Here’s the text of the opening statement that I gave at the preliminary budget hearing of the Finance Committee today. Be sure to check the Finance tab on this site to keep up-to-date on the budget hearings for the other committees.
Good morning and welcome to the opening day of the City Council’s hearings on the Mayor’s Preliminary Budget for Fiscal Year 2011. My name is Domenic M. Recchia, Jr. and I am the new chair of the Finance Committee. I welcome everyone.
I would also like to take a quick moment to thank the entire Council Finance Division, especially Preston Niblack, Tanisha Edwards, and Juliana Han, for their hard work on these hearings.
The Preliminary Budget hearings mark the beginning of the Council’s role in the annual budget adoption process.
At the time of adoption of last year’s budget, the size of the gap for Fiscal 2011 was projected to be almost $4.9 billion. However, since budget adoption, due to lower than expected job losses, and an unexpected boost in profits of New York Stock Exchange member firms, OMB increased its forecast tax revenue by $1.7 billion for Fiscal 2010, and $727 million for Fiscal 2011, effectively reducing the budget gap to $2.6 billion for Fiscal 2011.
To close the remaining gap, the Mayor has proposed the following measures:
1. A tax fairness program, consisting of 2 measures: extending the mortgage recording tax to co-ops, and applying the sales tax to aviation fuel.
2. A citywide PEG package of $484 million for Fiscal 2010, and $1.1 billion in 2011, with 4 percent savings from uniformed agencies, and 8 percent from other agencies, on an annual basis. The Department of Education’s PEG will be realized by providing a 2 percent annual increase for teachers, rather than the 4 percent that was previously assumed.
3. Elimination of the collective bargaining reserve.
When the Mayor released his Preliminary Budget, his budget did not account for actions taken on the State level. On the State level, the most recent forecast for the New York’s State’s 2010-11 budget gap was raised to $8.2 billion.
To partially offset this gap, aid to New York City was severely affected. State budget actions will cost the City $1.3 billion, with the largest action being the permanent and complete elimination of the City’s share of unrestricted aid from the State totaling $656 million, also known as AIM funding.
In light of the State’s actions, the Mayor presented a separate “Contingency Plan” that included $1.3 billion in additional agency actions to deal with the budgetary shortfalls that would occur if the State Executive Budget was adopted as proposed.
According to the Mayor’s contingency plan, the state cuts would require school aid cuts in the amount of $493 million, which would mean laying off about 8,500 teachers, and an additional 3.6 percent city funds reduction in uniformed agencies, and an additional 7.2 percent reduction in all other agencies.
As you can see, we have a lot of work to do, and a lot still needs to be done to ensure that New York City will continue to provide core services. However, we must remember that the January Plan is just that – a plan. A lot remains uncertain. Much depends on the adoption of the State budget.
The Fiscal 2009 and 2010 budgets were balanced with two temporary revenue sources — the federal stimulus package, and the State budget. Fiscal 2011, however, is very different. While the federal stimulus funds continue to provide some budgetary relief in Fiscal 2011, the level of that relief is less than half of this year’s support, and very soon, the money will run out. As far as aid from New York State, while the City must be treated fairly, clearly, the size of the State’s gap will surely mean more pain for the City between now and the Executive Budget.
An essential function of these hearings will be to hear from the Administration, the agencies, and the public-at-large to ensure that agencies will be able to continue to fulfill their core mandates.
These are difficult times, and in such times, tough choices must be made. It is my hope that these choices will be made deliberately and responsibly through negotiation and with compassion for the residents of our great city.
These hearings will culminate in the Council’s Response to the Mayor’s Preliminary Budget, which is due on April 8th. We hope that our response will significantly influence the Executive Budget, due by April 26th.
As in the past, we kick off these preliminary budget hearings with OMB, the City’s Budget Office responsible for producing the Preliminary Budget. We will then hear from the Department of Finance, the Department of Design and Construction, which was created by this Committee in 1997 to more efficiently carry out capital projects, then our Comptroller John Liu, and finally the Independent Budget Office.
We will now hear from the Director of the Mayor’s Office of Management and Budget, Mark Page.
