A revenue and expenditure forecast for fiscal years 1998-2001, issued today by the Independent Budget Office (IBO), has found that New York City's budget outlook continues to improve but serious long-term fiscal challenges remain.

"While the city's budget continues to benefit from surging revenues during the current fiscal year--which will help to balance next year's budget--longer-term problems persist because spending needs will grow more than twice as fast as projected revenues over the next few years," said IBO Director Doug Criscitello. "Any proposals to decrease taxes or increase spending in light of an expected current-year budget surplus should be tempered with the prospects of large budget gaps beyond 1999."

In order to provide an objective benchmark for consideration of the Mayor's forthcoming preliminary budget, the report, entitled New York City's Fiscal Outlook, provides IBO's forecast of what the city's finances would look like if existing spending policies and tax laws are allowed to run their course over the next few years. IBO is the only entity in city government, other than the Mayor, that is required by the New York City Charter to forecast city revenues.

The report's main findings are:

The city's budget outlook continues to improve:

• Given unexpectedly strong revenue growth, 1998 will end with a $634 million cushion.

• Assuming this surplus is used to prepay expenses, the city will face a 1999 budget gap of $1.4 billion-roughly $1.1 billion less than IBO forecast one year ago.

• Projected out-year gaps are smaller than previously forecast.

Long-run revenue growth will be insufficient to sustain current spending policies:

• Spending will rise 4.8 percent annually compared with 2.2 percent revenue growth.

• As a result, gaps of $2.6 billion and $2.8 billion are forecast for 2000 and 2001.

• Debt service and education spending will increase rapidly while spending for social services will rise more slowly.

• Revenues will grow sluggishly due to a cooling off of the local economy, tax cuts, and limits on property taxes.

As part of its charter mandate to improve understanding of the budget, IBO has published New York City's Fiscal Outlook a month in advance of its February deadline to give both interested citizens and government officials a non-technical, easy-to-understand outlook on the city's finances before the 1999 budget adoption process gets underway.

Copies of the 28-page report are available by calling (212) 442-0632, writing to the Independent Budget Office, 110 William Street, New York, NY 10038, or by accessing IBO's website at www.ibo.nyc.ny.us.