MAYOR BLOOMBERG TESTIFIES BEFORE THE NEW YORK STATE FINANCIAL CONTROL BOARD on July 28, 2005

Today, for the fourth time as mayor, I come before the members of this board, and the people of New York, to report on the fiscal health of our city.

The contrast between the harsh conditions that New York City faced the first time that I was here, and the far more encouraging ones that we enjoy today, is truly striking.

The combination of 9/11 and a steep national recession had taken a terrible toll on our city’s finances. During the final quarter of 2001, the city’s economy had lost nearly 100,000 jobs. Our tax revenues had plummeted, and the city faced its worst fiscal crisis in nearly 30 years.

But even in the bleakest times, our Administration remained confident that, if we made not just the hard decisions, but the right decisions, New York would recover, and that we would retain our status as the greatest place in the world to live, work, and do business.

Following 9/11, it was clear that City government was going to have to do more with less. In response, we have cut City tax levy spending by $3.6 billion. Yet today, the quality of services is better, our economic prospects are brighter, and the promise of opportunity for all in our city is greater than it was four years ago.

That was borne out in May, when Standard & Poor’s cited both our diverse economic base and our Administration’s sound fiscal management in upgrading the rating on New York City’s general obligation bonds from “A” to “A+.” That is the highest rating we have ever earned since they began evaluating New York G-O bonds 50 years ago. What a contrast to the era when this board was established—a period when New York City’s financial practices were so discredited that its bonds were unrated, and the city was shut out of the private credit market.

Clearly, our Administration has succeeded in improving the services that keep this a city where people want to live and businesses want to locate and expand. That is precisely what has happened. Today our city’s quality of life is improving… our economy is growing… and our finances are on a firm footing. While we continue to face serious challenges, if we stay on the course we have set, New York’s best days are still ahead.

Government’s first responsibility is public safety. In recent days, we have all appreciated how the New York City Police Department has risen to the challenge of providing the additional security on our streets and in our subways that the times demand. But even as our police department has dramatically increased all of its counter-terrorism and intelligence-gathering activities, it has also continued to drive crime down to levels not seen since the early 1960s. Crime today is nearly 20% lower than it was four years ago. Over that period, we have reduced crime in every borough, and in every category. We’ve had three consecutive years with fewer than 600 homicides, and this year we could even break the 500 mark.

Key indicators of other City services tell a similar success story. For the first time since World War II, the average life expectancy for New Yorkers is higher than it is for people in the rest of the nation. New Yorkers should continue to live longer and healthier lives because of our Administration’s successful efforts to help New Yorkers break the smoking habit. Today, there are 130,000 fewer smokers in New York than there were four years ago.

Under our Administration, our municipal hospitals and clinics have improved to the point that they are now recognized as being among the best public facilities in the nation. To build on those gains, and to ensure that all New Yorkers have access to top-quality health care, we’re investing more than $1 billion to modernize and expand Health and Hospitals Corporation facilities.

Our streets are cleaner than they have been in more than 30 years. The number of children in foster care is at a 17-year low. Because that means smaller caseloads, we’re able to reinvest the resulting savings in programs that strengthen troubled families. Over the last two years, we’ve reduced the number of people living in City homeless shelters by 12%, and the number of children in those shelters by 18%. As a result, we’re in the process of closing the largest family shelter in the city at the Carlton House Hotel in South Ozone Park.

Since 2002, we’ve moved 43,000 people off welfare. During that time, the number of New Yorkers receiving public assistance has fallen by 11%.

Over the last three and a half years, we’ve added 300 acres of parkland to the biggest and best city parks system in the nation. We have also launched the most ambitious affordable housing initiative that the city has seen in 20 years. We are on course to meeting our goal of preserving and creating affordable housing for more than 200,000 New Yorkers by the end of 2008.

And while our reform of the public schools—which I believe will be our Administration’s most lasting achievement—remains very much a work in progress, we’ve produced real results that show that we’re headed in the right direction.

This year, our 4th grade students achieved the greatest one-year gains ever on the State English Language Arts test. Students in grades 3, 5, 6, and 7 posted the highest scores and the biggest one-year gains on the citywide ELA and math tests since the City started giving those tests in 1999. Perhaps most heartening, our African American and Hispanic students made impressive gains in closing the achievement gap in our schools, with the biggest one-year test score gains and best performance levels ever.

The four-year high school graduation rate, while still too low, is the highest it has been since we started tracking it 20 years ago. The number of schools in danger of being closed as irreparable failures has been cut in half, and is at an all-time low.

Our Administration has matched these reforms with the highest levels of education funding in the city’s history. Since 2002, we’ve increased City spending on the public schools by $2.5 billion. We have also committed a record $6.5 billion in City funds to a school capital plan that will, when combined with the new classrooms we’ve already created, produce nearly 100,000 new classroom seats in all five boroughs.

In short, because we have made the operation of City government more efficient, we’ve been able to put the city’s finances in order, while also making the strategic public investments that have fueled New York’s dramatic economic recovery.

You can see the evidence of that recovery in virtually all of our key industries. Start with construction and real estate. Over the last few years, we have issued record numbers of new housing permits. In Queens alone, the number of residential permits issued last year was nearly five times greater than it was 10 years ago.

Citywide, the average price of housing has doubled since 1998. Our commercial occupancy rate is better than 90%, and is higher than in any other major city in the nation.

The financial services industry posted healthy profits of $13.7 billion during 2004.

There’s also good news in our all-important tourism industry, which generates $24 billion a year in business activity, and which supports the jobs of nearly 300,000 New Yorkers. This year, our city is on track to break last year’s record of 39.6 million visitors —in large part because the current forecast is that we will have an unprecedented 12 million visitors this summer. International tourism is also on the rise; last year, the number of visitors from overseas, who typically far outspend domestic tourists, grew by 10%--the first such increase since 2001.

The city’s overall economy is growing faster than the nation’s for the first time since 2001. Jobs figures released last week show that we gained 8,500 private sector jobs in June.

That puts us on course to meet or exceed the forecast that we will add 50,000 private sector jobs to the city’s economy this year. Wage earnings in the city are at levels not seen since before 9/11.

Unemployment citywide has now fallen to 5.5%. That’s lower than it was before 9/11. And for the last four months, it has remained below 6%, which is the first time that has happened since 2001.

As encouraging as these trends are, we’re not resting on our laurels. In order to ensure the city’s long-range prosperity, our Administration continues to pursue an aggressive strategy to diversify the economy and invest in all five boroughs.

Yesterday in Queens, I helped unveil the new American Airlines terminal at Kennedy Airport, financed by $1 billion in City I-D-A bonds. It will not only enhance JFK’s role as a major international gateway, but also complement our Administration’s efforts to create a new transportation-related business district in neighboring Jamaica.

In the Bronx, we’ll soon open the new $85 million Fulton Fish Market, the centerpiece of our strategy for bringing more food industry jobs to Hunts Point.

On Staten Island, we’ve begun making $66 million in infrastructure improvements in the Stapleton area that will turn the Homeport site into housing and open space and an economic engine for the borough.

We’re making $71 million of similar improvements to the area around the Brooklyn Navy Yard to support new tenants there, including Steiner Studios, the largest film and television soundstage on the East Coast. Film production continues to be a growing industry in our city. Over the last two years, film and television location shooting days in our city have increased by more than half. And in just six months time, our Administration’s targeted tax credits for television and film production have brought in $330 million worth of new business and provided jobs to 6,000 New Yorkers.

To encourage our manufacturing sector, we’re establishing industrial business zones across the city. And our rezonings of the Far West Side of Manhattan and Downtown Brooklyn have replaced long-outdated zoning regulations, and laid the foundation for private investment that will lead to major future commercial and residential expansion in those areas.

These and other policy initiatives and public investments will keep New York’s economy growing, and reinforce the city’s continued fiscal health.

The FCB’s staff report acknowledges the City’s strong fiscal position. As the report points out, City revenues have been so strong that the City was able to end Fiscal Year 2005 with a balanced budget while also pre-paying $3.5 billion in expenses for Fiscal Year 2006.

This permits us to balance next year’s budget while also enacting a range of much-needed and well-deserved tax relief measures for New Yorkers.

As it did last year, the $400 property tax rebate will repay those who made the greatest sacrifices in helping secure New York’s future. The Earned Income Tax Credit, included in the City budget for the second consecutive year, will also make a huge difference in the lives of hard-working New Yorkers who earn less than $36,000 per year.

The elimination of the City sales tax on clothing and footwear priced at less than $110, which the Governor signed into law on Monday, will help New Yorkers clothe their families. And virtually all of the money returned by these tax relief measures will be spent in our city, supporting local businesses, and creating local jobs.

Your staff report also makes note of the recent binding arbitration decision concerning the Patrolmen’s Benevolent Association. I want to call attention to the fact that the Public Employees Relations Board decision sets out productivity measures that the PBA must accept. That provides very important validation for our Administration’s position that raises for City workers must involve offsetting savings in the way that we do the people’s business. Weaving that principle into future collective bargaining agreements is fundamental to the city’s long-term fiscal health.

We remain hopeful that we will also reach a contract agreement with the United Federation of Teachers. And while we certainly will not negotiate that contract in public, I want to stress that it too must include productivity measures.

If the City were to compromise on that point in these negotiations, it would undermine our position with all of the other City unions, especially those that we are now having contract talks with.

Our school principals—the frontline managers of the school system—also must have greater flexibility and autonomy in doing their jobs. That will make a huge difference for the future of our schools and our students.

The future of our city also demands both fiscal prudence at the local level, and also urgent efforts at all levels of government to control the non-discretionary expenses borne by City taxpayers.

The current City budget illustrates this problem clearly. Between Fiscal Years 2005 and 2006, discretionary spending by City agencies is expected to grow by $139 million. But non-discretionary expenses, including pension and employee health benefit costs and the local share of Medicaid, will increase by $2.5 billion. Pension costs alone will account for $1.4 billion of that figure.

The continued growth of these non-discretionary costs is why we are projecting a $4.5 billion gap between City revenues and expenses in Fiscal Year 2007.

Action by State leaders to control these expenses is imperative. In the area of pension costs, for example, our rising expenditures are largely the product of pension “sweeteners,” enacted by the Legislature and passed on to the City as unfunded mandates that we increasingly cannot afford. This simply cannot go on.

Zero tolerance for inefficiency, waste, or fraud in the expenditure of any public dollars is also essential to balancing our budget in the out-years.

The recent reports of widespread fraud in the Medicaid program are highly troubling, and, if they are true, especially scandalous. This is not a “victimless crime”; far from it. The mounting costs of the Medicaid program translate into fewer dollars for our libraries, senior centers, and after-school programs, let alone such essential services as police and fire protection. The kind of cynical defrauding of the Medicaid program that we’ve been reading about is a crime against the people of New York that must be stopped, and its perpetrators must be punished.

Year after year, our Administration has joined the state’s county executives of both parties in asking Albany for Medicaid relief. The soft cap on local Medicaid expenditures enacted last year was a good beginning. But until a full audit of the program has been completed, and instances of fraud have been identified and eliminated, I believe the Legislature must refrain from any further enhancements to this program.

The City must also do its part to ensure fiscal prudence. In that vein, I’m glad to report that there is an emerging consensus among the members of the City Charter Revision Commission that the wise financial practices required by the State Financial Emergency Act should be made part of the Charter.

Our Administration will without reservation continue to apply those principles to overseeing the City’s finances. We look forward to continuing to work with the governor, the State and City comptrollers, State and local legislative leaders, and the FCB to safeguard our fiscal future.

And before closing, I would like to say, Governor, how much I appreciate everything you have done for our city and for our entire state, not just over the last three and a half years, but during your entire tenure.

In your remarks yesterday, you spoke from the heart about how the example of your parents taught you the intense satisfaction that comes from making life better for the whole community. Whatever path you choose to follow in the future, I hope that you find it rewarding, and that it gives you the kind of opportunities to serve others that you continue to exercise so well as governor of our state.