Despite the city’s improving economy, long and short term risks loom for Mayor Michael Bloomberg’s budget plan, the city’s comptroller and Independent Budget Office said in testimony to the City Council’s Finance Committee.
In her prepared testimony, Ronnie Lowenstein, the director of the city’s Independent Budget Office, said that she expects the city to end the fiscal 2011 year with a surplus of $365 million. Yet job growth remains sluggish, and Albany’s budget woes — coupled with the elimination of federal stimulus funds for schools — pose serious risks to the city’s fiscal future, she said.
“I cannot tell you the city’s near-term fiscal outlook is appreciably better and will ease the challenges currently facing the city,” Lowenstein said in her remarks. The Independent Budget Office director added that if Congress does not extend relief for Medicaid spending, which it may not, the program could cost the city an additional $279 million in 2011.
A spokesman for the mayor’s office said the Medicaid money is a major concern and City Hall is working closely with Congress to ensure that the funds comes to the city. The spokesman added that gridlock and uncertainty in Albany has left some financial decisions to guess work.
Lowenstein expects a $3.3 billion budget shortfall for 2012, close to $500 million less than the estimate by the mayor’s office. Neither prediction includes the federal government’s plan to eliminate $853 million in stimulus funds for schools in 2012.
Comptroller John Liu echoed many of the Independent Budget Office’s fears in his report on the mayor’s proposed $62.9 billion budget for 2011, but he sounded a more alarming tone.
In his report, Liu said the mayor’s plan underestimates overtime costs. The comptroller was particularly skeptical that the teachers and school administrative unions would accept two consecutive 2% raises, as assumed by the mayor’s proposal.
“[Bloomberg] is…relying on a labor negotiation strategy that has little precedent in our city’s history,” the comptroller’s office wrote. “In case it is not successful, there must be a “plan b” to address the challenging period ahead.”
In May, Bloomberg released a budget calling for the city to eliminate 11,000 jobs, many among teachers. Yet last week, as he prepared to lay off more than 4,000 teachers, the mayor instead announced a wage freeze for all teachers over the next two years.
The United Federation of Teachers, which has been without a contract since October, immediately dismissed the proposal.
In total, Liu said the mayor’s plan could result in a budget gap of $462 million for 2011 and $4.4 billion in 2012. By 2014, he said the city’s budget gap could grow to $5.7 billion.