A Big, Fat 'Greek' Budget
As Mayor Bloomberg un veiled his updated $66.2 bil lion city budget last week, Greek protesters were terrorizing their compatriots and global markets -- pushing the Dow toward an afternoon four-figure drop.
In other words, the West’s economic crises are far from over. Too bad the mayor’s budget -- and, even more so, the politicians bickering over it -- ignores that fact.
Greece is in trouble because markets have made it admit that its finances are impossible. Athens will spend 13.9 percent more than it can expect to take in this year -- and that’s no one-time thing. For years, Greece has spent more on its public workers and retirees than it could afford - because membership in the "safe" euro allowed it to borrow cheaply.
The deadly violence on the streets shows why Greece ignored this imbalance as long as it could: Reality isn’t easy.
New York isn’t Greece. For starters, the city is far more honest about its numbers. But those numbers are disturbing.
Sure, the mayor has been able to balance the books through three years’ worth of fiscal crises. But beneath the balancing tricks lurk scary, permanent gaps: Like Greece, we permanently spend more than we take in. And the gap looks to grow wider.
In fiscal year 2009 (which started in July 2008), New York spent 6.1 percent more than it took in via tax collections and other recurring local revenues -- a $2.5 billion gap. In 2010, the city spent 5.2 percent more -- $2.2 billion.
For the new year, 2011 -- which starts this July -- the city will spend 7.6 percent more than it takes in, or $3.3 billion. By 2014, we’ll cross an important line, with an 11.3 percent gap. Like Greece did, we’re approaching scary double digits.
Also like Greece, New York had a deceptively easy ride for a while -- thanks not to the euro, but to a Wall Street flush with credit-bubble cash. From 2003 to 2008, city revenues grew 47 percent -- delaying a disaster as spending rose 45 percent.
Since Wall Street collapsed, we’ve won extraordinary rescues from outside -- just as Greece must turn now to the European Union and IMF. Gotham got $2.3 billion in federal stimulus for 2010 -- filling in our structural deficit. We’ll get another $1.9 billion for the upcoming year.
But neither City Hall nor Albany used that breathing room to start facing uncontrolled, unsustainable costs. Instead, they’ve given us political shows and token actions.
In this budget cycle, Bloomberg has focused on what Albany is purportedly making him do. He said Thursday that the Capitol is "starving New York City" by cutting nearly $500 million in education aid, forcing 4,419 teacher layoffs and 1,995 fewer teacher hires. The state’s $1.3 billion in cuts elsewhere will force another 4,583 job cuts.
But Albany has ramped its education spending to $8.3 billion in the last half-decade, from $5.8 billion in 2004. Since Bloomberg took office, city spending on education (not including pensions) has risen 68 percent, more than twice much as police, fire and sanitation outlays. A loss of $500 million should be manageable.
The bickering allows everyone to ignore the real problem -- public-sector retiree costs. It’s not simply that taxpayers have to make up for declines in the stock-market portfolios that fund our workers’ guaranteed pensions, it’s worse: Even as we must pour more cash in, more is pouring out, too.
Pension and health payments to retirees are now $13.1 billion a year, up from $7.5 billion in 2002. The cash drain is accelerating as more uniformed workers retire on lucrative disability pensions and others live longer.
Cutting library hours, closing senior centers and shutting pools down early will save just $36 million -- one day’s worth of payments to public-sector retirees. As the Citizens Budget Commission noted last week, if public-sector workers were to agree to pay small amounts toward their health plans and accept less generous pensions for new workers, the city could avoid teacher-job cuts.
New York isn’t close to confronting these issues. Even the mayor’s budget offers teacher raises, and pay hikes to other workers if they’ll make modest concessions. In fact, with benefits costs up from 33 percent of wages and salaries to 70 percent in a decade, raises should be completely off the table.
Instead of seeing stimulus money as a one-time fix, we’re settling in to this extra cash every year. The mayor expects DC to extend extra Medicaid funding again, and his budget footnotes say mildly that more education cuts will come next year unless Congress extends the stimulus there, too.
Washington can’t bail us out forever -- and even the Greeks are trying to make changes with their bailout money. It’s time for Bloomberg and the rest of the political class to stop the histrionics and buckle down to making the serious changes New York needs.
This piece originally appeared in New York Post
This piece originally appeared in New York Post