The final budget season of Mayor Mike’s reign is starting — and he’s going out the way he came in: Absent radical moves in the next nine months, the next mayor will face permanent multibillion-dollar deficits — the same outlook Bloomberg faced 11 years ago, taking office in the wake of 9/11.
Last week, Bloomberg’s budget director kicked off the scrambling. Citing a $2.5 billion budget gap in the fiscal year that starts next July and even bigger holes after that, the budget office ordered city agencies to start cutting back now, so that they can save $2 billion over the two years.
Most agencies will have to cut 5.4 percent this year, and another 8 percent cuts starting next July.
But uniformed agencies and public schools will get a break. The police, fire, sanitation and correction departments face 2.7 percent cuts this year, and 4 percent next year. Education takes a 1.6 percent hit this year, and 4 percent next year.
Why the sudden cuts?
For starters, there’s the bet City Hall made three-plus years ago, in the post-financial-crisis downturn, that Wall Street would come roaring back to see the mayor out of office. That gamble’s not paying off.
Part of that strategy was to rely (while waiting for a financial boom) on one-shots to fill budget gaps — at least $2.3 billion this year. Oops: One reason for the current crunch is that one of those one-shots — $635 million from selling taxi medallions — isn’t coming through, since a judge ruled that the City Council must approve the sale.
Nor is Wall Street riding to the rescue, longer term. As the budget office reported in August, the city’s five biggest investment banks saw earnings fall 17 percent in the spring — after a 26 percent drop over the winter.
Big Finance is gradually realizing that it got too big during the credit boom, and needs to cut back permanently. Between January and June, Gotham’s securities industry cut 1,100 jobs.
That’s a loss of roughly $12 million in personal-income taxes for the city — enough to pay for 80 or so cops.
European and Asian banks are also cutting back in Gotham. The Japanese bank Nomura, for one, means to cut a billion dollars annually — and its New York office will bear 21 percent of that, roughly 600 jobs.
One telling sign is that financial firms aren’t adding office space. Leasing activity fell by half in the first six months of this year. No new offices means no new workers to pay new tax dollars.
But the biggest problem is that Bloomberg never changed much about the city’s finances.
Well, one thing has changed: The numbers have gone up. In Bloomberg’s first full fiscal year, 2003, the city spent $31.5 billion of its taxpayers’ dollars. This year, it will spend $52.7 billion — growth of $15.9 billion above inflation.
Nearly half the new spending is for public-employee benefits, which cost $6.4 billion then and $16.5 billion now. On that, the mayor doesn’t want change, at least not badly enough to fight the public unions for it.
Take schools. Why is Bloomberg letting education off the hook, relative to other agencies — when city taxpayers’ contribution to education has nearly doubled, from $5.1 billion back then to $9.2 billion today? (And that doesn’t count teacher pension, up to $2.9 billion from $1.1billion.)
Similarly, instead of another year of cutting around the edges of the sanitation budget, why not unveil a pilot program to competitively contract out some sanitation services — and scare the union into making concessions?
Such tactics are the obvious way to get past the unions’ refusal to play ball on wages and health-care contributions.
Instead, union leaders are stalling — they’ve let contracts expire, and are waiting — figuring they can cut (much) better deals with the next mayor. Bloomberg plainly isn’t too worried about that risk.
As things look, signs point to the mayor starting up the music for the annual “Dancing with the City Council” come January — threatening to lay off teachers and close firehouses to save a few million, then not doing it.
As the clock ticks toward pumpkin-turning time, the mayor should sit out that waltz — and try something different.
Nicole Gelinas is a contributing editor to the Manhattan Institute’s
City Journal.