Saturday, May 07, 2005

Bloomberg's glimmer of fiscal sanity

Updated: the Post says $52 billion, but the official press release says the 2006 fiscal year budget (mid-2005 to mid-2006) is $49.7 billion.

NYC Mayor Michael Bloomberg is the regularly scheduled guest every Friday on John Gambling's radio show (WABC, AM 770, starts at 10 a.m. Eastern). I'm no fan of Bloomberg, but I thought yesterday was an excellent show. You can listen to it online here.

The topic was New York City's upcoming budgets, including the projected $3 billion surplus for fiscal year 2005 (fiscal 2006 begins on July 1). Bloomberg credits an unexpected boost in tax revenue, including $1 billion since January). Let's also not forget, as I pointed out a few nights ago, that NYC is receiving "aid" from Albany and Washington -- meaning non-NYC taxpayers have the dubious honor of helping balance NYC's budget.

A year ago, the 2006 budget had a projected $3.8 billion deficit. At current economic conditions, it will be balanced, even though it will spend $49.7 billion compared to $47 billion in 2005. It will be balanced even despite $500 million in individual tax cuts. Bloomberg also proposes to reduce the sales tax on clothes less than $110, starting June 1. He was absolutely right to call it the easiest tax to evade: people can and regularly do shop for clothes in Connecticut or New Jersey, instead of the city where they'd pay an onerously high sales tax.

I fully support Bloomberg's tax cuts as a good step into bringing people, businesses and jobs back to NYC, but at the same time, I worry about the dangerous assumption of the new 2006 budget: that current tax revenues stay steady. I haven't been able to find information on why exactly NYC has a sudden surge in tax revenue.

Now, what to do with 2005's surplus? The many unions employed by the city, especially teachers, almost immediately started clamoring for the money. West Side Stadium supporters probably thought immediately, "Great, there's the money for it!" But the situation isn't that rosy. NYC's 2007 budget has a projected $4.5 billion deficit (I expect it's not from reduced revenue, but increased obligations like pension payments and union workers' raises). Bloomberg wants to save today's surplus to pay for tomorrow's deficit, and it's the right idea. In Friday's print edition of the New York Post, he explained, "It is not true that we have lots of extra money."

Randy Weingarten, the teachers' union president, responded, "How can that possibly be when you have a nearly $3.3 billion surplus? It would have been more honest to simply say 'you are not a priority' than to engage in this fiscal hocus pocus." She needs to consider the whole picture. It doesn't sound like she ever had to budget anything for more than one year, and besides, teachers' unions tend to treat public treasuries as bottomless wells of liquid gold.

Bloomberg got lucky with the boost in tax revenue, especially since it's an election year. I only hope he can keep the unions' hands off the surplus.

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