The Independent Budget Office today released it analysis of the Mayor's Preliminary Budget for 2002 and Financial Plan through 2005. The 90-page report finds that for the fifth time in a row, the city will end its current fiscal year with a large surplus, which it will use to close part-but not all-of next year's budget gap. But with slower economic growth large budget gaps loom-growing from $1.1 billion in 2002 to $4.5 billion in 2004 and 2005.
"The city's economy is heading down an uncertain road, and it is time to heed the flashing yellow lights," said IBO Director Ronnie Lowenstein. "IBO's projections are based on slower economic growth, not a recession. But this slowdown leaves us with large gaps to close as revenues fail to keep pace with rising education, labor, debt service, and Medicaid costs," added Lowenstein.
IBO estimates that city's budget gaps are $1.1 billion higher than the Administration's projections for 2002 and 2003. In 2004 and 2005, IBO's projected gaps of $4.5 billion are over $2 billion more than the Administration's. "These gaps are too large to simply out-grow, and will pose a significant challenge to the Mayor and City Council-and their successors-as they strive to close them," said Lowenstein.
The IBO report provides a detailed reestimate of the Mayor's budget proposals (see attached chart), including new forecasts of city tax collections and other revenues. The report also reviews the Mayor's proposals for new tax cuts, which grow from $400 million in 2002 to $1.2 billion in 2005.
Additionally, the report presents information on a number of spending proposals that are included in the budget:
- For the Mayor's new four-year housing program, the budget provides $336 million in capital funds, two-thirds of it reallocated from other housing programs
- The Administration proposes spending $292 million over four years-$900 million over 10 years-to increase the number of permanent jail cells by more than 5,500 even though the number of arrests has dropped.
- The proposed education budget would increase resources for summer programs, weekend classes, classroom libraries, and school safety. The city would provide no new funds for these initiatives; instead the city would return to the Board of Education a portion of the funds that it transferred last June to an education reserve in the miscellaneous budget. Additionally, a $20 million increase originally planned for gym and other athletic programs will be redirected to the new initiatives.
The full report is available upon request or can obtained in PDF format on IBO's Web site, www.ibo.nyc.ny.us.
Mayor's Preliminary Budget for 2002 and Financial Plan through 2005