Opinion|How to Fix New York’s $5 Billion Budget Crisis
Before he borrows, Mayor de Blasio needs to make significant cuts to avoid greater pain later.
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New York is facing the nightmare scenario that its political leaders have feared since the 1970s, when the city nearly went bankrupt. It is staring down a budget hole of more than $5 billion, along with hard questions about how to fill it.
Mayor Bill de Blasio has asked the State Legislature to give him the authority to borrow the $5 billion. Without it, the mayor says, he’ll be forced to lay off or furlough 22,000 city workers.
In the end, New York may have to borrow some money until revenues recover and the city is back on its feet. Like other areas of the country hard-hit by the coronavirus, the city and state will also need more federal aid in the months and years ahead.
Borrowing should be a last resort since it increases the cost of every dollar the city spends, though it can be an appropriate strategy to get through a short-term crisis. But borrowing to meet operating expenses is especially hazardous. Cities that do so over and over again are at greater risk of the kind of bankruptcy faced by New York in the late 1970s and Detroit in 2013.
Any borrowing should be accompanied by a clear plan for how the city would use the funds to stabilize its finances and what it is doing to ensure the government is the right size for New York’s needs and revenues. “Otherwise, we’re using borrowing to prop up spending we can’t afford,” said Andrew Rein, president of the Citizens Budget Commission, a nonpartisan watchdog group. “We’ll make our kids pay our bills.”
Before Mr. de Blasio adds billions to the city’s debt sheet — or lays off thousands of workers — he needs to find savings.
It won’t be easy. The city’s budget grew under Mr. de Blasio, to $92 billion last year from about $73 billion in 2014, his first year in office. Complicating matters, the mayor has hired tens of thousands of employees over his tenure, adding significantly to the city’s pension and retirement obligations.
To make cuts without slashing vital services or laying off workers, the mayor will have to be creative, make unpopular decisions and demand serious cost-saving measures from nearly every city agency and, crucially, the municipal unions.
One way to begin is with a far stricter hiring freeze. Every year, some 20,000 city workers leave their jobs or retire. Yet as of June, the work force was reduced by only about 800 from the year before, according to the Citizens Budget Commission. If the city hired about 7,500 fewer workers each year, it could save an additional $750 million annually, the commission has said.
The mayor will need to do something he has rarely been able to: ask the labor unions to share in the sacrifice. The Citizens Budget Commission found that the city could save nearly a quarter of a billion dollars in the first year alone, rising to a saving of $750 million annually after several years.
Nicole Gelinas, a senior fellow at the Manhattan Institute, a conservative think tank, said she determined that a $150,000 salary cap on the city’s nonunion work force could save New York $200 million every year.
The mayor must also get serious about enforcing overtime caps, which have been blown for years by city agencies. As just one example, this year’s budget calls for overtime pay at the Police Department to be reduced by $350 million, a commitment that should be kept.
There are other cuts to be made. Scott Stringer, the city comptroller, has urged the mayor to demand that agencies come to the table with greater savings, an exercise former Mayor Michael Bloomberg turned to frequently that can help force agencies to become more efficient.
Laura Feyer, a spokeswoman for Mayor de Blasio, said the city had already shrunk its budget significantly. “We can’t just cut our way out of this Covid-19-induced budget hole,” she said in a email. “We are not asking for borrowing to avoid making hard choices. We’re going to continue having discussions with unions to avert as much pain as possible, but we all agree long-term borrowing is the best solution.”
The uncertainty around New York’s financial position has some calling for the state’s Financial Control Board, created in the mid-1970s to oversee the city through its fiscal crisis, to take the reins of New York’s finances. That is premature and should be avoided if at all possible. New York’s mayor and City Council, duly elected by New York voters, are far more accountable to residents than a panel in Albany. The city should be given a real chance at managing this crisis.
To make it through, the city needs Mr. de Blasio to act swiftly and forcefully to make tough cuts that will save the city greater pain later. With any luck, this lame-duck mayor is still up to the task.
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The post How to Fix New York’s Billion Budget Crisis first appeared on MetNews.
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