NYC struggles with huge budget deficit
NEW YORK (AP) – Eighteen months ago, the city’s economic engine was chugging along so mightily that a record $3 billion surplus allowed City Hall to cut taxes, hire thousands of people and plan two new baseball stadiums costing $800 million each. Today, New York City is looking at its worst fiscal crisis since it went to the brink of bankruptcy in the 1970s.
The city faces a projected $6 billion deficit next year, thousands of layoffs and big tax increases. The thought of new ballparks has become the most anachronistic of pipe dreams.
New York’s historic period of economic growth during the 1990s came to a thudding halt in a crisis blamed on the national economic slowdown, the attack on the World Trade Center, the downturn on Wall Street and steep tax cuts enacted during Mayor Rudolph Giuliani’s administration.
The latest sign of the city’s dire straits came last week when City Hall acknowledged that Mayor Michael Bloomberg – who had previously denounced tax hikes – would seek a property tax increase of as much as 25 percent. Part of the increase could take effect as soon as January. The property tax increases would be the city’s first since 1991
Along with layoffs, other possibilities for closing the deficit include shuttering firehouses, imposing new bridge and tunnel tolls, closing senior centers and collecting garbage less frequently. Bloomberg is expected to release a detailed plan this week.
Bloomberg, a Republican political novice who took office in January, has been trying to strike a balance between assuring the city’s 8 million residents that New York will not sink back into the fiscal abyss that was the 1970s, and warning everyone that the next few years will be rough.
“The city has a problem, everybody knows that,” said the founder of the Bloomberg financial news service. “Nobody’s going to be happy with any cuts. Nobody’s going to be happy with any revenue enhancing, but we have to do it. The law requires us to balance the budget or you will get what we had in the mid-1970s, and we cannot tolerate that.”
During the 1970s, as New York teetered on the edge of bankruptcy, garbage piled up on the streets and the city seemed ungovernable. Eventually, the federal government came to the city’s aid, but not before New York eliminated thousands of jobs, closed hospitals and had its budget placed under the watch of a fiscal monitor.
Bloomberg and Democratic City Council Speaker Gifford Miller said the current crisis is at least as bad as the problem 25 years ago, in part because the state is having budget troubles of its own.
“I think it’s worse” this time, Miller said. At least the crisis in the ’70s “was mitigated by the fact that the state was in very strong fiscal condition.”
One relic of the 1970s is that the city continues to pay $500 million a year in principal and debt service on the money it borrowed back then.
Some observers say if the city is to get through its budget crisis smoothly, the mayor must ditch the financial jargon.
“People are walking on eggshells already,” said political analyst Mike Paul.
“If the situation was explained in layman’s terms, including mapping out how we’re going to get out of this mess, it would help everyone, including the mayor.”
Put simply, the city has a $1 billion deficit this fiscal year and an estimated $5 billion to $6 billion gap next fiscal year.
Bloomberg has repeatedly said he will not borrow money to help close the current deficit. Yet at the same time, he has pledged not to allow budget problems to get in the way of fighting crime or educating the city’s 1.1 million public school children.
“I will not allow the streets to become unsafe,” he said. “I will not allow the streets to become filthy. I will not stop our effort to improve the education of our young people.”