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Commentary By E. J. McMahon

Instead of Facing Fiscal Crises, NYC & State Are Burying Their Heads in the Sand

Cities, Cities Tax & Budget, New York City

The headlines surrounding this week’s New York City budget naturally focused on #DefundthePolice demands. But for all its larger potential implications for New Yorkers’ security and quality of life, the partially illusory $1 billion “cut” in the New York Police Department budget was a sideshow in fiscal terms.

The main event was the city’s squishiest, shakiest budget in 30 years — and Mayor Bill de Blasio’s failure to rise adequately to the challenge of a serious, looming fiscal crisis. Grappling with enormous revenue losses, both Gotham and New York state urgently need to reorder priorities, restructure operations and reduce spending.

But like Gov. Andrew Cuomo at the state level, Hizzoner has failed to tackle this problem head on. Instead, also like Cuomo, the mayor is avoiding tough decisions and playing for time. Both the mayor and the governor are counting on Congress to deliver billions of dollars in unrestricted aid to states and cities as part of the next rescue bill, expected to pass at the end of July.

Like the governor, the mayor ­entered 2020 inadequately prepared for a garden-variety recession, much less the sharp and sudden downturn in economic activity brought on by the March COVID-19 lockdowns.

In his April budget proposal, the mayor tapped reserve funds, targeted federal coronavirus relief aid and savings from a hiring freeze to close a two-year gap of $8.7 billion. De Blasio also asked the state Legislature for authorization to borrow $7 billion to cover operating expenses — an extreme step for which he could offer no compelling justification. That idea didn’t get anywhere in Albany (although Cuomo himself had won authorization to issue up to $11 billion in deficit bonds).

In late May, de Blasio updated his financial plan to reflect a further $1.6 billion drop in revenues, warning the added shortfall might force him to lay off 22,000 city workers.

He made yet another borrowing request to the Legislature — this time seeking to issue $5 billion in deficit bonds over two years, again without demonstrating any immediate need for the money. Again, he was unsuccessful.

Without borrowing a penny, the new city budget purports to close the added revenue gap with projected savings on employee benefits and police overtime, which are unlikely to materialize.

Meanwhile, City Hall’s traditionally low-balled revenue ­assumptions now look skewed more to the high side, given the significant uncertainty about the timing and strength of a recovery that has barely begun. The city’s projected fiscal 2022 budget gap of $4.2 billion could easily end up more like $6 or $7 billion.

Cuomo has an even bigger problem: a current budget gap of roughly $8 billion, which he has threatened to close with local aid cuts of up to 20 percent if he doesn’t get it from Washington. The state’s fiscal 2022 budget gap is roughly $17 billion — but ­Albany’s red ink tends to flow downhill, to the Big Apple and other local governments.

One obvious money-saver for both the city and state would be a public-employee wage freeze, which could be imposed by state legislation.

With millions of New Yorkers out of work and many if not most private-economy employees ­already absorbing pay cuts, a freeze would save the city at least $800 million and the state more than $300 million this year.

But the mayor has never even broached the possibility of a freeze. Cuomo has been content to administratively ­impose a temporary freeze on state-employee wages, indicating he will let the raises flow once the feds ­deliver the aid he needs.

While awaiting a federal handout, de Blasio is required to present his newly adopted budget to the state Financial Control Board — whose chairman is the governor.

However, unlike all but one of his predecessors since the mid-1970s — the exception being the politically short-lived Eliot Spitzer — Cuomo in nine years as governor has never personally attended the board’s annual summer meeting, which usually ­occurs within a few weeks of the city’s budget passage.

A looming fiscal crisis would be a good time for the governor to take his fiscal oversight role more seriously.

This piece originally appeared at the New York Post


E.J. McMahon is an adjunct fellow at the Manhattan Institute and research director at the Empire Center for Public Policy. Follow him on Twitter here.

This piece originally appeared in New York Post