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Nycc Budget Response Fy 2011

Nycc Budget Response Fy 2011

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Published by: NYC Council Tech in Govn't Committee on May 14, 2010
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10/26/2011

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NewYorkCityCouncil
Christine C. Quinn, Speaker
FinanceDivision
PrestonNiblack, DirectorJeffreyRodus, FirstDeputyDirector
TheCouncil’sResponsetotheMayor’sPreliminaryBudgetforFiscalYear2011
In fulfillment of CityChartersection 247(b)April 8, 2010
Hon.ChristineC.Quinn
Speaker
Hon.DomenicM.Recchia,Jr.
Chair, FinanceCommittee
 
The City Council’s Response to the Mayor’s Preliminary Budget for Fiscal Year 2011i
Summary
The Mayor’s Preliminary Budget for FY 2011 was released in the context of an unusual degree of uncertainty.On the one hand, the economic recession – nationally, the worst in 8 decades – appears to behitting bottom. However, given the wrenching dislocations in the housing market and financialservices industry, the recovery seems likely to be much slower than is typical, with employment levels not projectedtoreach their2008 peak before 2013.The bottoming out of the economy is in part due to the federal government’s rescue of majorfinancial institutions, which, combined with extremely low interest rates, has led to a record-breaking year for Wall Street profits. As a result, the Mayor’s preliminary budget projected higherrevenues – up$1.8 billionin2010, comparedtotheAdoptedbudget.Nonetheless, like employment, tax revenues are projected to recover only slowly after dropping 7percent in2009, reachingtheir 2008level in2011.
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The combination of higher revenues, a PEG program totaling $484 million this year, and the use of reserves and other resources, has yielded a $2.9 billion surplus for 2010, which would be used tohelp close next year’s gap. It is worth noting that two-thirds of the $4.5 billion 2011 budget gapprojected as of November would be closed using the surplus, while only $1.5 billion are 2011actions – primarilythe $1.1 billionPEG program.Finally, the Preliminary Budget comes against the backdrop of a severe fiscal crisis at the Statelevel. At the time the budget was released, the State Division of the Budget projected the State’sbudget shortfall at $500 million for the current State fiscal year and $8.2 billion for the comingyear. The Governor’s Executive Budget for FY 2010-2011, released 9 days prior tothe PreliminaryBudget, proposed actions that the Mayor’s Office of Management and Budget projected would leadto a $1.3 billion additional shortfall in the City’s FY 2011 budget. Although the final outcome of negotiations between the Governor and the Legislature will likely be somewhat more favorable tothe City, both the Mayor and the Council recognize that the Executive Budget will have to addressan additional gap. On March 23
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, the budget director instructed City agencies to prepare foradditional cuts totaling 3.6% for uniformed agencies and 7.2% for all other agencies. TheEducation Department budget faces a $493 million cut in State aid that the City does not anticipatebeingabletoclose withCityfunds.These circumstances make developing a response to the Mayor’s Preliminary Budget particularlychallenging. It is clear that, even without further cuts, Council Members are deeply concernedabout the impacts of the Preliminary Budget on public safety, education, and social services. Anyfurther cuts cannot follow the “across-the-board” approach taken so far. Already, because thePreliminary Budget PEG program ignores the Council’s restorations to the public libraries, CUNY,Aging, Cultural Affairs, and other agencies, FY 2011 cuts tothese agencies risk crippling key publicservice areas. The Council urges the Mayor to consider this in preparing the Executive Budget.The Office of Management and Budget must also provide the Council with the analysis of the
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Withoutthe changes inproperty,sales and business taxes donein2009 and 2010itwouldbe 2013 beforetaxrevenues returnedtotheir2008level.

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