Bloomberg Unveils Re-Election Budget That Cuts Taxation

Mayor Bloomberg unveiled a proposal yesterday for spending nearly $50 billion that provides everything a politically expedient budget should: tax cuts, education initiatives, and more money for popular programs. He has pulled an election-year budget out of a hat, despite a recently discovered $800-million accounting mistake concerning pension funds.The $49.7 billion budget for fiscal 2006, which begins in eight weeks, includes $500 million in tax relief, modest proposals on class size and school safety, and a balance sheet that will have the city end the year in the black. Indeed, New York banked its largest surplus ever, $3.2 billion, in fiscal 2005 – a sum that has made Mr. Bloomberg’s task of balancing the budget in fiscal 2006 that much easier.“All of the pain, those 300,000 municipal employees who are doing more with less, the property tax and sales tax. … You are starting to see the benefits,” Mr. Bloomberg told reporters in the Blue Room at City Hall yesterday. “We have a reason to have a grin on our faces.”On the tax side, Mr. Bloomberg is offering his $400 property tax rebate, a plan to roll back the city portion of an unpopular sales tax on purchases of clothes and shoes under $110, and tax relief for owners of small rental buildings and those who repair low-income Mitchell-Lama properties.Mr. Bloomberg also set aside additional money for libraries, cultural affairs, restoration of a fifth firefighter at engine companies, after-school programs, senior citizens’ meals, and an extra garbage collection at street-corner baskets.For the schools, he is offering $50 million in new education initiatives, $13.7 billion in school construction, and $415 million in campus wide renovations at CUNY. Those are politically popular proposals that not only stand him in good stead with voters, but also could rob the City Council and its speaker, Gifford Miller, who is hoping to challenge Mr. Bloomberg for the mayoralty come November, of the opportunity to take credit for preserving them from the budget ax.In an effort to blunt attacks he may face from the teachers union and parents of children in violent public schools, the mayor in his new budget set aside $50 million for:* Early-grade interventions and class-size reductions;* Hiring an additional 300 school safety officers;* Expanding early grade intervention programs into middle schools;* More translation services for non-English-speaking families;* An expansion of the teacher-mentoring program;* More money for a citywide approach for gifted-and-talented programs.“Funds must go to capping class sizes, not just averages,” the president of the United Federation of Teachers, Randi Weingarten, said. “The mayor has decided to pass up a great opportunity to break the back of the achievement gap that is holding back so many of our children.”The union leader also wondered aloud about how Mr. Bloomberg could have a $3.2 billion surplus and not have “a single penny for teachers, police officers, firefighters, or other municipal workers.”Teachers, police officers, and firefighters have been working without a contract for years and have been pressuring the city to give them cost-of-living increases and competitive salaries. Mr. Bloomberg has said any salary increases need to come from changes in work rules and productivity enhancements, because the city doesn’t have any money to spend on raises.“The only way to pay more money is if we generate more money,” Mr. Bloomberg said.Until now, the mayor has been able to balance the budget through some judicious cost cutting and a lot of luck. Since his January budget proposal, tax revenue forecasts increased by $1.4 billion in fiscal 2005 and $692 million in fiscal 2006. The bulk of the revenues came from higher-than-expected personal income tax payments, which accounted for $587 million; the unincorporated business tax, $156 million; and $457 million collected from taxes on real estate transactions.A senior budget analyst at the Manhattan Institute, E.J. McMahon, said Mr. Bloomberg was counting on that luck holding out.“If you can grin while your budget gap is 8% of revenues, that makes you pretty optimistic,” Mr. McMahon told The New York Sun. “This is a Bloomberg election-year budget. This is fiscally prudent but status quo on the high side. All in all, he’s done a pretty capable job of managing the status quo.”That is not to say Mr. Bloomberg hasn’t had to face some significant challenges in balancing the budget, as he is required to do by law.Case in point: The city’s actuary informed the administration just weeks ago that it owed an additional $547 million to the city’s pension funds for the next fiscal year. Apparently, an old formula didn’t compute the city’s contributions correctly and the actuary had not counted about 1,000 teachers who were retired and collecting pensions. They had apparently been entered in the wrong category, officials familiar with the problem said.In his January budget, the mayor had anticipated finding about $300 million in pension savings, but instead the cost increased $547 million. The upshot was that the city had to find $847 million to make up the shortfall. The city pays almost $5 billion a year toward pensions.“Of course I am upset about this,” Mr. Bloomberg said, as he told reporters of the “$800 million pension error.”“They found 1,000 employees they did not cover and there is a change in the assumptions,” he said. “This is a one-time thing, and it is fortunate it came in this year.”Generally, city leaders strive for long-term budget stability – budgets balanced over five years. Mr. Bloomberg has opted to take the budgets one year at a time. As a result, estimated deficits for 2007 through 2009 now average more than $4.2 billion a year.The mayor’s explanation for the yawning deficits is that mandated expenses – such as Medicaid and pensions, among other things – are growing faster than revenues.“The city spends more money than it takes in an average year,” he said yesterday. “There is some $6.6 billion in annual expenses we have no control over.”That Mr. Bloomberg has chosen not to make structural changes to address that imbalance has some budget watchers concerned.“While the mayor’s fiscal plan appears balanced in the near term, it contains significant risks and demonstrates the fact that our expenses continue to outpace revenues,” the city’s comptroller, William Thompson Jr., said yesterday. “The budget also highlights that significant fiscal challenges will occur after the coming fiscal year and will need to be addressed.” Mr. Thompson, a Democrat, is seeking re-election.Speaker Miller, for his part, was more focused on spending than on deficits. He called on the mayor to incorporate some of the council’s proposals, including extending the personal income tax on individuals making over $500,000 a year, which is supposed to expire in 2007, so that the city could afford to reduce school class sizes. Members of the Democrat-dominated council also want Mr. Bloomberg to work with them to double the Earned Income Tax Credit for low-income families.Now the real negotiations, and election-year politics between the two leaders of City Hall, begin.

Bloomberg Unveils Re-Election Budget That Cuts Taxation

Bloomberg Unveils Re-Election Budget That Cuts Taxation

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