Brewing future budget pain
- Last Updated: 12:15 AM, June 27, 2012
- Posted: 11:05 PM, June 26, 2012
As she stood with Mayor Bloomberg on Monday to herald a “balanced” $70.3 billion budget, Council Speaker Christine Quinn showed that she can play Bloomberg’s stunt of looking responsible while showering everyone with cash.
But that game may be over. And if Quinn becomes mayor in 2014, paying the price for Bloomberg’s magic will be her problem.
Bloomberg’s budget is a bag of tricks. Sure, the mayor said that Wall Street’s continued turmoil is no longer “devastating news,” thanks to $6 billion in budget cuts since 2007.
But for the fiscal year that starts Sunday, the city will still spend $8.2 billion more than it did five years ago — and nearly $7.5 billion of that comes from city resources (the rest from federal and state grants).
At least, it’s supposed to come from city resources. Over the same five years, the city has run an average operating deficit of $1.6 billion, or 3.6 percent of city-funded spending. We haven’t really balanced the budget.
How have we said we “balanced” the budget? Partly Wall Street — the bubble gave Gotham an $8 billion surplus to slosh over.
But that money’s gone. Now it’s one-shot city.
The mayor will cover this year’s entire $1.6 billion operating deficit — and then some — with one-shots totaling at least $2.3 billion.
What are they — and what are the risks?
Taxi medallions: Earlier this year, the mayor wanted to reap $1 billion by selling 2,000 new cab medallions. A judge has stayed the mayor’s plan, saying he needs city council approval. So the mayor cut his estimated take here to $635 million for the year, calling himself “conservative.”
But the mayor has also ratcheted up the total he expects to receive to $1.46 billion, over three years instead of one.
Neither of these moves is responsible. Bloomberg thinks he can get $730,000 each for the medallions, based on recent million-dollar sales.
But medallions went for $600,000 five years ago — and the city has never dumped a new supply of 2,000 onto the existing 13,150 licenses, enlarging the market 15 percent. The glut may well depress the price even more than the mayor’s allowing for. Plus, the new cabs must be wheelchair-accessible, which could also reduce medallion prices.
It would be better to wait and see, rather than start spending money we don’t have.
“Trust fund”: The mayor’s other big trick is to suck another billion dollars from the $2.5 billion “retiree benefits trust fund” he set up in 2006. The mayor set aside that cash to pay for future costs as city employees retire but remain on city-funded health plans.
That was a good idea: The city had made $57.8 billion in promises without putting money aside.
But the mayor should have kept the money in the fund. Instead, he’s been raiding it — $1.1 billion over the past three years, and another $1 billion now.
There would only be one excuse for the mayor to spend this cash: If the city’s retiree-health liability were shrinking. Yet it has grown, to $83.9 billion. It will only fall if union leaders agreed to cuts.
But unions have balked at new contracts — even as Bloomberg draws down this fund to pay unaffordable benefits.
Besides the biggies, Bloomberg will plug the hole with:
* $466 million from the money that contractors have to pay us for CityTime project fraud.
* $150 million that a Dutch bank, ING, has to pay the Manhattan district attorney for money-laundering.
* And $90 million in lower interest costs, thanks to Federal Reserve chief Ben Bernanke’s record-low rates.
These things won’t happen again (well, someone will get caught money-laundering at some point). The mayor should use the windfalls to pay debt or invest in capital.
The latter is especially true with taxis: Two thousand more cabs, which run all the time, will wear out roads.
Quinn ignored all this, even lauding the retiree-benefits grab as prudent.
She spent most of her time bragging about restoring child-care money, which the mayor had pretended to threaten to cut. She also praised the council for expanding the city’s cradle-to-grave responsibility by “aging down” education to more infants and toddlers than last year.
Quinn did say something intriguing: “This budget says that we’re a city where every child will be given the opportunity and the resources to learn, a city that refuses to balance its budget by hiking taxes.”
The statement works only in third-term Bloomberg-land. We’ll see which half she chooses to stick with if she does become mayor — and inherits a legacy of deficits.
Nicole Gelinas (@nicolegelinas) is a contributing editor to the Manhattan Institute’s City Journal.Follow @NYPostOpinion