New York City Risks Larger Deficits Than Mayor Forecast, DiNapoli Says

New York City’s budget for the current fiscal year is balanced, though deficits may be worse than the mayor predicted, said New York State Comptroller Thomas DiNapoli.

In his annual review of the city budget, DiNapoli said today shortfalls may be as large as $5.1 billion next year, rising to $6.8 billion in 2014. The $63.8 billion budget Mayor Michael Bloomberg and the City Council approved for fiscal 2011, which began July 1, forecast potential gaps of $3.3 billion in 2012 and $4.8 billion in 2014.

While revenue will probably increase by $250 million, New York’s spending plan may have a $726 million deficit this year because of the unexpected $626 million cost of a new teachers’ contract and the loss of $279 million in Medicaid subsidies the U.S. Congress may not approve, DiNapoli said.

The city’s budget gaps, “already large, could grow depending on the resolution of the risks that we have identified for fiscal year 2011, and how the state and the city address the loss of federal stimulus funds for education,” DiNapoli said in his report.

The city balanced its budget this year by carrying over a $3.6 billion surplus from fiscal 2010, resulting mostly from $2.6 billion in more-than-anticipated revenue, and $1.3 billion in reserve funds. The city also saved about $1.2 billion in reduced agency operating costs due to improved efficiencies and reduced services, and used another $2.6 billion in nonrecurring resources to help balance that year’s budget, DiNapoli said.

Job Cuts

As of May, the municipal workforce declined by 6,500 jobs in the last fiscal year, with the administration aiming to reduce the payroll by another 1,800 jobs by the end of this fiscal year, DiNapoli reported. State aid to the city may decline by as much as $1.1 billion, DiNapoli said.

To soften the impact of a $493 million cut in state education aid, the mayor has rescinded a proposed two-year wage increase for teachers and principals, a period in which most other municipal workers got 4 percent annual wage increases, DiNapoli noted.

The mayor has asked the city’s unions to pay for any salary increases through increased productivity and higher co-pays on health insurance and other benefits. The outcome of these proposals remains unclear, DiNapoli said, and “will be determined through the collective bargaining process.”

Tax Receipts

Bloomberg warned of cuts to services in coming months in testimony today before the state Financial Control Board, a monitoring agency created during the city’s fiscal crisis of the 1970s. Even as the economy recovers, tax receipts will remain below pre-recession level through fiscal 2012, he said.

“Balancing our budget involved painful tradeoffs,” Bloomberg said. “We have, for example, not budgeted collective bargaining wage increases for teachers, or anyone else in the City workforce. And there will be noticeable, unavoidable cuts to services in the months ahead.”

The mayor is founder and majority owner of Bloomberg News parent Bloomberg LP.

To contact the reporter responsible for this story: Henry Goldman at hgoldman@bloomberg.net

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