Budget Minuet Begins Monday
As Mayor Offers Plan for 2005

By Henry J. Stern
April 24, 2004

On Monday, April 26, the mayor will present his executive budget for fiscal year 2005, which begins on July 1, 2004. The state's fiscal year started April 1, but for the 20th year in a row, no state budget has been agreed upon, although Albany helps determine what the city must spend and where the money will come from. Incidentally, the federal budget year begins October 1. The calendar year, which has started on January 1 since Pope Gregory XIII decreed it in 1582 (it used to be March 21), coincides with none of the three fiscal years.
 
The budget, written more in sand than in sandstone, is a digital image of where the city is today financially, as seen by the mayor and his OMB (Office of Management and Budget). It contains projections of tax collections that inform decisions as to how much money may be appropriated. The city usually spends every penny it can, and often then some, relying on time-tested techniques that are part of the budget director's esoteric craft.

It is an irony of elective politics that the chief executive gets much more media exposure than his hungry rivals, but he is the one held most responsible by law for a balanced budget. (The federal government's budget, as most of you know, is chronically unbalanced, and that is why the national debt now exceeds seven trillion dollars. On Thursday, it was $7,131,345,799,396.81, according to the US Treasury's Bureau of the Public Debt. Don't bother fixing on that number; the debt has increased by an average of almost $1,700,000,000 every day since September 30, 2003.)

Since city services are popular and taxes are unpopular, there is usually political pressure to provide additional services and maintain existing programs while simultaneously reducing taxes. The outs say this can be accomplished by various efficiencies, such as turning off the lights when no one is in a room. (No kidding: the Council's financial plan included a multi-million dollar reduction in the city's electric bill.)

Some civic, business and taxpayer groups like the Citizens Budget Commission feel the mayor’s budget is too high, and that insufficient attention has been paid to eliminating the overlapping evils of waste, inefficiency, duplication and parasitism in the city's huge workforce.

The mayor resists this critique, although his theory of ‘commissioner management,’ while working in stronger agencies like Police and Parks, does not deal as effectively with the soft underbelly of the bureaucracy, places like Human Resources, Housing (HPD, HA and HDC) and Youth & Community Development. Other agencies could also benefit from somewhat closer management and a stronger Mayor's Office of Operations. For example, it would help if some managerial employees were transferred to places where they could be more productive.

Nonetheless, the mayor’s fiscal reins are far tighter than the City Council would like. The Council, somewhat weakened by the departure of its chief of staff and another key official, proposes substantial budget increases for popular vote-getting programs (seniors, youth, fire, parks, cultural institutions, et al.), while demanding a deeper real estate tax cut than the mayor offers.

But how do you spend more, tax less and balance the budget at the same time? The usual devices are to increase estimates of receipts, and to minimize reserve funds. Tax receipts often exceed mayoral estimates, providing additional revenue that may be used for other purposes. How, for example, will the city be able to pay for wage increases that are likely to be negotiated this year, following the 3% settlement just agreed to with DC 37, the city’s largest union?
 
When the speaker of the Council responds to the mayor's budget, his leitmotif will be how much better he could do at balancing the budget while restoring the mayor's cuts. There is no legal requirement that his remarks be balanced. The truth is that with rising revenues, some of the cuts are likely to be scaled back, and the mayor and the Council will compete for credit for the restorations.

The issue of responsibility evokes the old Wernher von Braun story. Dr. Von Braun was a German rocket scientist who worked for the Nazis. He developed the V-1 and V-2 rockets, which killed thousands of civilians in Great Britain. Captured by the Americans after World War II, he was sent to Huntsville, Alabama to continue his valuable work in rocketry, which was helpful to the U.S. in its space race with the Soviet Union, which had captured lesser German scientists. In the verse that math teacher Tom Lehrer wrote in 1965, “'Once the rockets go up, where [do] they come down? That’s not my department,' says Wernher von Braun."
 
So we await Monday’s budget, which is usually leaked on Sunday. The City Charter directs that budgets be submitted on certain dates. It takes a Charter amendment to change the calendar, which has not been sought this year. So the city proceeds, without knowing what state aid, if any, it will receive for FY 2005. The major lawsuit over the budget for FY 2002 between Governor Pataki, on one side, and Mayor Bloomberg, Assembly Speaker Silver, and Senate Leader Bruno on the other is now on its way to the Court of Appeals. The Appellate Division (Third Department) supported the governor's position by a 3-2 vote Thursday, as reported in the Times and the Sun.
 
It would be daunting for a private firm to make responsible financial decisions while subject to these contingencies, even if a single CEO determined the budget. For the city, with 51 legislators who represent local interests, the process is even more difficult. But even though most of the budget consists of mandatory expenditures (pensions, interest, leases, etc.), or items carried over without substantial change from previous years, the proposals by the mayor and responses by the Council do indicate what these leaders are thinking about the budget, or, at least, what they want the voters to believe that they are thinking about the budget.

We'll be back next week, trying to analyze the budget. When I was younger, so much younger than today, I earned the title of administrative staff analyst in OMB. I voted on nine budgets as a City Councilmember, and later participated in fifteen budget submissions as a commissioner. So, while we know this does not compare with the excitement of sports or sex, old budget hands will begin to study the telephone book of submissions and try to discern their true meaning. In this contest, those who hide information have a certain tactical advantage over those who go seek it. The Independent Budget Office, revived by the courts after the Council voted to abolish it, is here to shorten the odds. As its staff knows how to clarify the issues and fears neither the mayor nor the Council, its reports should be quite informative.

Those of you who have read this far on this subject deserve praise. I trust that now you will be better informed about Monday’s announcements than you otherwise might be. Let us search for truth and justice in the miasmic mist of municipal mathematical manipulation. Veritas.