December 15, 2010
DiNapoli: NYC Economy Recovering Quickly; Budget Gaps Loom
Mayor Proposes Budget Cuts and Layoffs to Close Next Year's Budget Gap
New York City's economy is recovering from the recession at a faster pace than both the nation and the rest of New York State but not fast enough to close next year's budget gap, according to a report New York State Comptroller Thomas P. DiNapoli released today. The Mayor has proposed layoffs and service cuts to balance next year's budget, and the outcome of the State budget will have major implications for the City as legislators attempt to close a gap that could exceed $9 billion next year.
"New York City is taking steps to control spending, but maintaining core services will be difficult in the coming years," DiNapoli said. "The federal stimulus funds are going away and the city is expecting an unrealistic level of help from the state for education funding. All of this means hard times for the city's schools and its neediest citizens"
DiNapoli notes that debt service is expected to grow from $5.2 billion in FY 2011 to $6.7 billion by FY 2014, an increase of 31 percent. This rate of growth exceeds that of the City fund revenues, which would raise the debt burden to 14 percent by 2014, the highest level in more than a decade.
After declining by $2.5 billion in 2009, City fund revenues are growing again but not as fast as spending. City-funded spending is expected to grow by 4.4 percent in 2011 and 6.6 percent in 2012, driven by nondiscretionary costs. As of June 30, 2010, the city's accrued OPEB (Other Post-Employment Benefits) liabilities stand at $75 billion--$9.4 billion more than in the prior year.
Private-sector employment in New York City grew by 2.5 percent between December 2009 and October 2010, more than double the national rate. The city has regained almost half of the private sector jobs lost during the recession, but the unemployment rate remains high. The city accounted for 88 percent of new jobs added in the state during this period, many of them in retail trade, health care and restaurants.
Wall Street earned $21.4 billion during the first three quarters of 2010. While much less than last year's record of $61.4 billion, which was fueled by federal assistance, the securities industry is on track in 2010 for the second-highest level of profitability on record. While the cash bonus pool will likely be smaller this year than the $20.3 billion awarded in 2009, the average bonus may be somewhat higher since it will be shared among fewer workers.
Mayor Bloomberg increased funding to education by $853 million in 2012 to replace expiring federal stimulus aid, but he also proposed budget cuts that would reduce the net benefit to $503 million. The Department of Education is seeking to hit a cost-saving target for 2012 of $350 million by eliminating 5,398 positions, including 4,278 layoffs.
The City projects out-year budget gaps of $2.4 billion in 2012, $4.8 billion in 2013 and $5.6 billion in 2014. DiNapoli's report noted that these gaps could be significantly larger depending on the outcome of the state budget, collective bargaining negotiations, and how the state and city replace expiring federal stimulus funds.
Click here to view the report.