Hevesi Report on City Budget
Finds Growing Gap.  Surprise.

By Henry J. Stern
December 9, 2004

Our article Tuesday, "The Yawning Gap Between Words and Meaning," made the point that in politics today, whether international, national, state or city, there is an enormous difference between what public officials say and the reality of the fact situation with which they are dealing. This is not to say that they lie, although that is sometimes the case. It is more often that what they write or say may not fully cover the causes of the problem they discuss, or necessarily lead to its correction.
 
Today, the dichotomy between observation and resolution was demonstrated when a report by State Comptroller Alan Hevesi, issued Wednesday, was reported on in some of the city's newspapers. Hevesi was assisted by Ken Bleiwas, special deputy comptroller for New York City. A one-page press release preceded the 12-page report, which is well-written and sensible, unusually cogent for a public announcement. The last paragraph on page two sums up the problem:

"In recent years, the City has relied on substantial amounts of nonrecurring revenues to help balance its budget. That approach has not addressed the fundamental imbalance between recurring revenues and expenses, and the City has not taken full advantage of the time afforded it by this strategy to implement permanent changes that would produce recurring benefits."

That pointed statement is correct, but notice that the comptroller does not go far beyond it. He does not say what 'permanent changes' he would recommend. He can say — correctly — that that is the mayor's job, not his. He ran for mayor in 2001, and presumably, if he had been elected, he would have made the 'permanent changes.' He was elected state comptroller in 2002, and he is now doing his job by saying that 'permanent changes' should be made.
 
The comptroller's report got the most attention in the Post, which had a page two story by David Seifman. The headline: "City spending blowout shock - numbing numbers." Excerpts from an annexed chart: "Pension costs zooming 73 percent over 2 years, Municipal hospitals losing $435 million." Seifman's lead: "Spending by the city is growing at nearly four times the rate of inflation..." Later in the article: "Jordan Barowitz, a mayoral spokesman, didn't dispute Hevesi's findings," but blamed the 9.4% budget increase on non-discretionary spending. "'Until these costs are reined in by Albany, the city's budget will continue to grow,' he said." That is true, but it is not a solution.
 
The Sun's story, by Dina Temple-Raston, on p4, was headlined: "Hevesi: Huge City Budget Gap Looms," and began: "The state comptroller, Alan Hevesi, sounded the alarm yesterday, saying New York City faces a roster of risks that could significantly widen its budget gaps in future years. Overspending at the Department of Education, increases in the city's contribution to comply with a court ruling..."
 
The Times made this important story a Metro Brief, on B9. Mike McIntire's lead: "The city's budget deficit could be larger than expected next year, in part because the Department of Education overspent its budget by $236 million last year..."
 
We could not find a story about Hevesi's report in today's Daily News or Newsday, although Newsday posted an Associated Press article on the subject on its website at 3:15 this morning.
 
The following questions occur to us:

1) Why was the Department of Education allowed to spend $236 million over its budget? That is more than the entire Parks budget. Isn't the city's Office of Management and Budget supposed to prevent agencies from doing this? Are the city's accounting systems adequate to prevent such overruns?
 
2) Does the comptroller have specific recommendations as to how the city can correct the "structural imbalance" which he finds in its expense budget?
 
3) Do any New York State elected officials (e.g. the governor, the Senate and the Assembly) have any responsibility to assist the city to solve its "structural imbalance"? Of course, since the state itself is $6 billion in the hole, it would be a challenge. Will the state help us and, if so, how?
 
4) Medicaid costs continue to increase, and New York State spends more per capita on this than any other state.  In New York, the cities and counties' share for Medicaid (25%) is as high as the state's share, although the state pays 90% of the cost of long term care. Last year, the city spent almost $5 billion a year on Medicaid, and costs are rising.  Are there any ways to control these costs? Assuming there are, who has the authority and the will to implement them?
 
5) With industries laying people off every day to meet changing competitive conditions, why is public employment practically immune to a finding of redundancy? Why cannot employees be transferred more readily to departments where they may be needed, rather than hiring new employees to maintain service?

NYCivic welcomes additional questions from readers to public officials on this issue. If you have any, just e-mail them in. We will read them all and, if they are relevant, solicit answers.
 
The mayor's preliminary budget for FY 2006 is due in late January. What rabbits will he, Deputy Mayor Mark Shaw and OMB Director Mark Page pull out of their well-worn hat?