FOR IMMEDIATE RELEASE
July 25, 2011
MAYOR BLOOMBERG PRESENTS CITY FINANCIAL PLAN TO THE NEW YORK STATE FINANCIAL CONTROL BOARD ANNUAL MEETING
The following are Mayor Michael R. Bloomberg’s remarks as prepared. Please check against delivery.
“Good afternoon, everyone. The subject of this meeting is the City’s recently adopted budget and four-year financial plan. No question about it, the City faces significant budget challenges, both immediately, and long-term. And today I’ll outline how we’ve met them in balancing this year’s budget, and how we intend to address them from here on.
“The FCB was established 36 years ago, at the height of the profound fiscal crisis that then gripped our city. By bringing much-needed rigor to the planning and management of New York City’s finances, the FCB helped right the city’s fiscal ship.
“Thankfully, conditions today are far different from those we faced in 1975. Then, the City’s fiscal management left a lot to be desired – to put it mildly. Today, as the FCB report shows, the City’s handling of its finances is thoroughly above reproach.
“Then, the city’s population was shrinking. In many communities, housing, public safety, public schools, and public health were in decline. And all of those problems only worsened during and after the fiscal crisis, as the City slashed basic services to balance its books.
“Today, on the other hand, the City’s population is at an all-time high, and still growing. New Yorkers are living longer and healthier lives; our average life expectancy today is 19 months longer than in 2001.
“Fire deaths are at a record low. Crime has fallen to levels last seen nearly a half-century ago. Our affordable housing initiative, the largest ever undertaken by any American city, is on course to meet its goals. And standardized test scores and graduations rates show our public school students progressing far faster than students statewide.
“Back in 1975, even as the national economy was bouncing back from a recession, New York City’s economy decidedly was not. Today, however, the reverse is true; we came out of the last national recession sooner and stronger than the rest of the U.S.
“So the dire conditions that led to – and that were accelerated by – the fiscal crisis of the mid-70s are now a rapidly fading memory for some, and ancient history for many others. Nevertheless, we still face significant fiscal challenges today. Identified in the FCB report, they largely arise from matters beyond the City’s direct control.
“They include the need to curb rising pension costs that, if unchecked, will ultimately overwhelm City government’s ability to provide essential services. We are also threatened by the lethargic pace of the national economic recovery, and by the uncertainties caused by the debate on raising the nation’s debt ceiling and reducing the Federal deficit.
“Let me first summarize where we stand today. As the FCB report stresses, the City’s response to the deep national recession was prudent, swift, and effective. We benefited from the multi-billion dollar surpluses that we wisely accumulated during the pre-recession years; those savings stood us in good stead when the national recession began and City revenues plunged.
“Although those surplus funds are now largely depleted, they have been crucial to our ability to weather the recession. We were, for example, able to pre-pay expenses for the current fiscal year with $3.7 billion in those surplus funds. Also, even before the recession began, we directed City agencies across the board to begin tightening their belts.
“Since late 2007, these ‘programs to eliminate the gap,’ or ‘PEGs,’ have, again and again, produced substantial savings. Over the last four years, through 10 separate PEG programs, City agencies have taken $5.1 billion of gap-closing actions. Cumulatively, they were instrumental to balancing the budget for Fiscal Year 2012, which began on July 1st.
“And let me point out that over the past 10 years, spending by all City agencies, with the exception of the Department of Education, has grown by 32 percent, while the rate of inflation during that time has been 33 percent.
“These City agencies are spending less money, in real terms, now than in 2002. The exception is in education – and the reason is that we were underpaying teachers and losing them to other school districts. So we made increasing teacher salaries a priority.
“Now, let me be clear: Those budget actions will have real consequences. For example, because the rest of the City’s municipal workforce has refused to agree to additional savings, there will be layoffs of more than 1,000 non-uniformed, non-pedagogical employees during the current fiscal year.
“And the only way we will be able to afford raises for City workers in the future is if we can find some savings in our pension and health care costs. That’s not a negotiating stance. It is reality.
“Our best efforts notwithstanding, cutbacks in some City services also appear inescapable. But very importantly, in cooperation with Speaker Christine Quinn and her colleagues on the City Council, we protected core services, including police and fire protection and the public schools.
“And we did that despite record-setting cutbacks in State support, and by the impending expiration of Federal stimulus funding. Our schools were hit hardest by these cutbacks; they experienced a nearly $2 billion reduction in State and Federal aid.
“Rather than jeopardize the progress we’ve made in education, we chose instead to pick up the slack ourselves. To put what we’ve done in perspective: In 2002, the City provided 45 percent of funding for City schools; the State’s share was 44 percent; and the Federal government provided the balance of 11 percent.
“In the current budget, on the other hand, the City’s share of education funding has grown to 56 percent; the State’s portion has shrunk to 36 percent; and Federal funding is down to 8 percent of the total.
“This increased commitment by the City – along with the flexibility shown by Michael Mulgrew and the United Federation of Teachers – is what helped avert layoffs of classroom teachers for the coming school year. Having said that, let me add that meeting the costs of education will continue to be a major challenge going forward.
“As the FCB staff report notes, it’s critical for the City to realize savings now that can be applied to expenses in the budget for Fiscal Year 2013. To accomplish that, we are, in part, seeking to reduce costs and improve efficiencies in the administration of City agencies – which is a prime responsibility of the City’s Deputy Mayor for Operations, Steve Goldsmith.
“A year ago, he began leading efforts designed to realize $500 million in savings by the end of 2014 – with recurring annual savings of $500 million after that – in such areas as managing the City’s real estate holdings, vehicle fleets, and information technology.
“Such reforms will improve services, as well as reduce expenses. They’re already producing results. For example, earlier this year, we began consolidating and modernizing the IT data centers of more than 40 City agencies. We expect this to produce some $100 million in savings and avoided expenses by the end of 2014.
“Smart management that increases savings is welcome under any circumstances. Given the budgetary challenges we face, it’s particularly urgent now. We anticipate a budget gap of $4.6 billion for FY 2013 that will grow to $4.9 billion by FY 2015.
“Closing such a large gap is going to require intense efforts over the next 12 months; it will be a major priority for us. And even as we attempt to do more with less in delivering City services, we also have to face the fact that control of the principal drivers of this imbalance rests with the State. So closing these gaps requires action by our partners in State government.
“First, on the revenue side, Albany must stop its indefensible and total denial of any revenue-sharing funds to one locality, and one locality alone, in our state: New York City. This is unfair on the face of it.
“We recognize State government’s own budget difficulties. We commend many of the actions Governor Cuomo has taken to address them. And we’ve always been prepared to do our share to help.
“But there’s simply no rationale for what occurred this year, when other localities took cuts in State revenue-sharing that averaged three percent, while New York City was allocated nothing. Zero. Zilch.
“When people wonder why they’re facing service cutbacks, the cuts in State funding to the City are the primary reason. And because New York is the economic engine for the State, the consequences of these cutbacks are felt statewide.
“The pain inherent in our FY ‘12 budget could have been significantly reduced by a more equitable sharing of these State revenues – the greatest portion of which, let me add, are generated in our city. A return to equitable treatment from the State will also help us balance our out-year budgets.
“State action is also needed on the expense side of the ledger – especially in reining in the City’s skyrocketing pension and fringe benefit costs. During Fiscal Year 2002, when I became mayor, City-funded pension costs were $1.3 billion; in the current fiscal year, they’re $8.3 billion.
“That’s an increase of more than 500 percent from FY 2002. No, that’s not a typo – more than 500 percent.
“Total pension costs account for close to 13 percent of our current budget. To put that in perspective: that’s greater than the operating budgets of the Police, Fire, Correction, and Sanitation Departments combined. This is a clearly unsustainable trajectory.
“And it’s precisely why we’ve long sought pension reforms of the kind that Governor Cuomo proposed last month, and why we’re glad he has included the City in his recently presented pension reform package.
“While they would not affect benefits for current retirees and City workers, those reforms, including the creation of a new pension tier for new City hires, would save New York City taxpayers $30 billion over the next 30 years. I look forward to working with the Governor to pass this bill when the Legislature takes it up next year, and I am encouraged to hear that it will be his top legislative priority.
“Before concluding, let me turn briefly to the subject of the debate on the national debt ceiling and deficit. At this point, it’s uncertain what the outcome will be, or what the effect will be on our economy and budget. We do know that very substantial cuts to Medicare and Medicaid have been included in deficit reduction proposals that have been fashioned and floated in recent days.
“That could severely affect one of our major industries: health care, which employs some 450,000 people in our city. There could, for example, be significant cutbacks at our teaching hospitals, which train some five percent of the nation’s doctors.
“The City’s public hospitals could also face substantial funding cuts. There may also be reduced Federal funding in areas ranging from Homeland Security to affordable housing to social services. At this point, nothing specific is known. The devil, as usual, will be found in the details, as they emerge.
“And I assure you that we will continue to work with our two Senators and our State’s Congressional delegation, on both sides of the aisle, to defend New York’s interests in this process. Now I look forward to hearing the comments of others.”
Stu Loeser / Marc La Vorgna (212) 788-2958
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