De Blasio running short on time, money for New York City budget

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New York City’s deadline to pass its fiscal 2021 budget is two weeks away and Mayor Bill de Blasio is still looking to buy time and find money.

“We have two giant X factors,” de Blasio told reporters recently, citing uncertainties about a stalled rescue package from Congress and additional borrowing authority from the state government. “Both of those are very open questions right now.”

The City Council is considering de Blasio’s $89.3 billion executive budget, whittled from the $95.3 billion preliminary budget he released in late January.

The city’s own numbers are more straightforward — and dire. It faces a gap of at least $9 billion over two years from lost revenue due to COVID-19 and the related lockdown. The city began its first phase of reopening last week.

An extra layer of complexity is the sticky matter of police budgeting and governance in the aftermath of protests following the Minneapolis police killing of George Floyd. Nationwide calls for improvements included a threat from New York Gov. Andrew Cuomo to withhold state aid from municipalities without a plan to restructure police functions.

“[It’s] an important concern but it’s just one more thing thrown on top a huge pile,” William Glasgall, senior vice president and director of state and local initiatives at the Volcker Alliance, said on a Volcker webcast.

The City Council’s progressive wing is calling for a $1 billion cut to the New York Police Department’s budget, with money allocated to social-service and youth programs.

“I’m confident that over the next two weeks we will strike that balance,” de Blasio said Tuesday.

On Monday, police Commissioner Dermot Shea announced that the NYPD would disband its 600-person plainclothes anti-crime unit.

Further borrowing — a bill before state lawmakers would enable an additional $7.4 billion in bonding —- could raise more red flags on Wall Street and rekindle memories of how operational borrowing spawned the 1975 near-bankruptcy. An imbalanced budget, meanwhile, could trigger calls to reactivate the state control board established during that 1970s crisis.

Since the pandemic hit, Moody’s Investors Service and Fitch Ratings revised their outlooks on the city’s general obligation bonds to negative, citing the coronavirus impact.

Moody’s rates city GOs Aa1, while Fitch and S&P Global Ratings rate them AA.

The city has about $38 billion of general obligation debt outstanding, according to Comptroller Scott Stringer’s office. Its Transitional Finance Authority has $39 billion of future tax secured debt and $8 billion of building aid revenue bond debt, while the Municipal Water Authority is carrying $31 billion of debt.

The watchdog Citizens Budget Commission has called on a series of measures to the overall budget to eliminate or at least sharply reduce the gap before any further federal rescue aid or any need to bond more.

They include cuts to spending and workforce size; improved efficiency; health insurance overhaul; delays and limits to some expansion projects such as new schools; a temporary property tax increase; asset sales and boosting reserves.

“These are hard choices with difficult consequences, but provide almost $1.7 billion in fiscal year 2021, resulting in a $6 million surplus,” said Ana Champeny, CBC’s director of city studies.

At a media briefing last week, de Blasio called the CBC too austere.

“I’m not someone who believes in an ideology of austerity,” he said. “I come from an ideology that believes in the power of government investment, but I also believe in balancing budgets. So we always listened to the ideas from the Citizens Budget Commission, but we don’t necessarily share their philosophical view.”

The city’s budget allocates roughly $11 billion to the NYPD. That includes a $5.6 billion operating budget and $5.3 billion of costs “centrally allocated,” including $2.3 billion for fringe benefits, $2.8 billion for pensions and $215 million for debt service.

“Centrally allocated costs for the NYPD are particularly high since uniformed health insurance and pension benefits are more generous than for other city employees,” said Adrian Pietrzak, a CBC research assistant.

Only the Department of Education and the Department of Social Services have higher operating budgets than police.

About one-third of NYPD employees are civilians, according to CBC. In addition to administrative positions, civilian employees include 911 call responders, school safety agents and transportation enforcement agents.

The pandemic has also pushed under the radar one of the city’s longstanding problem departments — the New York City Housing Authority.

The Independent Budget Office on Tuesday said the pandemic and the ensuing economic downturn will create new fiscal challenges for NYCHA, which was already struggling to fund the 302 developments it oversees and is operating under a federal monitor.

While NYCHA has received $166 million in funding for coronavirus response under the federal CARES Act, it figures to spend a vast amount of the operating funds on coronavirus mitigation, such as sanitizing developments and buying personal protective equipment for workers.

“[That leaves] little leeway for the additional challenges posed by the pandemic,” IBO said.

IBO estimated that with the current economic downturn, NYCHA’s tenant rental revenue will be $85 million, or 8% less in 2020 and $140 million, or 14% less in 2021 than estimates NYCHA produced in December.

“If that happens, the city would likely face pressure to increase its contribution to NYCHA to shore up this financial hole at a time when the city is facing severe budget problems of its own,” IBO said.

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