Say sayonara to superfluous city spending, adieu to rosy revenue projections and farewell to fat city coffers.
For the first time since 2002, Mayor Michael Bloomberg's executive budget slams the brakes on agency expenditures -- ending the spending increases of the last five years. At the same time, Bloomberg has tentatively agreed to keep the 7 percent property tax reduction for one more year and continue the $400 tax rebate indefinitely.
At City Hall on Thursday, the mayor -- dressed in a crisp blue suit and red tie -- pointed to the slips and slides of Wall Street and to gloomy economic forecasts. Those predictions, the mayor contends, cannot be ignored.
"The numbers are scary," Bloomberg said during a presentation that kicks off his formal budget negotiations with the City Council. "Wall Street, which we depend on for tax revenues, is having some serious problems."
Those problems affect city agencies, and now the mayor is proposing to slash 6.4 percent of city funded expenses in fiscal year 2009. What started as a so-called across the board cut -- which the mayor first announced last year -- is beginning to play favorites, with certain agencies and programs, like the city's Department of Youth and Community Development, slated for more cuts than a few other areas, like the Department of Information Technology and Telecommunications, which is getting an increase in city funding.
The largest proposed cuts come in programs that are key City Council priorities.
Though these decreases are not definite -- the City Council and the administration must reach an agreement and pass a balanced budget by July -- you can bet this latest budget battle will be far less congenial than those of recent years.
On Thursday, the mayor proposed a $59.1 billion budget -- a small increase from his $58.5 billion proposal released in January. The budget includes $1.3 billion in cuts for fiscal year 2009, which starts in July.
Higher than expected revenues and a 33 percent increase in foreign tourists since 2000 have provided some cushion for the city. But, according to Bloomberg, our fiscal horizons remain cloudy. For fiscal year 2010, the mayor said he expects a deficit of $1.3 billion, growing to $4.6 billion in fiscal year 2011.
Because of that, the administration plans to roll back the 7 percent tax break, passed in 2007, to raise $1.22 billion -- but not until fiscal year 2010. (Some officials see that proposal as a stretch, since next year is an election year, and politicians dislike raising taxes the year their name is on the ballot).
One official said it was not impossible, though unlikely, that the City Council would revisit the tax rate this year, depending on the economy.
"Obviously if we needed revenue we could raise the property tax by a percent or two," said the council's Finance Committee Chairman David Weprin. "The sense of the council is everyone would like to see the property tax stay in place for the most part."
In what many have termed a significant but needed cut, the mayor also proposed to extend the city's four-year capital plan to five years, effectively slashing 20 percent of the program's cost by extending proposals -- not eliminating them. The administration has not determined which projects will be pushed back and plans to release that information in September.
For the most part, the city's fiscal watchdogs saw the mayor's proposal as sound -- a realistic approach to a teetering stock market and an economy that, some analysts say, is ensnared in a recession. But critics have already emerged and are gearing up for a contentious battle over some of Bloomberg's planned cuts, particularly in education.
While tourism continues to boost revenues, Wall Street's woes have barreled down Broadway and into City Hall. Wall Street firms lost more than $11 billion in 2007, after posting record profits the previous year, according to the mayor's office.
Because Wall Street drives the city's economy (wages in the securities industry alone account for 25 percent of city salaries), any volatility there can threaten city programs.
Much of his hour-long budget presentation was devoted to the financial sector's impact on the New York City economy. In slide after slide, the mayor reiterated Wall Street's influence, despite efforts to diversify city revenue.
"Everyone in this city should pray that Wall Street does well," said Bloomberg gesturing to a slide with his presentation's typically morose statistics.
The city's fiscal watchdogs and observers have echoed that sentiment. While little can be done about the impacts of this economic slowdown, some experts suggested the administration should attempt to limit Wall Street's impact in the future.
Nicole Gelinas, a senior fellow at the Manhattan Institute, said the city should explore other sources of revenue, so it is not held hostage to the ebb and flow of the stock market. "A lot of this is designed on our tax structure," said Gelinas. "We could make this a lot easier if we designed a structure that attracts new businesses."
A pillar of the Bloomberg's fiscal year 2009 budget is that no one is immune -- all city agencies must shoulder the burden of hard times, which some see as a fair approach to fiscal policy.
"From a fairness point of view, you don’t want to have any sacred cows," said Charles Brecher, executive vice president and director of research at the Citizens Budget Commission. "Everyone has to pitch in."
Although Bloomberg directed all agencies to submit approximately 3 percent cuts last year and another 5 percent for fiscal year 2009, some departments are now bearing more of the burden than others.
According to an analysis of budget documents, several agencies are seeing more than 10 percent cuts in city spending. The Department of Youth and Community Development has a 27.6 percent decrease in city spending for fiscal year 2009 compared to the projected city spending in fiscal year 2008. The Department for the Aging, Department of Cultural Affairs, Department of Homeless Services and Housing Preservation and Development are all slated for large cuts in city spending -- ranging from about 11 to 19 percent.
"Any further cuts to the Department of Aging, is serous business in my backyard," said Councilmember Vincent Gentile.
Other departments have been spared. The Department of Information Technology and Telecommunications is seeing a 20 percent increase in city funding, catapulting their funds from $202 million to $243.7 million. The increase, according to the mayor's executive budget, will go to the city's new wireless network for emergency personnel and to support the city's 311 information hotline.
Some of the rising costs, however, are out of the administration's control. For instance, the Department of Sanitation's expenditures have risen by 2 percent from 2008, which, according to budget documents, are attributed to the rising personnel and waste export costs.
Overall, some of the agencies that see large decreases in city funding may have gotten a boost in funding from the state or from Washington. Others, like the Department of Youth and Community Development, saw their federal funding actually decrease as well.
City Council tends to put a high priority on spending for community-based groups and programs that tend to get funding from the city's youth department and other departments slated for spending cuts, such as the Department of Cultural Affairs, which is facing an 11 percent cut in city spending. In the past when such programs have been cut by the administration, the council has restored their funding during budget negotiations -- a process called the budget dance. Some observers have crticized this maneuver, saying the executive branch's reductions are meaningless, since they are always restored, allowing council members to score easy political points .
"We've come a long way to ending the budget dance," said Weprin, alluding to the back and forth between the administration and the council. "It always seems to be that when there are cuts, council priorities seem to go first."
One priority close to the Bloomberg administration, education, has been thrust to the budget debate's center stage. A coalition of more than 40 organizations, including the city's powerful teachers union, already is preparing to launch a publicity campaign slamming the administration for backing down on its promise to fund education.
While the city's education funding is actually up from fiscal year 2008, by about 3.5 percent, advocates contend higher costs for food, energy and the overall impact of inflation mean the Department of Education and classrooms will end up losing out. In this year's state budget, education funding saw a 7 percent increase compared to the last fiscal year.
On the steps of City Hall on Wednesday, the day before Bloomberg released his executive budget, city officials and advocates railed against the mayor -- urging him to "keep the promise" of continuing to increase education funding.
"Turn this car around," said Robert Jackson, chair of the council's Education Committee, who pledged to vote against the budget if the department's funding was not restored. "You're heading in the wrong direction. You're supposed to be the education mayor," he added, alluding to Bloomberg's takeover of the public schools.
Following the release of the mayor's budget, Council Speaker Christine Quinn called the total budget proposal responsible, but hesitated to lend her full support because of the proposed funding to the education department. "While the news of continued relief for homeowners is a positive step, the cuts to a number of city agencies, most notably to the Department of Education, are a cause for concern," she said in a prepared statement. "The council remains committed to ensuring that the necessary cuts have the least possible impact on our classrooms."
It is likely the Department of Education will not be the only battleground at City Hall this fiscal year. Libraries, which have often been the focus of the City Council and the administration's budget dance, are making an encore appearance on the dance floor.
Though the budget shows a 70 percent decline in city funding for the city's library system, funds have been prepaid to keep services up for fiscal years 2008 and 2009. But cuts elsewhere, like to the nearly $50 million needed to keep branches open six days a week, are being cited by some members as a priority.
"Sixty percent of the money added last year for six day service would be eliminated, which would in effect destroy six-day service," said Gentile, who chairs the council's subcommittee on libraries.
Other areas identified as council priorities, like the Quinn's suggested tax rebate for renters or her proposal for a sales tax free week, were left out of the mayor's budget. So far, the council's suggestions to cut spending in the administrative offices of the Department of Education and out of the classroom have not seen a response from the administration.
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In March, Barack Obama raised $40 million for his presidential campaign. Hillary Clinton brought in over one million dollars from a single Elton John concert in April. Mayor Michael Bloomberg spent more than $70 million of his own money on his reelection campaign in 2005.
Candidates today are raising and spending more than ever to run competitive campaigns and win elections. Some argue this campaign spending spree and steroidal growth of campaign fundraising detracts from the meat of campaigns, as candidates spend less time talking about issues and more time soliciting contributions.
The issue is particularly pressing in New York State. While contributions for campaigns for president of the United States are capped at $4,600 for both the primary and general election, individuals can contribute up to $15,500 to New York State Senate candidates and $7,600 to candidates running for State Assembly. A person can give someone running for governor $56,000.
Some advocates want governments to take more responsibility for financing election campaigns, and an increasing number of states and cities are adopting systems that allow public dollars to be dedicated to campaigns. Here in New York, reformers are seeking changes that would establish public financing, but there is not yet consensus about what form that might take. Public matching and full public financing are the most notable systems being pursued, but what do these terms mean and what system would best serve the voters?
In spring 2007, many good government organizations, including the New York Public Interest Group (NYPIRG), Citizens Union (whose sister organization publishes Gotham Gazette), Common Cause/NY and the League of Women Voters, were preparing for then Gov. Eliot Spitzer to make a deal that would bring about sweeping campaign finance reform. The package was set to lower campaign contribution limits, close loopholes, strengthen enforcement and provide more disclosure of contributions for public scrutiny. An agreement was outlined in a press release but legislation was never introduced as tensions increased between the governor and legislators in Albany due to the "Troopergate" scandal.
Today many of these same organizations continue to push for stricter regulations of campaign financing and greater transparency for contributors and their links to the candidates they donate to. The advocates want limits to so-called soft money contributions -- or funds intended to support the organizational activities of the political parties and their housekeeping accounts, but which are often used to support the individual candidates. They want to close loopholes that allow corporate subsidiaries to make additional contributions and require that campaign contributors and "bundlers" -— individuals who gather donations from others and deliver them to campaigns as a bulk contribution -— disclose their names. These changes, however, are only part of the package to reform campaign finance. Many groups are also advocating that public money be made available to state candidates for campaigns.
New York City and a number of other places use a public matching fund system that gives candidates a certain amount of public money to use for their campaign. In order to receive the funds, candidates must agree to a spending cap and in many cases must meet threshold requirements for individual contributions to demonstrate their viability. The money must come from a certain number of contributors, not just a couple of wealthy individuals.
Public matching ratios range from small to generous. Here in New York City, the public matching system provides candidates with $6 of public money for a significant portion of the private money they raise. If there is a self-financed opponent (such as Michael Bloomberg), there are additional spending triggers that provide challengers that participate in the public financing program a higher match ratio or increased expenditure limits to level the playing field.
The presidential primary system also employs a public matching system. After candidates meet a number of fundraising goals, they are eligible to receive a dollar for dollar match of the first $250 dollars a contributor donates. Candidates have to adhere to spending caps both in total spending and state-by-state limits. In 1999, George W. Bush became one of the first presidential candidates since 1976 to refuse public matching funds in the primaries.
Full public financing also know as "Clean Money, Clean Elections," provides candidates that meet an initial fundraising requirement a grant of public money for their campaigns. Unlike public matching funds, after candidates raise a specific benchmark of private money raised, they will receive one block sum of funds to support their campaign. Once a candidate qualifies and receives full public financing funds, they cannot raise any additional private money. Candidates must also pledge to a spending cap, as with public matching funds, and are not allowed to accept any private money after they receive public funds. Many systems also have trigger provisions that provide additional funds to participants in the program when outside groups run ads against them or when they face a non-participating candidate that spends more than the public grant.
Some states, including Arizona, Maine, New Mexico, North Carolina and Vermont, have already enacted legislation providing candidates with full public financing. It is set to begin in Connecticut for statewide races this year.
At the federal level, presidential candidates running in the general election automatically qualify for a campaign grant. The money comes from the Presidential Election Campaign Fund, and includes funding from taxpayers who contribute when filing their tax returns. In 1992, President Bill Clinton and his opponents Bob Dole and Ross Perot received $29 million each. In 2004 general election nominees were eligible to receive $74.62 million in public funds for the general elections. Each presidential cycle the grant totals are adjusted for increases in the cost of living. This year, grants to candidates will be approximately $85 million. As candidates fundraise almost half that amount per month, rumors are spreading that candidates are shying away from full public financing in the general elections.
With both public matching funds and full public financing, participation is voluntary. Candidates can choose to fund their campaigns through private donations, or if personally wealthy, they can fund their own campaigns. The internet has provided candidates with a new fundraising tool that allows them to reach large audiences of people quickly and cost efficiently. If Barack Obama wins the Democratic nomination, there is some speculation that his fundraising success may sway him against using public funds in the general election, especially if his presumed opponent, John McCain, chooses to also fund his campaign through private contributions.
For some, the notion of government funding campaigns just doesn't sit well. Some critics of using public money to finance campaigns argue that they should not be forced to contribute their tax dollars to fund the campaign of candidates they do not support. In addition, there is some disagreement about the role government should play in financing campaigns at a philosophical level, with some believing it is an inappropriate use of tax payer money and government resources. Other critics believe campaign finance laws in general restrict the public's ability to exercise their first amendment rights.
Supporters argue that public financing is a concrete way to break the link between large contributors and special interests and candidates by making it possible for candidates to run without their support. Advocates argue that money plays too big a role in elections now, swaying politicians and forcing them to spend enormous amounts of time raising funds. If candidates were not under so much pressure to raise tens of millions of dollars in one month, as is the case for the presidential candidates, they could spend more time developing the positions on the issues and communicating with voters.
Supporters of public funding of elections also argue it will level the playing field by enabling people who are not wealthy or do not have the ability to raise funds from large donors to run for office. They believe that this will increase the diversity of the candidates and allow voters more choices on Election Day. And when those candidates make it into office, they can spend more time on their public duties and less time fundraising for the next election. There are many organizations that support Clean Money, but also support public matching funds as a step in the direction towards full public financing.
Other advocates disagree, however, about the merits of full versus partial public financing. Proponents of full public financing argue it is the best way to free public officials and candidates from the influence of special interest money and large donors. Candidates would compete on an equal level with campaign spending tamped down by spending limits put in place. This would further empower citizens in the elections process.
Those who support public matching funds argue that by not allowing voters to contribute to the campaign of their choice throughout a campaign, full public financing limits a voter's right to free speech. This, in turn, could alienate voters from the democratic process. In addition, critics of Clean Money also worry that if contribution limits for qualifying requirements are set too low, such as $5 or $10 dollars, contributors may not take their donations seriously.
In any case, supporters of both systems agree something needs to change in New York State. Gov. David Paterson sponsored the Clean Money bill in the Senate when he served as Minority Leader. Advocates of public funding of campaigns are working to make reforms; how far these changes will go toward providing public dollars to campaigns is still uncertain. Until then candidates continue to rake in donations, hoping to out-raise and possibly out-spend their competitors to victory.
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The indictment of two City Council staffers completely overshadowed an attempt to get back to business at City Hall last week, but Council Speaker Christine Quinn tried to move on anyway.
At its stated meeting Wednesday, the City Council approved a bill providing greater protection to taxi and livery drivers during the dispute process at the Taxi and Limousine Commission. It also approved a resolution calling for the immediate bailout of the city's Off-Track Betting Corp.
While Quinn continued to ward off questions on the ongoing phantom organization investigation, another press conference blocks from City Hall highlighted alleged corruption in the allocation of the council's discretionary funds.
Two staffers, including the former chief of staff to Councilmember Kendall Stewart, were indicted on federal charges of mail fraud and money laundering for redirecting funds from an educational nonprofit for their own personal use. The funds originally came from the council's discretionary funding. (Check out our previous coverage of the council's discretionary funding here and the scandal here).
That announcement occurred while the speaker gave a routine press conference prior to the body's stated meeting. Needless to say, not a question was asked regarding the legislation under consideration by the council.
Though little attention was paid to the bill, the council approved legislation Wednesday that gives greater protection to taxi drivers who face complaints in front of the Taxi and Limousine Commission.
Currently, when a cab driver faces a complaint at the commission, only a written statement is needed from the accuser for the cabbie to be found guilty. The bill, (Intro 256) which was sponsored by Councilmember Miguel Martinez, would encourage the commission to provide witnesses through teleconferencing or videoconferencing. The commission, however, would not be required to produce witnesses, but show only reasonable efforts that they attempted to, according to the bill.
"It's about due process," said Martinez. "We have drivers understanding that they are not guilty until proven innocent, but rather they are innocent until proven guilty."
It was approved unanimously by a vote of 51 to 0.
About 1,500 pink slips went out to employees of New York City's Off-Track Betting Corp. this week, according to Councilmember David Weprin -- an outspoken supporter of keeping OTB afloat.
The city's betting locations are poised to shut their doors this summer, because they are soon to become insolvent.
For months, members of the City Council and Mayor Michael Bloomberg have blamed Albany for the corporation's failure to remain profitable, arguing the state has devised funding formulas that treat the city's locations unfairly.
In response, the council approved a resolution (Reso 1235) urging the state to move quickly to save OTB before it closes all of its locations in the city by June 16. The move followed a commitment last week by Gov. David Paterson, Assembly Speaker Sheldon Silver and Majority Leader Joseph Bruno, who promised to work with the city to keep them open.
According to Weprin, OTB brings in $1.1 billion of revenue annually.
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