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PR- 329-10
July 28, 2010


The following are Mayor Michael R. Bloomberg’s remarks as prepared:

“Thank you, Governor Paterson, and good afternoon, everyone.

“The Financial Control Board’s annual review of the City’s fiscal outlook is a practice that began more than 30 years ago. It was one of the reforms instituted to prevent a recurrence of the fiscal crisis of the 1970s. It has persisted, with good reason, ever since. And once again this year, we’ve been well-served by the thorough and dispassionate analysis that the FCB has provided.

“Let me state at the outset that we agree with the FCB staff’s findings about the economic outlook for New York City, and about the soundness of the budget the City has adopted for Fiscal Year 2011. We also heartily concur with their warnings concerning the continued unchecked growth of spending in such areas as pension benefits for City workers.

“As I’ll describe in a few minutes, our Administration is moving vigorously to reduce the City expenditures that are under our control by making the operations of City agencies more efficient. But we need an equally forceful effort by State leaders to rein in these mounting pension costs.

“Because until that happens, the now-relentless increase in these uncontrollable expenditures will inevitably choke off the ability of City government to provide police and fire protection, parks and libraries, schools and sanitation and other essential services.

“Those services are what give New York City our unparalleled quality of life. And our success in enhancing that quality of life – despite the unavoidable cutbacks resulting from the deep national recession – is why we remain a city where people want to move to and visit, and where businesses want to locate and expand. There is a virtuous circle at work here – one that begins with our sound management of the City’s finances.

“Because we’ve kept the City’s fiscal house in order – specifically, because we’ve been able to offset the decline in City revenues produced by the recession with billions of dollars in surplus funds wisely accumulated and then rolled forward from more prosperous times – we have, so far, been able to avoid the painful worst-case scenarios of large-scale layoffs and service cutbacks that other local governments across the nation are now suffering through.

“Bear in mind that New York City began battening down its fiscal hatches in early 2007.  That was months before the national recession began, and a year before the economy went into its steep free fall.

“Since then, we’ve directed City agencies to make eight rounds of budget belt-tightenings, which have produced $4 billion in savings that are reflected in the current City budget.

“This foresighted, disciplined, and measured approach to guiding the City through the recession has allowed us to trim rather than slash City operations, while finding ways to do more with less.

“Our commitment to maintaining – and improving – essential services has helped keep our five boroughs stable and attractive places to do business. It’s a major factor in why our economic outlook has been steadily brightening in recent months, and why, overall, our economic and employment numbers continue to improve. 

“For example, our unemployment rate has dropped for six consecutive months; over 37,000 more New Yorkers have jobs now than did in January; we have the lowest vacancy rate for office space of any major city in the nation; and our critically important tourism industry has rebounded from last year’s downturn.

“No question about it, there are still too many New Yorkers without jobs – and we’re working hard to accelerate job creation in our city. But clearly, we’re moving in the right direction.  

“Our sound management of the City’s finances is also why, in close cooperation with Speaker Christine Quinn and her colleagues in the City Council, we were able to produce the timely, balanced, and prudent budget for Fiscal Year 2011 that we did.

“It’s a budget that imposes no new taxes on New York City residents. It keeps the growth in the City’s controllable expenses below the rate of inflation. And it allowed us, thankfully, to swear in a new Police Academy class earlier this month – something we’d once believed the pinch on the City’s finances would require us to forego.

“Let me be clear, balancing our budget involved painful tradeoffs. We have, for example, not budgeted collective bargaining wage increases for teachers, or anyone else in the City workforce. And there will be noticeable, unavoidable cuts to services in the months ahead.

“But we have, I believe, done an effective job of protecting core services, and avoiding the kind of destructive cuts that New Yorkers who lived through the 1970s fiscal crisis remember all too well.

“That said, we also recognize that the final shape of the budget for FY 2011, and what it will mean for City residents, depends on the resolution of important State and Federal issues.

“First, as to Albany – the City’s adopted budget assumes that the State will return one-point-two billion fewer tax dollars to the City in the coming fiscal year. But we won’t really know the true impact of the State budget on the City until a State budget is fully enacted.

“And I want to now reiterate my support for the Governor’s proposed tax on sugary beverages, which he has asked the Legislature to enact in the special session being convened later today. It would raise upwards of $1 billion without harming the State’s economic competitiveness, while simultaneously producing major health benefits and reducing what we spend on health care.

“Then there’s the Federal government. The City has anticipated receiving more than $600 million in Federal Medical Assistance Percentage, or ‘FMAP,’ funds, spread over the current and next two City fiscal years.

“We included nearly $300 million of this money in our FY 2011 budget after a six-month FMAP extension was passed by both houses of Congress. Then, however, the House passed an alternative bill that didn’t provide for an F-MAP extension.

“That is where matters stand at the moment – and the resulting uncertainty has very real consequences for the City. The FMAP money in our budget for FY 2011 alone represents the equivalent of paying for nearly 600 new police officers, more than 460 new firefighters, and nearly 3,100 new teachers.

“Even more significantly, the State has also assumed that it is receiving some $1 billion in FMAP funds. If Congress fails to pass an FMAP extension, the resulting State shortfall will almost certainly become a City problem, too.

“For these reasons, we’ve said that if – as seems increasingly likely – an FMAP extension isn’t enacted by October, the only responsible thing for us to do then will be to modify the City’s FY 2011 budget accordingly. 

“And even though the current fiscal year isn’t yet one month old, we’ve also begun to take steps to balance next year’s budget, too. As our economy recovers, our tax revenues are expected to continue to grow – but at a rather moderate pace. Our own projections are that the City’s economically sensitive tax receipts will remain below pre-recession levels through Fiscal Year 2012.

“And as the FCB staff report points out, the increase in these revenues will be more than offset by the expiration of hundreds of millions of dollars in Federal stimulus funding, and by the mounting pension, health benefit, and other uncontrollable costs the City faces. The result – a projected shortfall in the City’s budget for FY 2012 of some $3.3 billion. And, this gap will, if unchecked, grow to an estimated $4.1 billion in Fiscal Year 2013, and $4.8 billion in Fiscal Year 2014.

“That’s why we’re working now to close these gaps, and preserve frontline services and the city’s quality of life. This effort is being overseen by someone who has a well-deserved reputation as one of the nation’s leading experts in the realm of reinventing government: the City’s new Deputy Mayor for Operations, Steve Goldsmith.

“The first fruits of this effort – which we’re undertaking in cooperation with the City Council – were made public last week. They’re a set of strategies that will improve services to New Yorkers and save City government a total of more than $500 million by the end of 2014, with recurring annual savings of $500 million in the years that follow.

“They involve maximizing assets and streamlining operations in such key areas as managing the City’s real estate holdings, vehicle fleets, information technology infrastructure, and human resources. Implementing these reforms will allow us to reduce our workforce, through attrition, by about 3,000 employees in the years to come.

“These are the first installments in what will be a series of proposals to re-imagine City government for the 21st century – making it smaller, smarter, and truly fiscally sustainable. We do not expect this will in any way diminish the quality of the services that we provide. Quite the contrary. We believe, for example, that consolidating office space will improve employee communication and productivity.

“It’s a fallacy to directly equate the amount of money that is spent with the quality of services provided, or to think that every time government cinches in its belt, someone must get hurt. As a recent Time magazine report on the crisis facing local governments across the nation concluded, in budget decisions as in surgery, there are ‘cuts that injure and cuts that heal.’ We hope that our State leaders take that observation to heart.

“With Federal stimulus funding coming to an end, and with the revenue squeeze produced by the national recession still very much with us, State governments from coast to coast now confront a third consecutive year of enormous budget deficits. That includes our own New York State government.

“Simply trying to patch things over and ‘muddle through’ is no solution to a budget crisis in Albany that shows every indication of only worsening in the years to come. The sleight of hand of shifting costs from the ledger of State government onto the budgets of local governments – including New York City’s – is not an answer, either.

“Nor is making unreasonably deep cuts in the assistance from the State that pays for the schools, hospitals, and other essential services that the people of New York City rely on. There are other, better paths to follow.

“Since 2002, we have spoken in Albany and at these FCB meetings about the need for fundamental reforms in the State’s relationship to local government, including the creation of a new pension tier for newly hired City workers. This is an essential first step in curbing the ever-mounting pension costs that undermine our ability to keep New York City solvent, vibrant, and growing.

“Nothing could now be clearer than this – the ‘Santa Claus with other people’s money’ philosophy has finally reached its inevitable dead end. The day of reckoning is here.

“More than 30 years ago, the State leaders who established this Financial Control Board also instituted pension and other reforms that helped rescue New York City from the brink of bankruptcy, and put it back on firm financial ground.

“The question today – and the question history will also ask – is: Do we here and now have the same foresight and fortitude that they did?

“We owe it to ourselves, and to our children, to answer: ‘Yes.’

“Thank you once again for your excellent and insightful report on the City’s finances. I now look forward to hearing the comments of others.”

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