Strategy for Stability and Growth
By Mayor Michael R. Bloomberg
When you suddenly find yourself with more money on hand than you might have anticipated, you have two choices: Spend it now, or save it to help pay for big upcoming expenses. In government, too often the wrong choice - spend it now - gets made, and taxpayers foot the bill later. But last week, when I presented the City's preliminary budget for Fiscal Year 2007, I proposed that we put away $3.5 billion in City funds now to meet growing future costs.
We can do that because we're going into the next fiscal year in better shape than we had estimated even a few short months ago. There are a number of reasons why. First, our five-borough economic development plan has helped stimulate investment, create jobs, and reduce unemployment to its lowest level since 2000. As a result, our economy is strong, the real estate market is booming, and City government is collecting more in taxes than we had once expected. Also, we continue to benefit from the difficult but responsible choices we made to get the City through the post-9/11 fiscal crisis. And our efforts to restrain City spending have saved nearly $4 billion in City tax dollars since 2002, and will produce another $500 million in savings over this fiscal year and next.
The result is that we can use today's good fortune to address some big problems that we see coming. I'm talking about ever-mounting expenses that are out of the City's control, but that we must meet. They include payments on the City's debts, the local share of Medicaid costs, and rapidly growing health care and pension benefits. We're expecting those costs, combined, to grow by almost 15% in the next fiscal year alone, and account for almost one of every two dollars in the $52.2 billion budget we proposed last week. Unless we do something to control and meet these escalating costs, they'll soon overwhelm our ability to pay for police and fire protection, schools, parks, and other essential City services.
It's only sensible to act now. That's why last week, I proposed that we use $1.5 billion to reduce future debt costs, by pre-paying some of the City's debt now, and also by financing more big City projects on a "pay-as-you-go" basis rather than using borrowed money that future generations would have to repay, with interest.
I also proposed creating a $2 billion trust fund to cover the future cost of health benefits for retired City employees. Putting aside money for that purpose is something the City has never done before - and with retirees living longer, and their medical costs climbing, it's high time we did. Because while $2 billion is only a fraction of what these benefits will cost down the road, there'll never be a better time than now to begin saving to meet them. We'll also work with State officials and City labor leaders to find innovative ways to rein in health care and pension costs.
In the State of the City last month, I called this a special moment in New York's history. The reason is that our achievements over the last four years, and the spirit of unity that New Yorkers have forged, now give us an opportunity to put our city on the road to long-term stability and growth. A good first step along that road will be adopting a City budget that is realistic and responsible - one that keeps New York on firm fiscal ground now and in the years to come.