Mayor Michael R. Bloomberg today announced his Fiscal Year (FY) 2005 Preliminary Budget and presented an updated four-year financial plan for New York City. The $45.7 billion budget includes a $400 per household property tax rebate to thank New Yorkers for their sacrifice and assistance in getting the City through the fiscal crisis.
“New York City’s homeowners stepped up when the City needed them most,” said Mayor Bloomberg. “Now that our fiscal situation has stabilized, they deserve to be rewarded for their sacrifice. Over the last two years, we have made the tough decisions that have maintained vital City services, kept control of the City finances with its elected officials and maintained the City’s long term fiscal stability. While we are not out of the woods yet and the City faces considerable challenges in the future, New York’s finances are balanced and our best days are yet to come.”
Over the past two years, New York has weathered the toughest fiscal crisis in a generation. Budget gaps hit all time highs; pension, Medicaid and other non-discretionary spending is growing at a tumultuous rate and more than $3 billion in gap closing actions have been achieved. Today, through strong, decisive and disciplined financial management, the City’s finances have stabilized and tax revenues are strengthening. Wall Street profits are expected to top $15 billion, a substantial increase over last year, but well below industry projections. Tourists are returning to New York City, hotel occupancy and room rates have increased and the real estate market remains healthy. However, significant out year budget gaps remain and fiscal restraint is still a necessity.
Despite the challenging fiscal environment City services and the quality of life continue to improve. Crime is down 10% since the beginning of the Administration and is at its lowest level since 1968. The 311 system is revolutionizing the way citizens interact and receive services from Government. The Department of Education is refocusing its resources on core instruction and increasing the time spent each day on literacy and math instruction in elementary schools.
$400 Homeowner Rebate:
Because New York City homeowners sacrificed to help the City get through the fiscal crisis, all Class 1 and Class 2 homeowners will receive a $400 rebate on their property tax. The program will cost approximately $250 million and 600,000 owner-occupants of one, two and three family homes, co-op and condos will receive the $400. All of these taxpayers whose FY ‘05 property tax bill is at least $400 in total will receive the rebate. The $400 rebate will, for the average homeowner, offset the cost of the 18.5% property tax increase. The total cost of the rebate is 14% of the entire $1.8 billion property tax increase.
Social Promotion has plagued the education system for decades. In his State of the City Address Mayor Bloomberg announced that the Department of Education would end this backward process once and for all. The Financial Plan includes $25 million in new funds to end Social Promotion.
Increasing Public Safety:
The Financial Plan contains $15 million to match the Federal COPS Program to hire a new class of 730 police officers. This will put an additional 730 police officers on the street. Hiring two classes -- one in January and one in July -- will now become standard practice, allowing for better training, deployment and more consistent patrol strength over year.
Long Term Fiscal Planning:
Through prudence and hard work the FY ’04 budget will generate $1.4 billion to pay down out year budget gaps in FY ’05 and ’06. $765 million in additional tax revenue and $625 million in other income in FY ‘04 generated this revenue. $695 million will be used to close the $2 billion gap in FY ’05 and $695 million will be used to reduce the $3.2 billion gap in FY ’06.
Gap Closing Program:
Mandated increases in City spending on Medicaid, fringe benefits, pensions and debt service are the principal cause of budget gaps in FY ’05 and beyond. City discretionary spending is decreasing or holding level at approximately $14.4 billion a year. Non-discretionary/mandated spending has surpassed discretionary spending in total, is increasing at a rate of 13.2% between FY ’04 and FY ’05 and will top $21 billion by FY ’07.
The $2 billion FY ’05 budget gap is closed by a combination of sources including the $695 million generated in FY ’04 for out year budget relief, $526 million in additional tax revenue in ’05, $700 million in State and Federal assistance and a $324 million agency reduction program.
State and Federal Aid:
The FY ’05 Financial Plan calls for additional Federal and State aid to New York City, including many items that are of no cost to the State or Federal Governments. New York City is requesting $300 million of assistance from Washington and $400 million of assistance from Albany.
New York City pays over $11 billion more in Federal taxes than it receives from the Federal Government in spending. The City requests that the Federal Government increase Medicaid spending for localities. In addition, New York City does not receive its fair share of homeland security funding given its standing as a financial, cultural and international capital. The City is requesting $400 million in Homeland Security Funding and is demanding that the Federal Government abandon its population-based formula in favor of a threat assessment formula that will deliver security resources where they are needed.
The State tax burden on New York City residents is 33% higher than the Statewide average. New York City is the economic engine of the State, yet it sends far more to Albany in taxes than it receives back. The State underfunds the City’s public schools, imposes local participation for Medicaid costs (unlike most States in the country), mandates certain services while failing to allocate appropriate funds, and continually imposes higher pension costs through benefit enhancements for City employees. The Financial Plan calls for the State to reform the current Medicaid system in New York to reduce the local burden of these expenses.
Municipal employees and their unions must share in the solution to the City’s current financial challenges. The Financial Plan assumes all collective bargaining agreements between the City and its employees should be funded through increased productivity. In FY ’04 the City reached an agreement with the Municipal Labor Council that generated funds for certain employee health benefits at no additional cost to the City.
Preliminary Four-Year Capital Plan:
The Preliminary Capital plan invests an additional $2 billion in City schools. Outside of the Department of Education, the Administration last year cut close to 20% out of its capital plan to hold down the cost for City debt and will now cut another $525 million. As part of an effort to continue to control debt service costs, this year the City has committed to spending $200 million per year in Fiscal Years 2004 - 2009 on pay-as-you-go capital for the City school system. By next September, the City will have opened 30,000 new classroom seats. More than 8,000 of which will have come from converted administrative space, the equivalent of 13 new schools that would have cost half a billion dollars to build..
“New York City continues to be the best place on earth for people to live, work, do business and visit,” concluded Mayor Bloomberg. “We have fought hard these last two years to keep New York City strong, and the gains we have made together are historic. I am committed to ensuring that New York City’s future is even brighter. Together we can make it happen.”