Bloomberg’s Latest Financial News: More ‘Pain’ for N.Y.

In a sober wake-up call, New York Mayor Michael R. Bloomberg unveiled a budget Wednesday filled with dramatic cutbacks, deferred dreams and “pain all around” in the wake of the Sept. 11 terrorist attacks.

“The music has stopped. . . . We must now, all of us, face reality,” said the mayor on a day when his predecessor, Rudolph W. Giuliani, received an honorary knighthood from the Queen of England and was serenaded by a royal band an ocean away.

Grappling with an unprecedented $4.8-billion deficit, much of it brought on by the World Trade Center disaster, Bloomberg warned New Yorkers that “there are no gimmicks or Hail Mary passes” to bail the city out of its budgetary crisis. Dispelling any illusions about a quick recovery, he noted that even larger deficits may haunt New York in future years because of a drop in tax revenue and the estimated loss of 100,000 jobs.

Bloomberg, a Republican media mogul who had not held political office before, insisted New York will remain a world-class city and vowed to keep the streets safe. Yet he spelled out plans to cut $1.8 billion in spending sure to antagonize powerful labor unions and other special interest groups.

Among the most controversial reductions are $212 million--and 1,600 jobs--from the Police Department, $64 million from the Fire Department and a whopping $361 million from the Board of Education. The mayor also called for major cuts in libraries, homeless aid programs and senior centers.

No city agency was spared. Under the draconian budget, much of New York’s costly recycling program would be curtailed, parking fines would be increased and the local tax on a pack of cigarettes would be raised.

“This budget hurts everybody,” Bloomberg told a City Hall gathering of visibly downbeat department heads. “We don’t think it hurts anybody fatally. We’re spreading the pain. There are no sacred cows here.”

The Police Department had been spared reductions during Giuliani’s eight years. Anticipating opposition, Bloomberg vowed that the police job cuts--to be generated by attrition--will be made up if the city’s plunging crime rate rises again. He said the department would remain at its current size of 39,100 and that 800 civilians would be trained to replace officers at desk jobs, freeing them to work on the streets.

The proposal, however, was blasted by union officials, who said New York’s police force should not be slashed to plug a budget shortfall.

Patrick Lynch, president of the Police Benevolent Assn., called the plan “dangerous” and predicted it would hurt the department’s morale. (New York police have been working without a contract for several years, and many believe that city officials have not negotiated with them in good faith.)

“They [officers] are afraid all their hard work these last few years will be for naught,” said Lynch, predicting weaker law enforcement under Bloomberg’s plan. “Precincts are already being strained for manpower.”

Elsewhere, advocates for the poor sharply criticized cutbacks that would halt an $80-million expansion of the city’s day-care program as well as agencies serving the city’s subsidized housing and hospitals.

“I don’t see any beef in his proposals, no proactive plan to improve schools,” said Board of Education member Irving Hamer, attacking Bloomberg’s plan to halt all new school construction except for five projects in Queens.

The mayor’s comments, delivered during a nearly two-hour address, were a statistical tour de force. Yet they lacked the dynamic tone of Giuliani’s messages.

Bloomberg, who was elected with the former mayor’s help, refrained from any direct criticism of him. But in laying out an ambitious plan to plug a staggering budget gap, the mayor couldn’t avoid some indirect shots.

“We’ve gone from a world where we generated surpluses every year to a world where tax revenues do not pay for services,” he said. There were warnings about a fiscal crisis, Bloomberg added, but officials believed “you could grow your way out of this and pray a little bit, and the prayers were answered. But this time the prayers won’t be there. Games were played in the past. People presented numbers that didn’t reflect reality.”

More important, he said, the terrorist attacks exacerbated an already worsening economic picture. Wall Street lost 25,000 jobs last year, Bloomberg noted, and the financial center’s overall profits dropped from $21 billion to $8.5 billion. That translated into a loss of $800 million in city revenue from taxes, a staggering financial blow, the mayor said.

Bloomberg urged City Council members--who will debate his $1.8 billion in city cuts and must pass a budget by June 30--to forgo any thoughts of raising taxes or laying off employees as a way to avoid reductions.

It remains to be seen how his budget will play politically, but many observers predicted months ago that the mayor’s first budget would mark the true start of his administration. Until now, he has enjoyed a honeymoon period, meeting with union officials, minority leaders and activists, exchanging pleasantries and avoiding comment on the fiscal crisis.

“On the day when Bloomberg spells out the pain and tells each group what they’ll be experiencing, that’s the day the new era at City Hall begins,” political consultant Hank Sheinkopf said shortly after the mayor’s razor-thin victory over Public Advocate Mark Green. “There’s going to be a lot of bad budgetary news for New York before things improve.”

Indeed, Bloomberg pointed out Wednesday that slashing $1.8 billion from the city’s current budgetary spending levels is just the beginning.

To make up the entire $4.8-billion gap, he said, New York City will need to borrow $1.5 billion in specially issued bonds to pay for operating expenses. The city was given permission to do this on a onetime basis by the state Legislature shortly after the terrorist attacks, Bloomberg noted. But he promised that this highly controversial practice, which brought on the city’s bankruptcy crisis 25 years ago, will be carefully monitored.

The balance of the $4.8-billion gap would be made up from deferred salary and pension increases to unions, plus varied assistance from federal and state officials, Bloomberg said. The mayor conceded that none of these givebacks is guaranteed, adding: “This is a budget. It’s all subject to change.”

Bloomberg has promised to keep an open mind on conflicting proposals. But he warned critics to identify other programs ripe for cuts if they object to the reductions that he has identified.

Above all, the mayor said, New Yorkers should be under no illusion that the federal government will bail them out. President Bush has pledged to help rebuild lower Manhattan with $20 billion, Bloomberg noted, but that is the maximum the city should expect from Washington.

“I’d love to have extra funds, but I’m not a good enough salesman,” he said. “And in a world where 49 out of 50 states look like they’re going to be running their own budgetary deficits next year? Let’s get serious.”