 million.
It’s also true that, parked just off budget, the city still has a reserve fund of more than $2 billion.
Moreover, like Rudy Giuliani before him, Bloomberg has a history of prudently low-balling his tax-collection forecasts. So some of his critics suggest he could easily make any need for teacher and firefighter cuts disappear, merely by changing a few digits on the projected-revenues side of the ledger.
But the city also is projecting a budget gap of nearly $5 billion for fiscal 2013. Any budget deal designed to prevent layoffs and staff cuts in FY 2012 will only make that number larger.
Ironically, the mayor has now become the victim of his own past success in building up huge surpluses to avoid tough budget decisions. As a result, the prospect of a large budget gap just over the horizon elicits little more than yawns from the unions and their allies in the City Council.
Once tax receipts cratered in the wake of the 2008 financial crisis, the city began consuming its last big surplus cushion. Excluding the prior-year surplus, the city already is running in the red this year. In the coming year, it will use most of what remains of the surplus to replace lost state and federal aid to schools — saving many more teaching jobs than Bloomberg proposes to cut now.
Worse, as the state Financial Control Board noted in its most recent staff report: “It will become more and more difficult for the city to manage its budget in an uncertain economic recovery and with the likelihood of further reductions in federal and state aid.”
In other words, almost as soon as the 2012 budget passes, the city will need to start making more cuts to help close the looming 2013 shortfall.
The federal and state governments certainly aren’t going to ride to the city’s rescue. And while the economic outlook is al ways uncertain, the downside risks seem more pronounced than usual just now. That uncertainty, and not just plain stubbornness on mayor’s part, explains why he’s digging in his heels on the latest round of budget cuts.
Trying to forge a compromise, City Council Speaker Christine Quinn this week broached the idea of tapping a union-controlled health-care reserve fund to backfill the budget cuts. But the unions are divided on the idea — which, in any event, would be just another one-shot gimmick.
What about that separate $2 billion off-budget fund that the mayor controls? It, too, is technically set aside to cover health insurance — specifically, for retirees’ “other post-employment benefits,” or OPEB. Bloomberg has already tapped the fund for $1 billion in budgetary relief, two-thirds of which is targeted to fiscal 2012. But the city’s unfunded OPEB liability has soared nearly 50 percent since 2006 to a whopping $80 billion.
The mayor no doubt hoped that the threat of teacher job cuts would help him get changes to the “last in, first out” layoff seniority rules. But the mayor’s LIFO reform was eviscerated in Albany.
Using one-shots to prevent budget cuts in the coming year would be a gamble with much bigger stakes. If Bloomberg yields to the pressure and starts playing the budget game for short-term political gain, New Yorkers could be paying the price in the form of higher taxes and diminished services for years to come.
E.J. McMahon is a senior fellow at the Manhattan Institute’s Empire Center for New York State Policy.