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Bill de Blasio
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Now our Mayor wants to borrow $7 billion from the Federal government.
Can someone stop this train?
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With no word from Washington, de Blasio eyes drastic budget maneuver
New York City’s finances, a deep well that Mayor Bill de Blasio has tapped to expand the municipal budget, are in crisis: The pending shortfall has surged $1.6 billion over the past month alone, prompting the mayor to seek a power so unusual, it was barred after the city’s 1970s fiscal crisis.
De Blasio’s declaration Wednesday that he wants the option to borrow his way out of the hole — barring a multi-billion dollar coronavirus relief package from the Trump administration — led to a clarion call from fiscal watchdogs for more austerity first.
Scott Stringer, the Democratic city comptroller running to succeed de Blasio, estimated that borrowing to cover $7 billion in expenses now would cost the city nearly $11 billion over the next two decades. He seconded the push for federal funding, but sounded the alarm over City Hall’s extraordinary request.
“While it's too soon to rule out any specific budget action, New Yorkers should know that under the mayor’s proposal our children could be paying over $500 million a year for the next 20 years,” Stringer said. “I urge extreme caution.”
Others were even more dire.
“The city has not come close to what it needs to do to control spending to get its fiscal house in order,” Andrew Rein, head of the Citizens Budget Commission, said in an interview. “Borrowing should be near or at the bottom of any list and we are not close to there yet.”
But other resolutions are anathema to de Blasio, who entered the 2013 mayor’s race with a call to tax the wealthiest New Yorkers to pay for universal pre-kindergarten. (He won the policy, not the tax, after taking office.)
Instead, the mayor is hoping to get through this crisis without substantive budget cuts. He’s bristled at calls to reduce city services or delay raises workers are guaranteed through labor contracts. Layoffs and furloughs are a last resort, he’s said. He’s even skipped his routine demand that Albany raise taxes on top earners and high-end home sales — targets he has eyed virtually every year of his mayoralty.
City officials said he is concerned about the potential exodus of millionaires who keep the economic engines humming, and realizes some New Yorkers may not be able to afford current property tax bills, let alone higher ones.
In similarly dire financial straits de Blasio's predecessor, Mike Bloomberg, relied on politically unpopular tax increases: He raised property taxes 18 percent following the Sept. 11 terror attacks and pushed for a 7 percent increase after the financial collapse years later. He repeatedly cut social services and tried to close fire houses and elderly centers. He even wanted to get rid of the office of public advocate, which later served as a mayoral launching pad for de Blasio. And during his final term in office, Bloomberg balked at the demands of municipal unions, leaving the entire workforce without contracts.
De Blasio has an entirely different attitude toward governing. He fought Bloomberg’s cuts when he was in the City Council, barely slashed anything after taking over City Hall in 2014 and has in fact increased the budget some $20 billion during his six years in office.
So instead, he is pinning his hopes on Washington replenishing the city’s coffers while seeking borrowing authority from Albany — in each case leaving the city's fate in the hands of a political adversary. (Gov. Andrew Cuomo threw cold water on the idea Tuesday.)
“We are now $9 billion in the hole between the current fiscal year and the one that begins July 1,” de Blasio said Wednesday. “We project unfortunately beyond next fiscal year additional lost revenue that will hold us back further. There is literally no way that we can solve this problem without federal help or without having to make very, very painful choices that will affect the quality of life in this city.”
De Blasio projected a $7.4 billion revenue shortfall when he released his budget in April, largely due to a loss of personal income taxes as the job market faltered.
City officials attributed the additional $1.6 billion the mayor announced on Wednesday to the grim state New York finds itself in after two months under assault by Covid-19: Even lower sales and real estate taxes than budget officials initially forecast.
The city routinely takes on debt to pay for long-term construction and infrastructure projects, but it is not allowed to borrow for its annual operating budget — a prohibition dating back to the financial crisis of the 1970s. New York City had been borrowing money to stay afloat then borrowing more to pay off prior loans. In the spring of 1975 the banks cut off the city's cash supply.
“The city’s leading bankers who had been its principal lenders came to see the mayor and the governor and told them both that nobody would lend the city a nickel under any terms,” Eugene Keilin, who was general counsel for the budget office at the time, said in a recent panel discussion. “The amount of the borrowing had gotten so high, and the explanations for it so vague that the city was not trusted.”
The administration is still paying off some of those loans today.
Dean Fuleihan, first deputy mayor, acknowledged the rarity of de Blasio's latest request.
“You would only want to do this kind of borrowing in extraordinary times, and that’s exactly what this is,” he said in an interview Wednesday.
De Blasio, during his daily briefing, pointed out that Bloomberg was able to secure a similar ability from Albany after Sept. 11, and Cuomo has gone in the same direction to cope with the state’s finances amid the coronavirus crisis.
“It's not something we want to use or intend to use in the first instance, but it's something we need as a last resort if our federal government isn't there for us,” he said. “If we're going to maintain basic services here in this city, we need some capacity to borrow.”
Nearly 1 million city residents have already filed for unemployment, Broadway hasn’t put on a show in months and stores and restaurants across the five boroughs remain mostly shuttered.
And while officials in Washington, D.C. fight over an aid package for local governments, the de Blasio administration has about one month to devise a balanced spending plan for the start of the new fiscal year on July 1.
“Their basic strategy is to just borrow and beg their way to next January and hope for a new [federal] administration,” said Nicole Gelinas, a senior fellow at the fiscally conservative Manhattan Institute. “But in the long-term, and with the change of the city’s economic well-being, that is not going to get you very far.”
Meanwhile, City Hall is set to pay $1.5 billion in retroactive raises to part of its workforce come October, Gelinas said. She has long criticized the mayor’s practice of allocating future funds for past work, something he did in settling the contracts Bloomberg had allowed to lapse.
Instead of asking for blanket revenue replacement from a divided federal government, Gelinas and the Citizens Budget Commission suggested that the city further cut its expenses.
But the mayor has never embraced budget cuts.
Year after year, he’s asked agencies to voluntarily come up with savings plans, arguing that forced reductions in their spending were a hallmark of the austere Bloomberg years he sought to reverse.
Only a small portion of de Blasio's recent $2.7 billion savings plan comes from recurring cuts. The largest programmatic loss, an annual summer jobs program for teens, will be back in next year’s budget provided the coronavirus is contained.
And while the city clocked a savings of $50 million on snow removal — since it barely snowed this winter — there is no guarantee that next year’s weather will be as mild.
Only once has the administration tasked its agencies with a mandatory belt-tightening exercise called a "program to eliminate the gap."
“It involves going through carefully and squeezing out the cellulite that builds up in every department,” Alair Townsend, the budget director for former mayor Ed Koch, said in an interview. “If you don’t force it out, it just grows and grows. The mayor never wanted a PEG program. He thought it sounded like cutting services, and cutting services was not progressive.”
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