FOR IMMEDIATE RELEASE
January 30, 2009
MAYOR MICHAEL R. BLOOMBERG PRESENTS FY 2010 PRELIMINARY BUDGET
Outlines Plan to Close $4 Billion Deficit
Details Specifics of Gap Closing Program - Previous Measures Prevented more Drastic Actions
Controllable Expenses Held Virtually Flat
Mayor Michael R. Bloomberg today presented a Fiscal Year (FY) 2010 Preliminary Budget and an updated four-year financial plan. The Mayor outlined a plan to close a $4 billion deficit for FY 2010 through nearly $1 billion in new agency gap closing actions, keeping controllable expenses virtually flat as well as revenue enhancements, including possible sales tax increases and long-term cost containment measures such as pension reform and efforts to reign in employee health care costs. The continued decline in the economy and the proposed State budget caused the City's FY 2010 deficit to grow from the $1.3 billion estimated in November to $4 billion. The Administration's savings and revenue actions taken at the end of last year reduced the deficit by $2.4 billion, preventing the deficit from reaching $6.4 billion and necessitating more drastic actions. The plan for a balanced budget will require assistance from the City's partners in organized labor, as well as the State and Federal governments.
"Since November, when we updated the City's financial plan, economic conditions have continued to worsen, with tax revenues continuing to sharply decline. The tough decisions we made over the last year prevented the current deficit from being unmanageable and we now have a plan to close that deficit. We will do our part by cutting nearly another $1 billion in agency spending and the wise choices we made when the economy was booming have helped, allowing us to pay down billions of dollars in expenses for future years. But we can't close this deficit alone - we'll need help from partners in Albany and Washington and from our municipal unions, who must be part of the solution. If our partners won't do their part, and we will be forced to make even harder choices than we are making today. In the current economic climate, we have no choice but to act, while fiercely protecting the quality of life that keeps New York a city where people want to live and businesses want to locate and expand. More difficult times may lie ahead but time and again, our unity, spirit, and willingness to stay focused on improving this city for the next generation have brought us through every storm, of every kind."
Without action, tax revenues are forecast to fall by $3.3 billion between FY 2008 and FY 2009, and fall an additional $1.7 billion between FY 2009 and FY 2010 for a total decline of $5 billion, a 13 percent decline.
Since only November, when the Mayor presented a modification to the City's financial plan, City tax revenues have fallen by an additional $800 million in 2009 and another $2 billion in 2010.
Economically sensitive tax revenues, which includes personal income, sales, business, and real estate taxes, are projected to fall by 28 percent, or nearly $7 billion, in FY 2010 when compared to FY 2008 levels.
New York City is expected to lose approximately 294,000 jobs from mid-2008 into 2010 and New York City wage earnings are expected to decline by $39 billion.
Wall Street firms are expected to lose a total of $47.2 billion in 2008 and further losses are expected in 2009. Those losses can be carried forward, potentially exempting those firms from paying business taxes for potentially years to come.
Agency Gap Closing Actions
The round of agency gap closing actions detailed today, which were ordered by the Mayor in early December, will save the City nearly $1 billion.
Prior to today's announcement, actions taken by City agencies since last January have saved $2.2 billion in FY 2010 and $1.6 billion in FY 2009. Those actions prevented a far larger deficit in FY 2010.
Controllable expenses have been held virtually flat and the overall year-to-year City budget has been reduced - the result of the cumulative cost-cutting and agency actions over the last year.
Examples of the new agency gap closing actions include:
Slowing the Growth of Uncontrollable Expenses
The Administration has proposed the creation of a new Tier 5 pension plan for City employees, potentially resulting in savings of $200 million in FY 2010. The new tier would save $7 billion cumulatively by FY 2030. The new pension tier would need to be created by State law.
The Administration will work with organized labor to secure health care contributions from City employees. A 10 percent employee contribution would generate more than $350 million in savings in FY 2010. Additionally, $200 million of savings can be realized annually through a cost containment program.
The 10-year capital plan, from FY 2010 - FY 2019 will be reduced to cut the rate of growth of debt service costs to the rate of growth forecast for City revenues.
The Federal stimulus bill drafted in the U.S. House of Representatives would reduce the City's Medicaid expenses by $1 billion in FY 2010.
Possible Revenue Increases
A repeal of the sales tax clothing exemption could generate $36 million in FY 2009 and $394 million in FY 2010, including two tax-free weeks. Increasing the sales tax rate by ¼ percent could generate $25 million in FY 2009 and $302 million in FY 2010. An expansion of purchases subject to sales taxes in the State's Executive Budget could generate $16 million in FY 2009 and $198 million in FY 2010 in City revenue. In total, potential sales tax increases would generate $894 million in FY 2010.
The Mayor also announced today that if the measures outlined in the preliminary FY 2010 budget are adopted, pre-existing out-year budget gaps will be reduced, but New York City will still face budget gaps of approximately $3.2 billion in FY 2011, $4.0 billion in FY 2012 and $4.2 billion FY 2013.
Stu Loeser/Marc LaVorgna (212) 788-2958
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