With the city and state bracing for a financial hit from an uncertain economy, Governor Paterson is arguing that the city's public employees don't seem to understand the extent of the trouble and the pressure they are putting on the city's budget.Speaking at the annual meeting of the state's Financial Control Board in Manhattan yesterday, Mr. Paterson said public employees are failing to recognize "the need to address these situations earlier and faster."
"Perhaps public servants are not understanding the crisis," he said.
His comments come amid growing anxiety about the fiscal fallout the city and state will bear from the national and local economic downturn. The state and city face billion-dollar budget gaps in upcoming years, which could widen further if Wall Street continues to slash jobs, financial sector bonuses dry up, and the city and state economies slow further. Wall Street lost a record $11.7 billion in 2007 and another $22.4 billion in the first quarter of 2008, according to a report by the state comptroller, Thomas DiNapoli.
Mr. Paterson is scheduled to make a live televised address to New Yorkers about the state's financial outlook this evening.
Mayor Bloomberg, who also testified yesterday before the board about the city's finances and budget projections, warned that the downturn would likely hit public employees. He said the city is facing a $2.3 billion budget gap next year and budget gaps that top $5 billion each for the following two years.
"I can't look at you in the eye and tell you that everybody is going to be able to get increases in their compensation in the future," he said. "That depends on a lot of factors outside our control."
The city's largest public employee union, DC 37, did not respond to a request for comment.
Mr. Bloomberg said the city's economic performance during the next few months would determine whether a 7% property tax cut currently in place could be sustained throughout the year. He already has said he plans to raise property taxes next year.
The Financial Control Board, which was established to oversee the city's finances after the 1970s fiscal crisis, emphasized yesterday that one of the biggest financial dangers facing the city is its unfunded liability for postretirement health care benefits, which grows by more than $5 billion a year and is expected to total more than $85 billion by 2012. One board member said the number is equivalent to an additional economic deficit of $23 billion.
Board members are calling on the city to come up with a plan to make regular payments into a health care trust fund it established to deal with the soaring costs.
Mr. Bloomberg placed some of the blame for the city's long-term liabilities on Albany lawmakers, who he said give away extra benefits to unions and then stick the city with the bill.
"Every time we negotiate a contract with the unions, the unions go around us to Albany, and Albany gives away the store, if you will, with us having to pay the freight," he said. "We all know there's a train coming down the road, and it's headed straight towards us."
Mr. Paterson offered a limited preview of his public speech on the economy, saying the severity of the situation is prompting him to want to speak personally to New Yorkers about the extent of the financial problems. The governor's plan to address New Yorkers about the economy was first reported by the New York Post.
A senior fellow at the Manhattan Institute, Nicole Gelinas, said the governor is smart to make a strong public statement about the economic troubles facing the state.
She said that if officials do not act decisively to manage the fiscal crunch now, in two years the city and state will face the same situation the city faced 35 years ago, when important public service jobs were cut in a panic.
"Then people will see garbage not being picked up, police officers being laid off," she said. "We have to manage these budget cuts well."