As the debate begins this week on how to remedy the city’s budget crisis, it’s worth keeping one thing in mind. For all the talk of budget “cuts,” Mayor Bloomberg has actually drawn up plans for a spending increase. The city’s overall budget this year is now pegged at $43.3 billion. That’s an increase of well over $1 billion from last year’s budget. A glance ahead discloses the same trend. Mr. Bloomberg’s financial plan has a budget that rises steadily right up until 2006, when spending is expected to reach $46.4 billion. The key budget line to note here is “personal service.” That’s what the city pays its army of about 250,000 full-time workers, plus another 150,000 part-time, seasonal, and per diem employees. Due to a stance toward the bloated payroll that can only be described as charitable, Mr. Bloomberg has allowed that number to grow from $22.8 billion last year to $23 billion. He projects the city will spend $25.3 billion in 2006.

Conventional wisdom is that “you cannot cut your way out of this crisis,” as City Council Speaker Gifford Miller told our Benjamin Smith yesterday. Purveyors of the conventional wisdom, which is what Mayor Bloomberg has advanced, insist that actually reducing spending, rather than just reducing the amount you’d planned to increase spending, is simply impossible. But the last time the city faced a fiscal crisis, it was forced to make real spending cuts. The city’s 1976 budget was $100 million slimmer than 1975’s, more than that if you account for the rapid inflation of the 1970s. More recently, Mayor Giuliani cut real city spending by more than 3% from 1994 to 1995, as the Manhattan Institute’s E.J. McMahon points out.

One of the points Mr. McMahon has made is that, as he put it in a posting over the summer on his website www.nyfiscalwatch.com, Mr. Giuliani’s first-term fiscal restraint stemmed from an outspoken commitment to reducing the size of city government, which he said had grown far beyond affordable levels. Mr. Giuliani, Mr. McMahon wrote, “adopted an adversarial stance towards city unions and used the threat of layoffs and of competitive contracting for city services as leverage to achieve his savings targets . . .” Mr. McMahon noted that in the end, Mr. Giuliani actually increased the payroll, but the point, we take it, is that Mr. Bloomberg has gotten himself into his current predicament by failing to bring to his leadership a commitment to reducing the size of city government in the first place.

On the contrary, Mr. McMahon noted that Mr. Bloomberg has described the city’s large workforce and heavy spending as evidence of New York’s “compassionate” philosophy of government. Back in the summer, Mr. McMahon warned that if Mr. Bloomberg had duplicated Mr. Giuliani’s first-year achievement and reduced city-funded spending by 3% (instead of increasing it by nearly 3%), he wouldn’t have needed to borrow $1.5 billion to close to close his 2003 budget gap. Which means that this year’s gap would far smaller and more manageable. Instead, he warned in August, the city’s failure to significantly curb spending this year means that next year’s problem will be that much worse. So as the debate on the city budget begins this week, beware of those who suggest the mayor is cutting spending.