MAYOR MICHAEL R. BLOOMBERG PRESENTS
 $44.1 BILLION FY 2004 PRELIMINARY BUDGET

City Will Continue to do “More With Less”

Mayor Michael R. Bloomberg today announced his Fiscal Year (FY) 2004 Preliminary Budget and presented an updated four-year financial plan for New York City.  In November, the Mayor released an updated financial plan at the First Quarter Modification that closed a more than $1.1 billion deficit by local actions in FY ‘03 and significantly reduced the budget gap for FY ’04.  The preliminary budget released today closely mirrors the plan presented in November and approved by the Council in early December.  The Preliminary Budget closes the shortfall by a combination of cost savings and efficiencies at City agencies, assistance from the State and Federal Governments, labor productivity and revenue enhancements including reforming the City’s income tax.  The FY ’04 plan released today includes an additional $500 million in cost savings and brings the total agency savings program to $2.6 billion since the beginning of the Administration.

“Over the last year the City has saved more than $2.6 billion without substantially reducing the services that we provide for New Yorkers,” said Mayor Bloomberg.  “Crime has continued to decline and our agencies have done more with less.  Over the last year every agency has found efficiencies and resources that have allowed us to deliver resources faster, less expensively and better.  We have contained spending while addressing the legal mandates of law and morality for social services, crime reduction and the education of our children.” 

The FY 2003 First Quarter Modification in November closed a $1.1 billion dollar gap in FY ‘03 with a combination of cost savings and revenue enhancements.  The Council, at the Mayor’s request, raised the property tax to close the budget gap and avoid potentially devastating cuts to City Services. Since November, the City’s revenue outlook has declined.  Wage income is expected to fall another 1.8% this fiscal year and the tax forecast was reduced an additional $108 million for 2003 and $289 million for 2004.  This is the first time since 1969, when data started being collected, that wage income has fallen two consecutive years. In addition, the smaller property tax increase enacted by the Council resulted in $608 million less in FY ’04.

The magnitude of today’s budget gap is substantial; however, the City is not in the same predicament as in 1975. Unlike the mid-1970s the economic foundation of New York City remains strong.  Population is at an all time high of over eight million citizens and the City is recognized as a vital and cutting-edge place to do business.

Expense Reductions:
Since entering office in January 2002, Mayor Bloomberg has implemented an ambitious program of cost savings. His first budget had $1.5 billion in savings in FY ‘03.  In July 2002, Mayor Bloomberg, in an effort to prepare for any financial shortfall in the current fiscal year, asked all City agencies for a 7.5% cost savings program for FY ’03.  In October the Mayor requested an additional 2% for FY ’03 and 4% for FY ’04 for the November Modification.  After the November Modification the Mayor requested an additional 6% cost savings from all City Agencies and 3% from Uniform Services and the Department of Education.  The result of these programs is a total reduction of over $2.6 billion since the Mayor took office. Every effort was made to absorb these reductions by finding ways to more efficiently deliver vital services. 

Tax Reform:
The November modification proposed a reform the personal income tax structure to: (1) raise revenues, (2) introduce equity into the City’s tax system and (3) mitigate the impact of higher property taxes on City residents. The personal income tax is currently levied only on residents, with a maximum rate of 3.65%.  Restructuring the City’s personal income tax base to include income earned in New York City by non-residents will provide an immediate across the board reduction to the City’s personal income tax, reducing the top rate from 3.65% to 2.75%, saving the typical tax payer $500 annually. This approach mirrors the methodology employed by New York State to impose its personal income tax, which is levied equally on all individuals working within the State regardless of residency. And because three-quarters of corporate employees that work in New York live in New York and pay local income taxes, tax reform will minimize any long-term impact on City employment.

In the short-term, this measure will generate nearly $1 billion in Fiscal Year 2004. However, the need to generate increased revenues from the personal income tax is temporary. Over the next several years the maximum rate will be reduced to 2.25%, the rate at which no additional personal income tax revenues will be collected over and above the amount collected under today’s tax structure.

State and Federal Aid:
The City is also requesting significant assistance from the State and Federal Governments.  The City is seeking $200 million in aid from the State Government from a menu of options that includes $815 million in proposals that have no cost to the State. These include Medicaid Cost Containment, Tort Reform, and Flexible use of Child Care Funding.   New York City is seeking $275 million in education aid to offset the ongoing cost of the teachers labor agreement.

New York City is requesting $200 million in aid from the Federal Government and an additional $700 million to fund emergency preparedness spending.  The City has prepared a menu of more than $1.4 billion in Federal initiatives with $300 million of no additional costs to the Federal Government.  These initiatives include flexibility in Hazard Mitigation, flexible use of Community Development Block Grants and reimbursement for of costs for protecting foreign dignitaries.

Workforce Productivity:
Municipal employees and their unions must share in the solution to the City’s current financial difficulties. Labor costs represent 72% of the discretionary portion of the budget --- the largest single component. Savings associated with workforce productivity are a major ingredient of the November modification.  In the absence of productivity improvements or other responsible alternatives, layoffs may become inevitable. 

Preliminary Ten Year Capital Strategy:
The Preliminary Ten Year Capital Strategy reflects a substantial reduction from recent expectations, however capital investment in the City over the next decade will remain high. This reduction will heap reduce the City’s long-term debt burden.  The impact of reductions will be substantially mitigated by greater cost efficiencies in the Department of Education and by using the financial strength of the New York City Housing Development Corporation to build housing and leverage significant funds.   The reduced program will address the otherwise continuously increasing cost of debt service which burdens the City’s operating budget before service needs can be addressed.

“We have shown the fortitude to tackle our problems directly and we look forward to working with our partners in Albany, Washington and the municipal workforce to achieve stability in New York’s finances and continue to build our great City,” concluded Mayor Bloomberg.