The Chief
May 3, 2002

IBO Sizes Up Ideas To Balance Budget

Catalyst for Debate

By Deidre McFadyen


The prevailing wisdom about the city's $5 billion budget gap is that it stems from the terrorist attacks of Sept. 11 coupled with a national economy that dipped into recession earlier last year.

But officials from the Independent Budget Office, a city-funded nonpartisan fiscal watchdog, maintain that the problems go deeper.

'Underlying Imbalance'

In its introduction to a new report analyzing 15 proposals to cut city costs and 18 ways to raise revenues, the agency says, "A significant portion of the gap stems from an underlying structural imbalance in the city's finances, and will not simply go away when the economy picks up."

While not endorsing any of the proposals, IBO officials said they presented the probable fiscal impact of each idea along with the arguments for and against with an eye to enriching the debate.

"How are we suddenly in this hole?" asked IBO spokesman Doug Turetsky. "The surpluses have masked the basic fact that our expenses have been rising faster than our real sustainable revenues."

Mr. Turetsky noted that the previous executive budget, signed in June by Mayor Giuliani and Council Speaker Peter F. Vallone, projected a surplus of $3.2 billion in that fiscal year and, in the same breath, a shortfall of $2.6 billion in the following one.

A number of the savings options in the report would run up against heavy resistance from the city's labor unions, which argue that they have sacrificed enough.

The IBO estimated that the city could save $197 million in 2003 if it withheld the equivalent of one week's pay per year from all city workers. Employees would receive the deferred pay when they quit or retired. Proponents, it noted, view a pay lag as a more palatable option than layoffs.

Another alternative would be to reduce the workweek of municipal employees by two hours to 33 hours a week. If Teachers, uniformed service workers and child welfare workers were exempted, the reduction would trim $146 million from payroll costs this coming fiscal year, the agency said.

The IBO calculated that the city could save $160 million next year if it required employees and retirees to contribute 10 percent towards their health insurance premiums. It noted that New York State employees already pay 10 percent towards the cost of individual coverage and 25 percent of the additional costs of family coverage.

Eye Teacher, Cop Savings

The IBO report also looked at savings that could be squeezed from particular agencies. The elimination of Teacher sabbaticals would yield $74 million annually. A move to one-person police patrol cars in low-crime areas could save up to $196 million, once fully implemented, the agency said. But an arbitration panel recently rejected a city proposal to limit sabbaticals as unwise at a time when Teachers are underpaid and in short supply. Patrolmen's Benevolent Association President Patrick J. Lynch would vigorously oppose one-officer patrols on safety grounds.

The IBO also analyzed a proposal to reduce Fire Department staff by 1,600 through attrition without closing any firehouses. The reduction, it said, could be achieved by modifying the constant staffing provisions in the existing contract to permit the closing of certain firehouses late at night, when emergencies are least common. The change would net the city $65 million once fully enacted, the IBO said.

One savings option that the union representing transit workers would embrace calls for elimination the subsidy to private bus companies that provide local service in Queens and Brooklyn and express service between the outer boroughs and Manhattan. If New York City Transit picked up those services, the agency said, the city could save $100 million annually.

On the revenue enhancement side, the IBO analyzed an array of possible tax increases, including restoring the commuter tax, increasing the base personal income tax rate by 1 percent for high-income filers, and extending the mortgage recording tax to co-ops. A 5-percent increase in the property tax - the only tax that the city can raise without Albany's approval - would yield an additional $487 million in revenue next year, the agency said.

The report also highlighted some hidden subsidies to corporations and other wealthy stakeholders. The city could save $9.6 million by eliminating the real property tax exemption that it granted to Madison Square Garden in 1982 to ensure the viability of the Knicks and Rangers in New York City.

The IBO also examined the possibility of chipping away at the property tax exemption enjoyed by private colleges and universities. It said the city could save $41 million if these institutions were required to pay 25 percent