Reduction in Tax Dollars the State will Return to City for Education will Leave City Schools With 6,400 Fewer Teachers this Coming School Year

State Budget will Cause Major Impacts Across Nearly All City Services

Three Years of City Cost Cutting Prevented State Cuts from Producing More Severe Impacts

Controllable City Expenses Reduced from FY 2010 to FY 2011; Budget Balanced with No Tax Increases

Mayor Michael R. Bloomberg today presented a Fiscal Year (FY) 2011 Executive Budget and an updated four-year financial plan. The Mayor outlined a plan for a balanced budget that totals $62.9 billion with no tax increases for New Yorkers. The FY 2011 Executive Budget is balanced in large part by the rollover of $3.3 billion of surplus funds from FY 2010, which was generated in large part through three years of City budget cuts. Without a State budget in place, the City was forced to make assumptions in the Executive Budget on the amount of tax dollars the State will return to the City - the Executive Budget assumes a State Budget that reduces the amount of tax dollars the State returns to City by $1.3 billion. The City's current strong fiscal position, which results from years of responsible budgeting, will limit some of the impact of the disproportionately large reduction of tax dollars the State will return to the City. But the reduction cannot be absorbed without significant consequences in nearly all areas of City services, particularly at the Department of Education.

"Our ability to put together a balanced budget is very seriously hampered by State government's continued inaction in addressing its own budget problems," said Mayor Bloomberg. "The Governor's proposed a budget that in effect balances the State's books by starving New York City, and we are still facing that very grim outlook. We've kept our own fiscal house in order, preparing responsibly for the downturn with eight different belt tightenings over the last three years, while spending in Albany has continued to spiral out of control. Now we are paying the price for Albany's irresponsibility."

State Budget Impacts - Department of Education
The Executive Budget assumes a reduction in the amount tax dollars the State returns to the City for education by $493 million. This will result in a reduction of 6,414 teachers and other pedagogical positions in the coming school year - 4,419 through layoffs and 1,995 through attrition.

Additional State Budget Impacts and Agency Gap Closing Measures
The Executive Budget proposes a gap closing program for other City agencies of approximately $1.3 billion for FY 2011, in addition to the staff reductions at the Department of Education. The $1.3 billion program is nearly $200 million larger than the FY 2011 gap closing proposal in the January Preliminary Budget.

Approximately $800 million of the $1.3 billion in agency gap closing actions are necessary due to the assumed impact of the State budget. An increase in the amount of tax dollars the State returns to the City - above the amount assumed in the Executive Budget - would mitigate the amount of budget cuts that have been proposed.

The gap closing actions will cause a total reduction in City headcount of 10,997 employees - 6,026 through layoffs and 4,971 through attrition. The total includes the aforementioned reductions at the Department of Education. There will be no layoffs at uniformed agencies.

Examples of the agency gap closing actions proposed include:

Prudent Actions Prevented More Cuts
The Mayor has ordered and implemented eight rounds of gap closing actions since early 2007 to prepare for the impacts of the national recession and keep the City's fiscal house in order.

The cumulative gap closing actions taken by City agencies are a major cause for the surplus generated in FY 2010, and the surplus, $3.3 billion, is being used to achieve a balanced budget in FY 2011 - preventing the need for further budget cuts this year.

For example, the January Preliminary Budget proposed reducing the number of NYPD officers on the street by 892 officers through attrition. The Executive Budget restores funding for those positions, so the number of officers on the street will remain the same. The January budget also proposed converting 400 NYPD desk positions, currently staffed by uniformed officers, to civilian posts. That portion of the proposal remains the same in the Executive Budget.

Controllable expenses in FY 2011 have been reduced by 2.1 percent compared to FY 2010 - the result of the cumulative cost-cutting and agency actions taken by the Administration.

Slowing the Growth of Pension and Health Care Costs
The Administration again has proposed the creation of a new Tier V pension plan for new City employees, which would result in an immediate cost reduction of $200 million in the first year implemented. The new tier would save approximately $7 billion cumulatively over the course of the first 20 years after implementation. The creation of a new, more affordable pension tier requires passage of a new State law. New York City's annual contributions to the pensions systems have grown exponentially, primarily due to market fluctuations and increased benefits authorized in Albany, growing from $1.2 billion in FY 2001 to $7.4 billion in FY 2011.

The Administration again has pledged to work with partners in organized labor to secure mandatory health care premium contributions from all City employees. A mandatory 10 percent minimum employee contribution would reduce costs by $357 million in the first year of enactment, increasing in subsequent years.

The FY 2011 Executive Budget does not rely on savings generated from pension reform or from new health care contributions from employees.

Economic Update
FY 2011 City revenues are slightly above FY 2010 revenues, up from $42.1 billion in FY 2010 to $43.2 billion in FY 2011, but revenues to the City remain below pre-recession levels established in FY 2008 - $43.9 billion. City revenues are not expected to surpass FY 2008 levels until FY 2012.

Economically sensitive tax revenues, which include personal income, sales, business, and real estate transfer taxes, have begun to rebound, but remain below pre-recession levels. Economically sensitive tax revenues are projected to be $22.1 billion in FY 2011, an increase of 4.9 percent from the FY 2010 levels, but are 14 percent below peak levels in FY 2008, when $25.7 billion in economically sensitive taxes were generated.

New York City is expected to post steady employment gains in the second half of calendar year 2010. From mid-2008 into the second half of 2010, the City is expected to have lost a total of approximately 169,000 private sector jobs - far less than previous estimates for the numbers of jobs lost due to the national recession.

Out-Year Gaps
The Mayor also announced today that if the measures outlined in the FY 2011 Executive Budget are adopted, New York City will still face budget gaps of approximately $3.8 billion in FY 2012, $4.6 billion in FY 2013 and $5.3 billion FY 2014.