This is the first in a series of commentaries Gotham Gazette will run between now and Election Day on the charter proposals appearing on the November ballot.

From a public finance perspective, the final report of Mayor Michael Bloomberg's 2010 Charter Revision Commission is half-hearted, superficial and ultimately reactionary. The unhappy result is embedded in one of the seven disparate proposals tossed together in what will appear as Question 2 on the November ballot. (Question 1 will be the much better known term limits proposal.)

The one finance-related proposal in that package would create a new mayor-dominated commission, this one to eliminate reporting requirements. Any new mayor-dominated commission, though, flies in the face of recommendations to the commission by elected and private individuals.

Many experts argued the city needed a countervailing force to balance the mayor’s broad budget powers. The proposal buried in Question 2 would instead give the mayor new powers. He could eliminate what he considers outdated city reporting requirements as well as advisory boards through a new seven-member commission that he would control. Bloomberg has been pursuing this goal, unsuccessfully, for at least seven years.

 

Further, in spite of the furor that followed the successful push by Bloomberg and Council Speaker Christine Quinn to extend term limits, the commission apparently saw no irony granting the mayor and a council speaker a new power to quietly get rid of reports and boards whenever it suits them.

At the same time, the final report did not act on suggestions for changes that would have made the city's budget process more democratic and transparent as well as providing better information on New York's fiscal situation. The report also ignores substantial issues relating to public finance – mayoral budget accountability in particular -- that the mayor's 2005 charter revision commissiondeferred but urged be considered again.

What the Commission Didn't Do

The commission’s final report summarizes a number of interesting public finance ideas proposed during public hearings. Those ideas aimed to offset the strong fiscal powers of the mayor. For instance, some of the borough presidents proposed that they receive an "independent" or guaranteed budget, rather than depend on annual political decisions by the mayor and council.

The presidents used as their model the Independent Budget Office, which every year, under the 1989 charter revision, receives a budget (approximately $3 million in recent years) equal to 10 percent of whatever the mayor's Office of Management and Budget gets. Quinn proposed that the Civilian Complaint Review Board and Conflicts of Interest Board also have an independent guaranteed budget.

Mark Page, director of the mayor’s Office of Management and Budget, testified in opposition to independent and guaranteed budgets for municipal officials. According to the commission's final report, he "cautioned against devising fixed formulas that the city would have to accommodate for years to come and argued that it is difficult to devise a formula that can take into account the evolving demands faced by the city."

On the mayor’s current exclusive power to make city revenue projections, City Councilmember Lew Fidler and City Comptroller John Liu argued that the comptroller, rather than the mayor, should have that power.

On the question of fiscal transparency -- the public's ability to understand how the city’s budget works – critics like Councilmember Gale Brewer continue to argue that the so-called units of appropriation -- total funding for, say, specific program areas -- are often so broad that it's impossible to trace where the money actually goes. The commission passed on that idea passed on any notion of breaking down such massive chunks into smaller and, more understandable blocks.

One of the least transparent parts of the city budget is its contract budget, now representing over $9 billion, or over 14 percent of the city’s $63 billion in spending for 2011. Steven Newman of the Human Services Council, an organization that represents non-profit firms that receive city contracts, argued that city agencies should submit an annual contract plan and create multiyear budgets for non-profits. He also recommended the city require a single audit for organizations that have several contracts. The commission ignored those proposals as well.

Behind the Commission's Proposal

The charter revision commission’s focus on the review commission is not simply disappointing. It is a step backward in terms of the issues discussed in the testimony, raising the likelihood of more self-serving executive actions and further marginalizing the City Council as an effective counter-weight to the mayor.

Reviewing the city's reporting requirements from time to time is certainly reasonable. City needs and functions change, data changes. But what this commission has done is bow to the Bloomberg administration's distaste for inside or outside accountability measures that it cannot control.

The distaste was apparent in the 2003 Bloomberg charter revision commission's failed effort to eliminate the Preliminary Mayor's Management Report, one of the two charter-mandated reports that ask the mayor to list fiscal and program goals and measure progress toward meeting those goals. Since the public's defeat of the 2003 ballot proposal, the mayor has simply not paid much attention to either the preliminary or final Mayor's Management Report.

Reporting Requirements: The 2005 Version

The 2005 Bloomberg charter revision commission also tackled the question of how to reform city reports, but it ultimately deferred action after extensive research. It also gave serious attention to -- but again did not act upon -- several public finance reforms that the 2010 commission never touched. For instance, it urged looking at the way recent mayors have used the surplus revenues sometimes called "rainy day funds" and how the city could provide information on budgets and programs that would improve transparency and fiscal accountability.

It was the 2005 charter review commission that considered creating a model board to review public reports and advisory boards -- what it called a Commission on Public Reporting and Accountability.

That commission would have essentially been controlled by the mayor, with six of the nine members either his ex officio appointees or people specifically named to the commission. But the City Council, city comptroller and public advocate would at least have had the other three seats.

Under the 2005 model, the review commission would have to solicit comments on any proposed elimination of a report or board and hold public hearings. If the commission voted to waive a report requirement or abolish an advisory board, it would be eliminated. The City Council could, however, restore the requirement or board by passing a new law.

The 2010 Model

The 2010 charter revision commission proposal for report and advisory board review takes a narrower, more insular track. Its title itself suggests a retreat from a public-interest perspective: Gone are 2005’s “public reporting” and “accountability.” The new title -- "city reporting requirements and advisory bodies" -- is neutral and apolitical.

The makeup of the commission repudiates any notion of a balance of powers in city government. The mayor controls four of seven seats -- the ex officio heads of his budget, operations, legal and technology offices. The council speaker would get a seat and would appoint two other council members as well. The mayor's head of operations would be the chair. Gone are the public advocate, the city comptroller and any private member.

The process as well as the makeup of the commission has all the earmarks of an insiders' club. The commission reviews all report requirements and advisory bodies. In the event it chooses to eliminate one, the chair and the commission shall solicit feedback "to the extent practicable" from those who "the chair or commission reasonably determines are the subject of or are otherwise affected or benefited by the requirement under review." Not exactly a public process.

The review of commission's decision also seems minimal and undemocratic. Any proposed elimination is posted in the city record and on the city’s website and any solicited parities are to be informed of the decision. The City Council has 120 days in which to approve or disapprove the commission's decision. If it does not act during that time, the decision takes effect automatically.

In other words, a mayor and a council speaker could simply agree to the elimination of whatever reports or advisory bodies their tightly controlled commission chose without any legislative action at all.

The commission also was not completely forthcoming about the effects of its proposal. The final report says that key fiscal reports required under the charter, such as the preliminary and executive budgets and the mayor's management report could not be eliminated. But the legal language, which will not appear on the ballot, exempts only part of mayor's management report requirement: The preliminary mayor’s management report, which Bloomberg first tried to do away within 2003 could be eliminated.

That this mayoral-dominated new commission proposal will be presented to New York voters as part of Question 2 should be an embarrassment to the charter revision commission and the mayoral administration whose heavy hand is all over its architecture.

Glenn Pasanen, who teaches political science at Lehman College, has been in charge of Gotham Gazette's finance topic page since 2001.

Photo courtesy of Library of Congress

Poverty continues to persist in New York more than 100 years after this picture of a family struggling to make ends meet was taken on Monroe Street.

The recession pushed an additional 100,000 people into poverty in New York City in 2009. This number would have been about three times as great had it not been for the relief provided by President Barak Obama's economic stimulus package.

New York City's poverty rate rose by 1.2 percent in 2009, increasing from 20.1 percent in 2008 to 21.3 percent in 2009, according to estimates by the Fiscal Policy Institute. Last year 1.8 million city residents lived below the poverty threshold, and half of that number had incomes below 50 percent of the poverty threshold.

Despite the fact that the city lost proportionately fewer payroll jobs than the nation in 2009, the poverty increase in the city easily matched the national poverty rise. For the nation as a whole, poverty rose from 13.2 percent in 2008 to 14.3 percent in 2009). In the 50-year history of the federal poverty estimates, there was only one year (1980) when the U.S. poverty rate increased by more than it did in 2009. The city's poverty rate remains about one and a half times the national rate.

The federal government pegs the poverty threshold for a four-person family at slightly under $22,000 ($21,954) for 2009. More adequately measuring poverty would undoubtedly put the rate higher than 21.3 percent in New York City since the current federal poverty measure does not adjust for regional cost of living differences nor has it been adjusted for changes in household spending patterns over the past 50 years. Housing costs in the city, for example, are much higher than the national average, and families today spend a much greater share of their income on child care and health care than they did in 1960.

Using an alternative methodology recommended by the National Academy of Sciences that addresses these and other shortcomings, the city's Center for Economic Opportunity figured that the New York City poverty rate for 2008 was 22.0 percent. The city has not yet estimated the poverty rate for 2009 using this alternative method.

The 2009 poverty rate for the city estimated by the Fiscal Policy Institute uses the Current Population Survey's Annual Social and Economic Supplement released earlier this month. The population survey is the source of the official poverty rates.

The Census Bureau will release poverty, demographic and other data based on a different survey on Sept. 28. These poverty numbers will utilize the same method that has been used for 50 years, but applied to a different survey, the American Community Survey. The Census Bureau has been phasing in the community survey to provide communities with more timely social and economic data, and the numbers may differ from the population survey's poverty estimates. The year-to-year changes likely will be very similar.

Rising Unemployment, Rising Poverty

Not surprisingly, poverty usually rises during economic downturns. Family income from wages drops when people lose their jobs or have their hours cut back when the economy falters.

Unemployment soared as the recession swept across New York City, rising from 5.4 percent on average in 2008 to 9.5 percent in 2009. This meant an additional 163,000 New Yorkers were without work. This unemployment jump far exceeds any previous one-year increase in a data series dating to 1976. Moreover, total wages paid in the city fell by 5.5 percent in 2009, a drop of $9.4 billion. Because Wall Street compensation levels frequently swing wildly from year-to-year, these figures exclude the extremely highly paid financial sector to provide a clearer picture of the recession’s impact on typical New York workers.

Some of the unemployed receive unemployment insurance benefits, but those make up for only a portion of their lost income. In New York state, unemployment insurance pays a benefit of half the recipient's wages up to a maximum weekly benefit of $405. The state has not raised that maximum level since 1999 although since then consumer inflation has risen by one third and the cost of living, as measured by the change in typical family budgets, has increased by 40 percent.

The Obama Recovery Act provided a $25 weekly supplement, and the federal government has funded extended unemployment benefits beyond the 26 weeks provided by state unemployment programs.

The Effects of the Recovery Act

The unemployment insurance supplement and extended benefits were among a number of key public benefits programs and the expansions made to them under Obama's American Recovery and Reinvestment Act (Recovery Act). Poverty rates across the country would have risen much more had it not been for these measures. The official poverty measure reflects the impact of some benefit programs that the act temporarily expanded, such as unemployment insurance, but not other programs, such as food stamps and tax credits.

Using the broader measure of poverty recommended by the National Academy of Sciences, several Recovery Act programs kept over 250,000 city residents out of poverty in 2009, according to an analysis prepared for the Fiscal Policy Institute by the Center on Budget and Policy Priorities. In addition to the extended and supplemental unemployment insurance benefits mentioned earlier, these programs include the Making Work Pay Tax Credit; an expansion of the Child Tax Credit; an expansion of the Earned Income Tax Credit for people with low incomes; an increase in the monthly food stamp benefit; and a one-time $250 payment to seniors, veterans and people with disabilities.

Various other Recovery Act programs, including fiscal relief to states to avert more damaging budget cuts, infrastructure spending and things like biomedical research grants, also helped save or create tens of thousands of jobs in New York City, and thus further moderated the poverty increase. Following the method utilized by the President's Council of Economic Advisors to estimate the act's state-by-state employment impact, the Fiscal Policy Institute estimates that the Recovery Act saved or created over 88,000 jobs in New York City. The Center on Budget and Policy Priorities' estimate of 250,000 New Yorkers kept out of poverty by certain Recovery Act programs does not fully reflect the total employment impact of the wide range of the act's programs.

More 'Deep' Poverty

Despite the act, though, the recession in 2009 had a devastating effect on many New Yorkers. Not only did poverty increase rapidly in 2009, but more and more of those below the poverty threshold fell further, into "deep" poverty. People in deep poverty have incomes that are less than one half the poverty threshold -- that is, less than $10,500 for a family of four. New York City's deep poverty rate rose from 9.0 percent in 2008 to 10.5 percent in 2009. This means that nearly half of the 1.8 million New Yorkers enduring poverty in 2009 were below 50 percent of poverty.

Deep poverty rose much faster in the city than in the nation last year. For the U.S. overall, deep poverty rose from 5.7 percent in 2008 to 6.3 percent in 2009.

The State Rate

New York's statewide poverty rate increased even faster than the nation's overall or New York City's alone. Poverty rose from 14.2 percent in 2008 to 15.8 percent in 2009. The number of New York state residents in poverty jumped by 284,000 to a little over 3 million. Only once since 1980 -- from 1989 to 1990 -- has New York state's poverty rate risen more than it did in 2009.

Poverty in the Empire State was the 12th highest among all states in 2009, and the highest among Northeastern states. The 10 states with the highest poverty rates are all Southern or Southwestern states. New York had a poverty rate slightly lower than Indiana's and slightly higher than West Virginia's.

The Uninsured

As people in the city and state lost their jobs, many also lost their health insurance. The recently released census data show that the percent of New York state's population without health insurance rose from 14.1 percent to 14.8 percent. The uninsured rate rose faster for the nation overall, reaching 16.7 percent in 2009. Over 2.8 million New Yorkers lacked health coverage in 2009, the most since 2002.

New York state was able to keep its uninsured rate from rising faster by significantly increasing the number of people covered by Medicaid. The percent of New Yorkers with employer-provided health coverage dropped from 58.7 percent to 53.7 percent in 2009, while the portion covered by Medicaid rose from 19.3 percent in 2008 to 22.2 percent in 2009. One million New Yorkers lost private employer-provided health insurance while Medicaid rolls grew by 500,000 in 2009.

New York's children were among the main beneficiaries of expanded Medicaid coverage. The Medicaid coverage of children rose by almost four percentage points since 2008 to over 40 percent.

While the recession has been declared to have officially ended in June 2009, and the city has begun to experience some job growth, most economic forecasts expect the unemployment rate to stay far above pre-recession levels at least through 2012. This means that it is unlikely that the city’s poverty rate can be expected to ease much from its current level of over 21 percent anytime soon.

James Parrott is deputy director and chief economist of the Fiscal Policy Institute. He has been studying and writing about the New York economy since he landed in New York City a quarter century ago.

Photo by Edward Reed, Office of the Mayor

In April Mayor Michael Bloomberg appointed Stephen Goldsmith deputy mayor. A few months later, Goldsmith produced a report casting doubts on the administration's management of little-noticed city operations.

Two recent reports on Bloomberg administration management issues -- one from the administration itself -- offer an intriguing alternative to the widely held view of a business-like machine. Instead, the reports describe surprisingly scattershot styles of management over the past eight and a half years.

One of the reports Maximizing Efficiency in NYC Government: A Plan to Consolidate and Modernize Back-Office Operations, by the mayor's own Office of Operations, reveals an administration with a blind eye to inefficiencies in many agencies. The other by the Center for New York City Affairs -- Managing by the Numbers: Empowerment and Accountability in New York City’s Schools -- finds that the city's largest bureaucracy, the Department of Education, is apparently unable to establish a stable management structure for the city schools.

The city report is an astonishing self-critique of city management eight and a half years into the Bloomberg administration. Rather than a centralized, top-down structure that maximizes efficiencies and accountability, the report finds inefficient, decentralized structures in several agencies. The report has attracted criticism for proposing that some city services be privatized, but it also proposes an array of other "efficiencies" that it says will save $500 million over the next four years and $500 million a year thereafter.

The report on schools is a comprehensive study of Bloomberg and Schools Chancellor Joel Klein's reform efforts in the $18.6 billion Department of Education. Here a centralized, business model does seem to have been in full flower, but the department has been unable to settle on a bureaucratic structure: There have been three major shifts in less than eight years. Throughout them all, though, the department has focused so narrowly on one policy goal -- higher test scores -- that it proved blind to skepticism from teachers, parents and academic experts.

A 'Blunt Assessment'

The Office of Operations' report is the first from the new, deputy mayor for operations, Stephen Goldsmith, who was mayor of Indianapolis from 1992 to 2000, where he gained a national reputation for management reforms, particularly in saving money from agency efficiencies and privatizing city services. He also has been a professor at Harvard's Kennedy School of Government, chief domestic adviser to President George W. Bush in the 2000 campaign and a former chair of the conservative Manhattan Institute's Center for Civic Innovation.

The report is remarkable for its blunt assessments. Such candor is a refreshing sign from the office that produces Mayor’s Management Reports twice a year, reports that have been short on assessments, goals and performance measures.

Goldsmith says his "concrete plan" will "turn ideas into efficiencies and save money in creative and previously unexamined ways."

For example, in information technology, the report found that "the city currently operates in a large and fragmented ... environment, consisting of more than 80 data centers that support approximately 3,000 applications in more than 50 different locations." Consolidating and modernizing this infrastructure would save nearly $60 million over the next four years, according to the Office of Operations.

The city collected over $40 billion last year in taxes, fines, rents and other revenue. Yet the report says the city could save $25 million to $35 million by consolidating collection operations and could increase collections by $100 million with stronger enforcement.

Human resources management in the city is "highly decentralized, which has precluded a coordinated, citywide [human resources] strategy." In fiscal year 2010, for instance, the city spent $410 million and had one human resources employee for every 38 workers, compared, the report said, to an average 95:1 ratio in organizations "similar to the city" Centralizing several hundred agency-specific human resources offices, Goldsmith's office believes, would save more than $100 million over the next four years.

The city's management of its office space and real estate is filled with inefficiencies, the Office of Operation concluded. No single agency is responsible for citywide real estate planning as project management is split between agencies and the Department of Citywide Administrative Services. Some 11 percent of city workstations are vacant.

The city currently owns and leases currently 19 million square feet of office space, costing $435 million a year. The report proposes the government reduce this by 1.2 million square feet in order to save $36 million a year by 2014.

The municipal government manages over 26,000 vehicles and other mobile equipment, at a cost of $667 million a year. Major costs include $283 million a year for maintenance, $250 million for procurement and $120 million for fuel. Nine agencies oversee 125 in-house vehicle maintenance shops, with more than 1,700 staff and over 300 vendor contracts for parts and maintenance services. Eight city agencies manage over 400 fueling locations.

Selling 700 non-emergency vehicles over the last year and a half has saved the city $20 million in one-time spending. Overall, downsizing, consolidating and privatizing services could save up to $71 million over four years, the report says.

Managing the Numbers

If the key management question raised by the Goldsmith report is how the Bloomberg administration missed chances to save $500 million a year in the operations of several relatively small back-office agencies, one big question raised by the Center for New York City Affairs report is how so many management resources in an $18.6 billion agency could be devoted to, as its title aptly puts it, "managing the numbers."

The numbers here mean the scores on standardized tests and the scores for schools themselves, the School Progress scores, which form the basis for the so-called school report cards. In terms of management style, the most interesting finding is that through the three re-organizations of school management, the aim has increasingly been to centralize the system around those numbers.

The first re-organization, from 2003 to 2007, the report notes, dismantled the 32 community school districts that had been in place since the decentralization movement of the 1970s and in its place created 10 administrative regions. That centralized the administration of schools but reduced community and parent access.

The second re-organization, from 2007 to 2010, did away with the regions and placed much more responsibility and accountability on the 1,588 school principals. They were given more authority over budgets, hiring and curriculum, but, as the report says, "In exchange, principals must demonstrate steady and marked improvement in student performance as measured by statistical data, such as standardized tests and graduation rates."

The second re-organization also offered principals management help: They could choose among 11 School-Support Organizations -- specialized Department of Education offices, universities and non-profit organizations, which offered expert advice on teacher development, budget options, curriculum, etc. Operations, such as food, transportation and supplies, were to be handled by borough-wide Integrated Service Centers.

The third shift in management structure, introduced earlier this year, collapses the School-Support Organizations and Integrated Service Centers into new Children’s First Networks. These networks, each with roughly 25 schools, are chosen by the schools to provide similar support services, in many cases across borough as well as neighborhood lines. Every school pays about $40,000 a year to the network for whatever services it offers. Six "cluster leaders" manage these networks.

Apparently in response to criticisms that the chancellor has too tight a grip on schools, his office argues that the current system is "decentralized." But the study's authors point out, "While principals have been given more management discretion, this has been accompanied by new powers and accountability demands coming centrally from Klein's headquarters. ... Neither the [community school] superintendents nor the school network teams have direct control of the principals."

According to the Center for New York City Affairs, it is the chancellor’s Division of Performance and Accountability -- where the school progress reports are developed -- and his Division of School Support and Instruction that "largely oversee schools today." The chancellor’s "restructuring has all but eliminated middle management and abolished day-to-day supervision of principals," the report finds. Extensive interviews with principals suggest that some thrive in this structure and that others simply become lost.

Management Under Review

The two reports -- one internal and the other external -- together suggest that any notion of a single Bloomberg administration "management style" is going to be hard to find. The idea, for instance, that this mayor has a business-like, centralized style is belied by the Goldsmith report, at least with regard to several back-office agencies that attract little public (and mayoral?) attention.

The bluntness of Goldsmith's assessment is encouraging. Maybe he can go on to answer some of the overarching questions about the administration's approach -- and its attitude toward centralization and decentralization, perhaps in a revamping of his Office of Operation's tired and largely irrelevant Mayor's Management Report this September. He and the mayor have made a good first step in setting out a management agenda that actually saves money. Tracing its progress in the management report would be a good second step.

Glenn Pasanen, who teaches political science at Lehman College, has been in charge of Gotham Gazette's finance topic page since 2001.

Photo (cc) New York State Archives. Gov. Hugh Carey meets with big six mayors in March of 1975 to discuss fiscal crisis

In the spring of 1975, the nation’s large commercial banks, fearing a default on New York City notes they had bought and sold for decades, severed their business ties with the city. Mayor Abe Beame’s City Hall was caught short – no longer could it turn to the powerful gatekeepers of the municipal bond market for the financing necessary to keep up with its bills, including a vast and growing pile of short-term debt. The recently elected Democratic governor of the state, Hugh L. Carey, stepped into the fray, fearing that a city bankruptcy would wreck the state’s entire financial system and generate national and even global repercussions.

Remarkably, Carey set the stage for approval by Congress and President Gerald R. Ford of billions of dollars in federal loans to the city, reform of the city’s scrambled finances, and the eventual return of the big banks. This dramatic story is drawn from an era, 35 years ago, when New York confronted a fiscal meltdown more imminent than the deeply entrenched but equally serious fiscal problems now facing the state. It is colorfully told in the new book "The Man Who Saved New York: Hugh Carey and the Great Fiscal Crisis of 1975," by Seymour P. Lachman and Robert Polner.

 

The following excerpt touches on the Washington phase of Carey's campaign to save the city from default and bankruptcy.

Time magazine’s Oct. 20, 1975, issue illustrated how far the city had sunk. Its cover depicted New York’s Mayor Abe Beame as a genteel hobo wearing a tattered top-hat, shaking a tin cup and pleading, “Brother, Can You Spare $4 Billion?” But Washington was unmoved. Tip O’Neill Jr., the majority leader of the House and a proponent of federal assistance for the debt-beleaguered New York City, said shortly after Governor Hugh Carey gave an impassioned plea before the Senate Banking Committee that an aid package was well short of the votes needed for approval. “If there were a vote today, I would have to say that New York would not prevail,” O’Neill said.

President Gerald Ford, as he would write in his autobiography, remained torn between his concern about the impact that a city default would have on residents and the desire not to let local leaders -- and lenders -- off the hook for decades of fiscal irresponsibility.

In the end, the president reconciled the competing forces with a bill that would add “Chapter 16” to the federal Bankruptcy Act to facilitate a gentle and “orderly” bankruptcy. It would keep some of the city’s remaining operating funds from getting tied up in the bankruptcy litigation, while allowing the court to authorize the sale of debt certificates secured by future city revenue, providing a short-term source of funds to carry on “essential services.”

“The bankruptcy option,” wrote Charles J. Orlebeke in a definitive study of the Ford White House during the city fiscal crisis, “appeared to offer him [the president] both a morally satisfying and administratively feasible path.”

But in a speech to the National Press Club on October 29, in which Ford laid out his new bankruptcy provision – delivering first formal statement on the New York crisis since May – his tone and message were noticeably un-gentle.

Ford, in the fateful speech, ignored the Herculean efforts made by Carey and Beame over the past six months, such as the sale of MAC bonds to stretch out of the city’s massive short-term debt, and the imposition of a financial control board to enforce deep cuts in city spending (including a planned 60,000 layoffs over the next three years). The president labeled the city, and its inability to meet its obligations, “unique among municipalities through the United States,” and alluded back to “a steady stream of unbalanced budgets, massive growth in the city’s debt, extraordinary increases in public employee contracts, and total disregard of independent experts who warned again and again that the city was courting disaster.”

He denounced “scare talk” used by New York politicians and bankers—“the blatant attempt in some quarters to frighten the American people and their representatives in Congress into panicky support of patently bad policy”—and added: “The people of this country will not be stampeded. They will not panic when a few desperate New York City officials and bankers try to scare New York’s mortgage payments out of them.”

The city’s “high wages and pensions . . . its tuition-free university system, its city-run hospital system, and welfare administration,” as Ford depicted them, meant, too, that the city must be taken to task. But he said the city’s political leaders had shown that they could not be trusted to exert spending discipline. An unearned and undeserved bailout by Congress, he said, would only set a “dangerous precedent,” signaling the willingness of the federal government to provide “immediate rewards and eventual rescue for every other city that follows the tragic example of our largest city.”

New York, Ford said, must face its “day of reckoning.”

“I can tell you, and tell you now,” he pronounced, “that I am prepared to veto any bill that has at its purpose a bailout of New York City to prevent a default.”

New York, Drop Dead

Ford’s speech stymied some inroads Gov. Carey had been making with key congressional committeees. More broadly, the address was a line in the sand, marking the beginning of a profound change arising in American political life, one that would be expressed in the angry citizen property-tax revolts a few years away. California voters in 1978 would approve Proposition 13, which deprived that state of increased taxes to pay for its systems of transportation, education, sewerage and potable water in an anti-tax movement that helped set the stage for the election of former California governor Ronald Reagan as president in 1980, not to mention his inaugural address in January, 1981, in which he declared, “Government is not the solution to our problems—government is the problem.”

The debate in 1975 over New York’s fiscal fate offered an early clue to the anti-tax fervency that was soon to gather to a gale force, although few imagined how successful that ideology would become, the vast social inequalities it would foster, or how ferocious and long-lasting would be the public and political backlash against unions, government, and public regulation of private industry and Wall Street. These first gusts emphasizing the finite nature of the public purse—which liberalism, in its view of government as the principal vehicle of opportunity and advancement, had never really defined—eventually turned into cyclonic winds in the 1980s, as corporate interests and influence rose, dominated and flourished.

Ford’s immediate need to court the right-wing of his party in the face of a Reagan challenge was a crucial factor in his giving New York the cold shoulder. He also made up his mind that fall to exclude from his reelection ticket Vice President Rockefeller, known as a liberal Republican and inextricably identified with his home state of New York, selecting instead the conservative Kansas Senator Bob Dole as his vice-presidential running mate.

Carey adviser Felix Rohatyn recalled that he and Carey watched Ford deliver his National Press Club speech on a television set in the governor’s Manhattan office and were “thoroughly depressed” as they sat down afterward for a late dinner at Elaine’s on Manhattan’s East Side. A newsboy walked into the casual bistro favored by Manhattan notables at about ten o’clock, hawking the early edition of the New York Daily News, and no one could believe their eyes. The front page headline in 144-point type, soon to be seen by millions of readers, screamed: “FORD TO CITY: DROP DEAD,” followed by the explanatory words: “Vows He’ll Veto Any Bail-Out.”

Powerful and unsettling—and immediately famous—the headline was an “unfortunate overstatement,” as James Cannon put it years later at a Hofstra University forum on the fiscal crisis, for Ford had never actually uttered the words “drop dead.” And he did not harbor malice toward its citizenry.

Ford himself was deeply stung by the headline. As late as 2001, five years before his death, he approached David Burke, who served as secretary to the governor under Carey, at a gala dinner honoring the ex-president with the John F. Kennedy Library’s “Profile in Courage” award for having delivered his controversial pardon of Richard Nixon “I want to get one thing straight,” Ford told the former Carey aide. “I never said ‘New York City drop dead.’ I never said that.”

The headline, however, reflected the fact that the president was, as he put it, “prepared to veto any bill that has at its purpose a bailout of New York City to prevent a default.” It arguably cost him New York State’s 41 electoral votes in the close presidential election that followed in November, 1976, against Democrat Jimmy Carter of Georgia, after Ford’s defeat of Reagan in the primary. Former Wisconsin senator and Ford friend Melvin Laird said years later that the headline was exceeded only by Ford’s pardon of Nixon in the degree of damage it caused his popularity and chances in the 1976 election. “That headline caused him a lot of harm, almost as much harm as the pardon did.”

According to Rohatyn, Carey glared at the News headline before him at Elaine’s and pronounced: “Now we’re going to win.” It seemed to everyone sitting at the table that night that he was right and that Ford would not be able to withstand the ensuing heat. Yet Carey worried privately. Despite what he told his dinner companions, he felt the headline might cause Ford to harden in opposing a New York aid package so he wouldn’t appear to waffle or flip-fl op at a critical moment, with the eyes of the country and the world upon him. Still, he felt that Ford would remain true to his word of September 2 and support federal assistance if Carey could bring Republicans (as well as many reluctant Democrats) around in Congress.

Carey Capitalizes

Carey all the same moved quickly to exploit the headline’s national impact and point a finger of accusation at Ford and the Republicans in Congress for promoting the city’s demise at the risk not just of the city itself but of almost everyone. Speaking to a gathering of the AFL-CIO in upstate New York, the governor was indignant, saying it “isn’t fair when the President of the United States hauls off and kicks the people of the city of New York in the groin.”

On the first of November, he delivered a blistering statewide radio and television address, emphasizing that the threat of a default had already raised the cost of borrowing in many cities and states. Knowledgeable and well-organized, he further declared that the “Ford formula deliberately unravels every step we’ve taken to solve our own problems,” as the easier bankruptcy option he proposed would scare off prospective investors in municipal bonds.

“Who would risk his funds knowing that the government could avoid repayment simply by slipping into bankruptcy?” the governor asked. Carey accused Ford of effectively running for reelection at the expense of the city’s millions of residents, with his “simplistic, self-defeating plan . . . designed more to appease the Republican Party’s Reagan wing than to help New Yorkers.”

If the city defaulted on its obligations, Carey stated, the holders of the city’s $14 billion in outstanding bonds and notes would conservatively lose $6 billion in the value of those securities. “That money will be written off on tax returns, and that means $2 billion less in federal tax payments.”

Carey added that it would be left to the U.S. Treasury to pay the cost of unemployment insurance and welfare assistance when businesses owed money by the city, including those “in communities such as Grand Rapids, Michigan”—Ford’s hometown—went under, while there would be “tremors and collapses in local governments around America, including agencies of New York State.”

Even so, Carey acknowledged that Ford was correct in describing the city’s history of fiscal irresponsibility. But he said the blame belonged to many, mentioning “city officials and interest groups; banks that did not ask the hard questions; a state legislature and hand-picked vice president”— former Gov. Nelson Rockefeller—“that specifically authorized every fringe and pension benefit and every unwise borrowing Mr. Ford now attacks so righteously; and presidents who diverted tens of billions of dollars to foreign dictatorships and senseless war, and who plunged our economy into its worst crisis in 40 years.”

Carey acknowledged the existence of a “skeptical, hostile” Congress, and the antipathy that New York City aroused in many quarters.

“Our city,” he conceded, “is often abrasive and arrogant, sometimes cold and unfeeling, always challenging. For a lot of reasons it has incurred the scorn of some of our countrymen; because of our pace and tone of voice, because of the colors of our skins and the accents in which we speak, and our tradition as a magnet for the disaffected, the dispossessed. What we’re hoping to buy” from the White House and Congress “is time to finish the job we’ve started. We don’t want to be bailed out. We don’t want to be a ward of the federal government. I ask Mr. Ford not to work against us to make New York bankrupt. I cannot believe that the specter of temporary political gain will lead him into driving a city into bankruptcy and risking the loss of taxpayers’ dollars . . . If the financial structure of government is shaken, Mr. Ford will be accountable to all the people.”

But he had faith in the president, Carey concluded.

“I spent more than a decade with Gerald Ford in Congress. We disagreed about many things. But I always found him a man ready to negotiate and compromise for a practical result.”

(The Man Who Saved New York is published by SUNY Press. For further information about the book or to purchase a copy, go here)

Photo courtesy ofpoverty initiative

Domestic Workers and their supporter successfully won passage of an unprecedented Bill of Rights for in Albany this year.

As Domestic Workers United members celebrated in the blazing heat at Union Square July 6 after the State Legislature passed a sweeping set of labor provisions protecting nannies and other home-care workers, the demonstrators received some unwanted resistance.

A lone man with a hand-held video camera in the otherwise empty park shouted "clean my room," and "wash my dishes," to the disgust of the activists who used a bull horn to rattle off a list of state lawmakers who pushed the bill forward. Park security led the heckler away while he tried to argue that he was simply exercising his free speech rights. By his demeanor and appearance he seemed not so much a political contrarian as a bystander who was a few sandwiches short of picnic, but the knee-jerk negative reaction offered a sign of the push-back the domestic workers are likely to confront as they try to implement their newly won legal rights.

The Bill of Rights is a milestone to be sure. A coalition consisting mostly immigrant women of color gathered enough political support to codify employee rights they have lacked: one day off per week, overtime pay and protections against workplace harassment. These are people who cannot form a union because of the nature of their work -- individual arrangements with employers who usually have only one or two people working for them. Now the legislation -- the first law of its kind in the country -- is intended to fill that gap.

These are great things for workers, but how will Domestic Workers United, which is not a union, hold employers accountable to these new laws? After all, the group does not have shop stewards who can file grievances and take employers before arbitrators. And just because something is illegal, it does not mean an employer won't do it.

Spreading the Word

Gov. David Paterson has announced his intention to sign the bill. Once he does, the Domestic Workers United will have to rely on one, the state to enforce the laws, and two, domestic workers to know their rights and have the confidence to speak up if they believe those rights are being violated.

"The most critical piece is going to be the education of workers so they understand their rights under the new law and employers understand their responsibilities," said Domestic Workers United director Priscilla Gonzalez, noting that the group communicates with members via newsletters and a network of volunteers to reach out to workers face-to-face.

Domestic workers cannot form unions for a variety of reasons, Gonzalez explained, but mainly because most of them are lone workers employed by one family, making the collective-bargaining process impossible. In addition, and much of industry is based on casual employment -- cash under the table.

Luna Ranjit, the executive director of Adhikaar, a coalition of Nepali workers collaborating with the Domestic Workers United, said that making the set of laws in the bill of rights effective will rely on simply word-of-mouth among domestic workers.

"Most of work is really talking to our members on a day-to-day basis," she said.

The State Role

With the state budget in shambles, enforcement may be a problem. While the state Department of Labor has been relatively progressive in terms of enforcing wage ordinances, it. Like many other state agencies, may see its workforce, diminished and weakened over the next several budget cycles.

"We understand the constraints at the Department of Labor, which is why we want to work closely with them to ensure that any existing resources are used in the most efficient way possible," Gonzalez said.

For the more-than 200,000 domestic workers in the downstate region, working conditions vary. Some employers already go above and beyond the minimum standards outlined in the law. But there are bad bosses too. Gonzalez explained that some domestic workers earn $12 per hour, while others have an hourly pay of 50 cents. In late 2007, a Long Island couple, Mahender and Varsha Sabhnani, were convicted in federal court on charges of enslaving and torturing their Indonesian servants. The news coverage sparked outrage against the family, though Gonzalez does not believe it was an isolated incident.

"There's more than we actually think," she said. "This is work that happens behind closed doors. The government has refused to see the home as somebody else's workplace."

Indeed, labor inspectors are common in commercial and industrial zones, but do not go door-to-door in residential neighborhoods.

A New Image

All this comes as many domestic workers are still grappling with the effects of the recession. When financial firms laid off traders, thousands of nannies, house cleaners and other similar workers lost their jobs as well. Things have recovered, although Domestic Workers United has been scrambling to direct out-of-work members to social services. Some have encountered new problems such as "nanny sharing," where two families seeking to reduce expenses share one nanny for one salary.

As it seeks to implement the law here, Domestic Workers United is looking beyond New York, helping to push similar legislation in Colorado and California. The group, Gonzalez said, also is exploring how it might push for federal legislation would make the domestic work industry a part of standard labor law.

All of this activity, the group hopes, could lead to a change in the change the perception of domestic workers. And that in turn, it thinks, could spur employers to adhere to acceptable workplace standards for people who care for children, cook and clean.

The time has come, Domestic Workers united argues, to realize that, for the class of movers and shakers in a place like the five boroughs, employing household workers is not a luxury, but a necessity.

"Domestic workers make all other work possible -- literally," Gonzalez said. "If a domestic worker doesn't show up to work then other workers can't go to work. These are the invisible hands that hold up countless families and homes."

Fiona Dhrimaj, Levin Institute

People who lost their jobs in finance learn about opportunities in small business, entrepreneurship and the emerging"green" economy.

The professionals with coffee cups and laptops spread out in front of them as they followed a lecture about government incentives for energy efficiency projects had something in common. They all had lost jobs in finance, swept out of interesting and lucrative jobs by the recession.

Among them was a 57-year-old man who used to run a platinum metals desk in New York for a family business from South Africa, a 33-year-old former technology analyst for a brokerage firm and a woman who once supervised the New York Stock Exchange's websites.

Those attending the career session at the State University of New York's Levin Institute in midtown Manhattan also were united in their willingness to look beyond Wall Street for their next jobs. After finishing a weeklong seminar on small businesses and entrepreneurship, 45 people stayed on for a second week of "green finance boot camp," said Helene Rude, the institute's director of educational services. The group spilled out of the main room into a nearby conference room where the attendees followed the presentations by video hook-up. "Why wouldn't you invest another week in something that's quote, unquote hot?" asked Rude.

The Levin Institute is contracted by the city's Economic Development Corp. to run the JumpStart program, which helps laid-off workers transition into new jobs. The program is open to professionals who worked in the financial services industry and lost their jobs due to the economic downturn. Participants, who attend at no cost, also must be New York City residents. Admission is based on a review of resumes and essays.

The current contract, which runs from December 2009 to the end of 2011, provides $300,000 for Levin to carry out several JumpStart programs benefiting a total of 300 out-of-work financial services workers, according to the Economic Development Corp.

While the main focus of the program is helping financial services workers, JumpStart also this year held a pilot program for laid-off media employees.

A Green Week

The green session, which ends this month, was designed to present out-of-work finance professionals with opportunities in the growing fields of developing, producing marketing and selling energy efficient technology and other environmentally friendly products and techniques. It addressed two economic goals of the Bloomberg administration -- keeping talented people shed by Wall Street from leaving the city and helping a vibrant green economy grow.

"When you match really smart business people up with really smart entrepreneurs, really interesting things happen," said Rude.

After they complete the session, participants are placed in 10-week, unpaid "consultant-ships" so they can gain experience.

It is difficult to pinpoint just how many job opportunities now exist in the green finance sector, but people involved in the JumpStart program see possibilities. They drew a parallel between the current potential for growth in green sector companies and the Internet bubble of the 1990s.

"The green movement is sort of like where the Internet was a dozen years ago, new and ready to explode," said participant Frank Provenzano, 33, who used to work in sales and marketing at a Wall Street firm. He said he came to JumpStart program primarily to learn about entrepreneurship but is glad he attended the green finance boot camp. "This has definitely opened up my eyes to how much opportunity there is," he said.

Provenzano knows that with opportunities come risks. The Internet bubble of the 1990s burst, forcing many companies to close down, something that could happen to the green sector as well. "A lot of start-up companies will come out of it, perhaps 10 percent will hit it big,” he said.

Filling the Jobs Gap

As the green sector began to emerge in the past few years, the city's finance and insurance industries lost tens of thousands of jobs. According to the Economic Development Corp., finance and insurance peaked in November 2007 when they supported 350,200 jobs. This May, that number stood at 311,000, the agency said.

Meanwhile, the Bloomberg administration was looking at efforts to add green jobs to the city's economy. Last October, Mayor Michael Bloomberg pledged to double the city's green-sector jobs from 13,800 to 27,600 by 2018.

"The impetus really came from city," Rude said. "They had done some research into the sector and really wanted to redirect some of the financial talent that lost its jobs into different areas and green finance was one of them."

Figures on how many green jobs have been created so far are not available, according to the Economic Development Corp.

The seminar covered a number of types of green finance including carbon emissions trading, opportunities in renewable energy start-up companies, green project finance and socially responsible investing, she said. Among the sessions offered were: "Making Some Green on 'Green'," led by Daniel Byrd, director of research for Virid Capital Management; "The Empire State Building and Large Scale Retrofits," on how the city's tallest building is becoming more energy efficient; and "What's Blowin' in the Wind?," a discussion of how wind can be distributed as an energy source, led by Russell M. Tencer, CEO of Wind Products, LLC.

The participants also learned they could make themselves valuable to future employers by understanding the Byzantine web of government incentives and tax breaks for energy efficiency improvements. They heard how green energy start-up companies needed financial expertise.

One such company, New York-based Solaire Generation, which makes solar-panel carports for parking lots, took two of the boot camp participants. One, a lawyer, provided legal help with a contract while the other helped to create a marketing plan, said La Vonda Williams, the company's chief operating officer. The company's decision to take on JumpStart consultants, she said, was prompted partly by its desire "to add momentum to several projects that had been placed on the back burner."

She added, "We were not just looking for financial skills, but multi-faceted individuals who could contribute on several fronts -- creativity, relationship building, legal strategy, etc."

Needed:Green Jobs

Most everyone involved in the program agreed that it made sense for the city to nurture the green finance sector and to encourage its talented workforce to seek out opportunities there.

"It's a win, win, win situation," said Danielle Gustafson, a boot camp participant who was the former managing director of global websites for the New York Stock Exchange. "It's a win for the consultants, for the companies where these consultants land and it's a win for New York City in terms of giving it an injection of talent into that start-up economy."

The classes, though, will not be successful if the jobs do not exist. People involved in the program acknowledged that green finance is a fledgling sector that has just started to grow and that opportunities are still limited.

Like some of the other participants, Gustafson did not end up at a "green" company for her consultancy position. Instead, she got a place at dotbox, a social media, e-commerce company. Nevertheless, she found the knowledge she gained during the boot camp on green finance useful. "It's already increased my clout," she said. "Whether I land back at some corporation, or land at a start-up, or kind of augment my existing consulting practice, it definitely was a good booster for me."

Rude said her efforts to place the participants at green companies were challenging. "It was a little tough because it's an emerging industry," she said. "There aren’t that many companies that can really bring someone on board because they are so busy trying to get the company off the ground.

"But that said, there are quite a number of entrepreneurs in the city who are venturing into green" and who need help, she said. "People who are starting these companies, they may know the technology really well but they may not have the same kind of business acumen."

Waiting for Trading

The city had placed a lot of hope for job growth in carbon emissions trading, but with a new national energy policy stalled in Congress, those opportunities have not developed.

The key to these jobs would be a national "cap-and-trade" policy, in which the government sets caps on the amount of pollutants utilities and other industries can emit. Those companies, in turn, are allowed to trade their allowance permits among themselves. The legislation, a version of which passed in the House of Representatives, is stalled in the U.S. Senate.

"The legislation has moved slower than everybody has hoped," said Ann Li, the director for financial services and international business at the Economic Development Corp.'s Center for Economic Transformation. "A huge part, if not the biggest part, of whether or not we have a vital carbon market depends on government legislation."

Currently, the New York Mercantile Market does handle some emissions trades, mainly from the European market. If the U.S. adopts a cap-and-trade policy, the number of carbon trades would increase greatly. To address that potential growth, efforts are underway to create a New York City-based Green Exchange.

"We think the prospect of an American carbon market is definitely on the board pending the creation of an important legislative framework," said Henry Bakker, the exchange's director of communication . "New York City, as a major international finance center, is particularly well-placed to become a global carbon finance hub."

Despite the uncertainties, the green finance boot camp included two days of presentations by Robert Rabinowitz of the London-based , European Climate Exchange, who talked about how he sees this type of trading developing in the United States. Rabinowitz addressed the April seminar via video-hookup because his flight to New York was grounded by the Icelandic volcano ash cloud.

Li said the city wants to make sure to be prepared if and when carbon trading becomes a going concern. "Once you can put a price to pollution you will have a market," she said. "We want to make sure New York City captures that market."

Vera Haller, the former editor-in-chief of amNew York and editor of NYNewsday.com, currently teaches journalism at Baruch College.

Photo (cc) D Sharon Pruitt

Self-congratulation filled City Hall late last month as the City Council adopted the $63.1 billion 2011 city budget that took effect July 1. For Mayor Michael Bloomberg and the City Council, the new budget represents a tough but fair resolution of the fiscal problems generated by a weak economy and losses in federal and state aid.

The mayor and council could in particular point to the $3.6 billion surplus in 2010 whose roll-over provided the key base for balancing the 2011 budget, an effort the state Financial Control Board in its June report credited to the city's "conservative assumptions and proactively managing its budget."

But from another perspective, the adopted budget is simply a short-term political solution, filled with unacknowledged inequities and mismanaged priorities, many of them the result of the rush to create the 2010 surplus. In this view, the budget could unravel in the next few months, much as last year's budget had to be modified mid-year.

The new budget, for example, depends on what City Comptroller John Liu, in comments on May's executive budget called "a labor negotiation strategy that has little precedent in our city's history. In case it is not successful, there must be a 'Plan B' to address the challenging period ahead." In other words, if city workers do not accept the wage freezes at the heart of this budget, hundreds of millions of dollars will need to be found elsewhere.

The Adopted Budget

The budget adopted on June 29 reflected some typical end-of-year changes. New revenues and new expenditure savings since May's executive budget added $370 million to the 2010 surplus and helped fund $395 million (only 0.9 percent of city funds) in City Council restorations and initiatives.

A few days earlier, after the preliminary handshake budget agreement with Council Speaker Christine Quinn, Mayor Michael Bloomberg said there would be, "pain, yes. Serious damage, no." On the council side, Finance Committee Chair Domenic Recchia explained, "We got lemons from the state, from the federal government and from the economic climate, but I'm proud to say that by working together with the mayor, we were able to make budget lemonade."

On budget-adoption day, Speaker Quinn echoed the Recchia metaphor: "We found ourselves struggling beneath an avalanche -- the persistent economic downturn; the declining federal stimulus dollars; the limited state resources -- all led to us ultimately being left with practically no tools to rebuild our city after being hit by such a historic financial crisis.”

The lack of "tools," though resulted from choice in some cases, not necessity. The mayor and speaker, for example, had made a much-touted pledge that there would be no new taxes in the adopted budget. This was an unusual if not unprecedented response to "a historic financial crisis." By contrast, the last financial crisis -- in 2002 -- was resolved with a balance of tax increases and expenditure cuts.

The speaker continued with a slap at the budget chaos in Albany. "Through a thoughtful, deliberate process, we agreed to a fiscally responsible, timely budget " she said. "We restored funding for core services for the most in-need New Yorkers.”

These positive City Hall comments brush over the fact this new budget represents the latest round of budget cuts -- the eighth in the past three years. The cumulative impact of these cuts totals $3.6 billion for 2011 alone. That is the equivalent of the combined expenditures of the fire, sanitation and housing departments in 2011.

The rolling nature of budget cutting over the three years has both minimized any political opposition and made more difficult to identify pain and serious damage from the budget. For instance, the city comptroller's recent comments on the executive budget pointed out that only $544 million of $1.3 billion in agency cuts for 2011 will be implemented in 2011; the other $747 million are recurring savings from cuts implemented in 2010.

Programs for the Needy

The New York Nonprofit Press provides extensive evidence that, while the administration has repeatedly said the cuts have been across-the-board and equitable, they have not always worked out that way. Instead, three years of agency cuts have caused serious damage. Since agency heads have much discretion, some programs remain relatively untouched, while others have suffers severe cuts or even elimination.

For instance, in child welfare, Nonprofit Press reports the council restored $12.1 million of the $12.8 million cut in preventive service programs, which could have reduced capacity by 30 percent. Also, some $6.7 million of a $9 million cut to childcare centers was restored. According to the Press, most significant proposed cuts in youth development programs were restored "either in whole or part."

On the other hand, although the $3.8 million elimination of the After-School Corp. youth program was fully restored, less than a half of a $8.5 million cut to the popular Beacon program, which runs afterschool, weekend and vacation centers for children and young people, was restored, and only half of the $6 million Out of School Time program was restored. A $1 million Neighborhood Youth Alliance/Street Outreach Program was eliminated.

Senior services "were extremely hard hit," the Nonprofit Press reported. While the mayor and council agreed to scale back the closing of 50 senior centers to save $11.5 million -- the social service cut that probably received the most publicity throughout the spring – the centers still saw their funding cut by 42 percent. Worse, a $10 million program that "provides homemaking for vulnerable home-bound seniors" was eliminated entirely.

A $2 million social services program for disabled older adults and an $850,000 intergenerational program for joint activities between seniors and youth also got the ax. After partial restoration, cuts to other senior programs ranged from 10 to 33 percent.

In homeless services, $1.2 million of a $1.7 million cut to medical services in shelters was restored. But other shelter programs, including the providing of employment specialists for residents, did not fare as well. Even after partial restoration, the city cut funding for Anti-Eviction Legal Services by 11 percent, the Housing Preservation Initiative by 33 percent; and community consultants by 50 percent. The $1.8 million cut in funding for on-site supportive housing case managers remained intact, an "unfathomable" cut, according to the director of the New York City AIDS Housing Network.

One earlier decision in the budget process can put these cuts in perspective: the mayor's decision, after the attempted Times Square bombing, to reverse an earlier decision and not cut some $105 million by downsizing the police department. That retraction took away funds that could have made most, if not all, of the social service cuts unnecessary.

The Groundwork for More Cuts

The 2011 adopted budget has the seeds of the next big mid-year package of agency cuts. Labor costs remain the big question mark.

The 2011 budget does not include one of the mayor's standard labor-negotiation goals -- savings from labor concessions on health premiums and pensions. After the release of the executive budget, Bloomberg shifted from proposing a limited 2 percent raise for teachers to no raise at all for two years. That, he said, would avoid teacher layoffs. Neither the United Federation of Teachers nor the Council of School Supervisors and Administrators, which represents principals, has accepted this proposal, although it remains unclear how they could fight it.

The mayor has expanded this no-raise demand to all city workers. As the comptroller points out, he has "removed funding of 1.25 percent from the [labor reserve fund] annually for the first two years for the next round of collective bargaining agreements, arguing that any wage increases must be paid for by offsetting reductions in the city's costs for fringe benefits or by productivity increases. On net, this approach allows the mayor to reduce projected spending $896 million over fiscal years 2010 through 2013.”

Another major question mark is whether the city will get $279 million in federal funds to offset city Medicaid spending; Congress has yet to agree to this.

The lack of a truly final state budget poses further uncertainty. According to the city comptroller, May's executive budget anticipated about $1.25 billion in lost state aid for 2010 and 2011, including nearly $500 million in state education aid for 2011.

The comptroller also raises the question of management. His comments include a charge, based on audits and contract registration, that some capital budget projects are mismanaged and do “not adequately protect the taxpayer.”

The CityTime computerized payroll project, significantly over budget, is "a prime example” of mismanagement, according to the comptroller. Juan Gonzales in a June 4 Daily News column pointed out that this system has already cost $700 million, 10 times its original estimated cost. It is not near completion, and the mayor is spending another $100 million on it this year.

Earlier in the year the Daily News found that 230 private CityTime consultants received an average of $400,000 each this year. (City computer technicians cost an average $77,000 a year.) At a June 16 labor rally outside City Hall, Lillian Roberts, executive director of the city’s largest union, District Council 37, argued that a 15 percent reduction in city consultant contracts would save over $316 million and thus eliminate all service cuts and preserve city jobs.

The city faces projected deficits averaging over $4.5 billion every year from 2012 through 2014. With the first of these deficits 11 months away, and the current prospects for a surplus in this year poor, recent history suggests that the exuberance at City Hall will soon fade. Unless the mayor and council can find new tools to minimize or cancel further harmful cuts, critics may begin to suggest that some of those budget lemons are homegrown.

Glenn Pasanen, who teaches political science at Lehman College, has been in charge of Gotham Gazette's finance topic page since 2001.

Photo (cc) 2010 William Alatriste

City Council Speaker Christine Quinn explains the budget before yesterday's vote.

Libraries won't shutter, public pools will remain open for swelter-saving dips all summer long, and fire companies are off the chopping block.

By a vote of 48 to 1, the City Council approved a $63.1 billion budget Tuesday that was less doom and gloom than what many New Yorkers initially anticipated. Instead of shuttering 50 senior centers, council officials say their plan will likely keep half open.

At least seven of 16 daycare centers slated for closure under the Administration for Children's Services will remain open all year. The public advocate's office -- shredded by multiple rounds of budget cuts in previous years -- will get another $600,000.

"This is a responsible, recession based budget," said Council Speaker Christine Quinn. "We had a couple of goals. We wanted to pass a budget that didn’t raise taxes, that didn't expand borrowing, that protected core services."

All that was accomplished, Quinn said.

Nonetheless, some advocates say the neediest New Yorkers will bear the burden of these cuts. The effects of that, they claim, will reverberate for years.

Another Round of Cuts

Just outside City Hall on Tuesday Heather Palenschat, a contract manager at the Community Service Society, delivered bad news.

An assistance program connecting vulnerable or immigrant New Yorkers to health care didn't make it into the budget. The 10-year-old $2 million program was eliminated.

"We don't understand why we were cut," said Palenschat. "It was super, super shortsighted."

The health care assistance program wasn't the only one that didn't survive. Advocates said after school programs were cut in half. Day care programs for seniors have been crippled. Adult literacy programs were also hit.

"The little haircuts that are often talked about are real cuts and critical services for communities," said Susan Stamler, the director of policy and advocacy for United Neighborhood Houses. "This is not a good budget, and I think we need to look long and hard at how we find the additional revenue needed to build and support services for our communities."

In the end, Quinn said, the council couldn't preserve everything. But she said the programs it did save are core services, like $37.4 million to go toward keeping 202 caseworkers at the Administration for Children's Services. Quinn said those caseworkers were added after the death of Nixzmary Brown in 2006.

The council steered $61.5 million to libraries, which will prevent the closure of branches but bring service down from six days a week to five. The council also provided money for mental health services at 12 homeless facilities and $36 million to keep 20 fire companies open.

The mayor initially threatened the city's fiscal plan could eliminate up to 11,000 city workers. Yesterday, Quinn said the council did not have an estimate for how much the city's work force would shrink. Officials said it would be far less than originally anticipated.

Just the Numbers

All in all, the council added about $397 million to the mayor's executive budget proposal. The fiscal year 2011 budget, which takes effect Thursday, rolls over $3.6 billion in surplus from fiscal year 2010.

Of the council funding additions, about $165 million went to the council's discretionary funding -- the money it sends to area nonprofits, which has been the subject of several scandals. While that particular pot decreased by approximately 20 percent in fiscal year 2011 compared to fiscal year 2010, the overall amount of money the council added to fiscal year 2011's budget increased by 9.2 percent compared to the previous year.

For more on who got what in the council's discretionary funds, go here.

While the budget does not raise taxes, the council did approve several increases in fees, including an increase in the elevator inspection fee, a monthly probation fee for those who have been convicted of driving under the influence and another set of fees for those seeking custody of children in family court.

During the vote on the council chamber yesterday, members cheered on colleagues and celebrated the end of the budget season. For some, that struck a nerve.

"While you're clapping and celebrating some New Yorkers are going to be crying," said Councilmember Charles Barron, the lone vote opposing the budget. "This was not a budget of necessity, this was a budget of choice," he added, arguing the council should have taken money from the city's health care trust fund to cover the cuts.

Council members who voted in favor of the budget opposed taking money from the fund, contending the city could need it for even grimmer times.

"Am I totally satisfied with this budget?" asked Councilmember Robert Jackson, the chairman of the Education Committee. "No. Could we possibly have done more? Yes."

But ultimately, he concluded: "Could we have done worse than we have done? Absolutely yes."

Photo (cc) 2008 thinkpanama

With six days to spare, the City Council and the Bloomberg administration agreed on a $63 billion budget late last night, saving both fire companies and public pools from closure.

Facing some of the steepest cuts in services since 2002, both Mayor Michael Bloomberg and Council Speaker Christine Quinn declared victory in City Hall's rotunda just before 11 p.m. Thursday, marking the occasion with the customary handshake and a kiss on the cheek. Both the mayor and the speaker emphasized the city's "on time" budget, taking a silent jab at the state, whose budget is nearly three months late.

The budget does not include any tax increases.

Calling the agreement "good news," Bloomberg said some of the measures in the fiscal plan would make government "better and more efficient." The comments were in striking contrast to his budget presentations earlier this year, which predicted doom and gloom for the city and layoffs in the thousands.

Nonetheless, the mayor acknowledged last night that the budget was full of tough choices.

"There just isn’t enough money to do everything we've done before and everything we'd like to do now," the mayor said. "But we worked hard to balance and preserve the core services we all rely on."

As part of the agreement, the council successfully negotiated to stave off the closure of 20 fire companies, and it restored funding for more than 200 positions at the Administration for Children's Services. About 3,000 slots in prevention programs and 72 child care classrooms at the children's services agency were also taken off the chopping block.

While the administration and the speaker said things could be much worse, the city's fiscal year 2011 budget is still not picturesque. The budget cuts $1 billion in spending. Both the speaker and the mayor acknowledged layoffs were necessary to deal with a $1.3 billion cut from the state and lower tax revenue in the city. Last night, officials did not have an estimate for how many people would lose their jobs.

In the mayor's executive budget, approximately 1,600 city workers were slated for layoffs outside of the Department of Education. Bloomberg said last night the Department of Education would lose some teachers this year, but only through attrition.

Cuts Here, Saving There

Though some of the controversial cuts were reversed in last night's agreement, many New Yorkers will still feel pain.

Libraries faced $75 million in cuts in the mayor's executive budget, which threatened to close branches across the five boroughs. Quinn said last night that all branches would remain open, but services would be reduced from six days to five. The announcement was met with applause by the dozens of fellow council members behind her.

The mayor's executive budget threatened to close 50 senior centers and 16 day care centers. Under the budget agreement, some of those facilities will remain open, said council officials, but others will have to shut. As of last night, officials did not have details on what centers would stay open.

The mayor said the senior centers that would close are facilities "that nobody goes to."

Not everyone agreed.

"We appreciate that there is an agreement to keep some of the senior centers open," said Bobbie Sackman, the director of public policy at the Council of Senior Centers and Services. "Even the smallest senior centers, the ones that were losing attendees, somebody is going to miss that senior center."

In the budget agreement, the city also rolled back a proposal to eliminate 248 HIV and AIDS case workers at the Human Resources Administration.

Quinn also said the council's controversial discretionary funding -- money doled out to local nonprofits member by member -- would be "significantly less" than in prior years.

The council is expected to vote on the budget next week, and more details of what has been slashed will be revealed then.

Although Bloomberg was optimistic that the city would emerge confidently from the Great Recession, obstacles are still on the horizon. Should the city not receive federal funding for Medicaid, it could be back to the drawing board this fall, the mayor warned.

And, he added, there is always fiscal year 2012 -- where the city already faces a $3.7 billion gap.