NEW YORK—While a grim fiscal forecast is projected for the de Blasio administration Mayor Bloomberg offered a ray of sunshine Thursday. Bloomberg announced that his administration closed the projected $2.2 billion budget gap with several cost-cutting measures, aided by higher-than-expected tax revenue.
Bloomberg will close the books on his 12-year reign with a balanced budget, the first time an outgoing mayor has done so in history, according to the mayor’s office. The move may be historic, but there are strings attached to Bloomberg’s gift to his successor.
Following the financial crash in 2008, Bloomberg put a three-year freeze on wage increases for nearly all of the 152 municipal labor unions. As a result no money was set aside in the budget for wage increases.
Now, for the first time in three fiscal years, the money is there, but the funds are set based on 1.25 percent raises, an offer the unions have repeatedly rejected. Union members are also expected to contribute 10 percent of their health care costs. Unions also demand retroactive pay for the years they have gone without a contract, a sum valued at $7.8 billion.
In order for de Blasio to keep the budget balanced in 2014, he will need to get the unions to agree to Bloomberg’s terms. If he chooses to give in to union demands, de Blasio will have to find other revenue sources.
“The budget is balanced according to what the Bloomberg administration’s policy on settling these labor contracts has been,” said Maria Doulis, director of city studies at Citizens Budget Commission (CBC), a nonpartisan watchdog group. “If the new mayor decides to settle the contracts on a different basis, it will upset this balance because there will be additional costs.”
De Blasio, a strong supporter of labor throughout his career, has offered little detail about resolving the union dispute. The mayor-elect plans to iron out the deals as soon as possible after assuming office. De Blasio would not commit to retroactive pay or pay raises, but assured voters he would be fiscally responsible.
Following Bloomberg’s announcement Thursday, the campaign was similarly noncommittal.
“We’re reviewing the budget modification released by the mayor today, and remain concerned about the continued impact of sequestration, high uncertainty around the flow of Sandy recovery aid, and the liabilities from unresolved labor contracts,” said de Blasio spokeswoman Lis Smith in an emailed statement. “We will continue to review this new budget information closely in the coming days and weeks.”
Harry Nespoli, chairman of the Municipal Labor Committee, which represents nearly 100 municipal labor unions, was less than thrilled with the announcement. He balked at the idea of the budget being balanced, saying Bloomberg was misleading the public knowing that more money will be needed to satisfy the union demands.
The unions have grown tired of negotiating with Bloomberg and have long been looking forward to negotiating new contracts with the next mayor. But Bloomberg’s budget puts a damper on what was looking to be a fresh start with the unions.
“He thinks he is helping de Blasio?” Nespoli said about Bloomberg’s budget during a phone interview. “He is looking to throw a monkey wrench in it right away, on his way out the door.”
Bloomberg rejected the notion he is tying the hands of the next administration, saying de Blasio will be free to do as he pleases—albeit at a cost.
“If they want to add services, add employees, or increase compensation, they will have to find other sources of revenue,” the mayor said at City Hall. “If you want to pay more than [the money allotted in the budget], you will have to find a new revenue source. If you want to do things retroactively, you would have to find a very big revenue source—the numbers would be staggering.”
De Blasio’s First Budget
De Blasio will have to submit a budget by Jan. 16—two weeks after taking office—unless the City Council allows an extension. While not perfect, Bloomberg’s budget allots money for union contracts and beats the prospect of a multibillion-dollar budget gap.
“He will have a month in office and he won’t have the pressure of having to figure out how to balance the budget,” Doulis said. “Now he has a little more leeway in thinking what he wants his fiscal priorities to be and how he will fund them within the budget or through new resources.”
Though a short-term crisis has been averted, this may be an issue the city will revisit in future years. Nicole Gelinas, a senior fellow at the Manhattan Institute pointed out some of the fixes were one-shot deals, such as selling city-owned buildings and taxi medallions. She argued those items should be used to fix infrastructure, not cover operating costs.
Gelinas also pointed out that the headcount for the municipal labor force decreased by more than 15,000 since 2001. Yet the per-worker cost has risen, largely due to increased pension and health care costs.
“While things could be a lot worse, and doing this is better than not doing it, the same problems that have plagued us over the mayor’s tenure will continue to plague the next mayor: rising public-sector benefit and debt costs,” Gelinas said via email Thursday. “The mayor has dealt with this universal municipal problem better than a lot of mayors have, but not as well as he could have.”
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De Blasio Receives a Balanced Budget From Bloomberg
The City Saved:
$364 million on health care for municipal workers in the fiscal year 2015
The city’s primary health care provider announced in August that it will not seek a premium rate increase for the first time in 15 years. The concession followed the city’s announcement of a competitive bid for a health care provider, although no new provider has been selected.
$200 million on debt service costs
The city refinanced high cost debt, saving $350 million over the next two fiscal years.
$210 million on school bus contracts
For the first time since 1971 the city opened school busing contracts to public bidding this year, saving $210 million over the next five years.
$60 million on 911 system contract
The city received $60 million from a settlement with Verizon for a delay in delivering a component of the 911 system.
$86 million on pensions
The city’s pension fund exceeded the expected rate of return in 2013, reducing city annual pension obligations.
The city earned additional revenue:
$520 million more in tax revenues than what was forecast in June
$64 million more on the sale of 200 taxi medallions than previously forcast
$200 million on the sale of two underutilized city-owned buildings in Lower Manhattan
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