INDEPENDENT BUDGET OFFICE
The City of New York
110 WILLIAM STREET, 14TH FL., NEW YORK, NY 10038
|For Immediate Release
Monday, May 17, 1999
|Contact: Herbert Block
* NEWS RELEASE *
IBO FORESEES $356 MILLION CITY BUDGET SURPLUS
FOR NEXT YEAR
THEN $2-3 BILLION GAPS BEYOND 2000
The city will realize a budget surplus of $356 million in fiscal year 2000, followed by gaps of $2.3 billion in 2001 and about $3 billion in both 2002 and 2003 if the Mayor's recently proposed budget is adopted in its entirety, according to the Independent Budget Office's (IBO), Analysis of the Mayor's Executive Budget for 2000. Moreover, the current year is expected to end with a surplus of nearly $2.1 billion -- about $300 million greater than projected in IBO's March analysis of the Mayor's preliminary budget. The forecast surpluses result primarily from ongoing growth in the city's economy coupled with the continuing record profitability of Wall Street securities firms.
In the current fiscal year, IBO estimates that city revenues from all sources will total $36.5 billion, a robust 4.6 percent increase from 1998, and nearly $400 million above the executive budget forecast. For 2000, however, IBO forecasts a slight (-0.4 percent) downturn in city revenues, to $36.4 billion-still $1 billion more than the forecast in the Mayor's budget. IBO expects revenue growth to resume again in 2001, averaging 2.1 percent annually, with total revenues reaching $38.6 billion by 2003.
"Officials in Albany backing a plan to eliminate the commuter tax for suburban residents who work in New York City fail to recognize the tremendous fiscal challenges awaiting the city in the near future. Notwithstanding recent surpluses, the city continues to face serious structural budget imbalance due to sluggish revenue growth expected in the years ahead, rising labor, education and debt service costs, and the need to repair the city's schools and crumbling infrastructure," said Douglas A. Criscitello.
"Although one can question whether the city should be considering tax cuts at all, it makes sense to let local officials decide which tax cuts are in the best interest of the city. Tax reforms presently being debated at City Hall would reduce certain regressive taxes such as sales and utility taxes, promote work for low-income individuals by establishing an earned income tax credit, and cut the tax on property rents paid only by businesses located south of 96th Street in Manhattan."
IBO's report notes that although the city has made great strides over the past decade in improving the quality of life through substantial reductions in crime, lower taxes, and an improved business climate, little has been done to address the city's long-term fiscal challenges. IBO suggests steps that could be taken now to alleviate budgetary problems in the years ahead. For example:
- Surplus funds could be used to finance some projects on a pay-as-you-go basis, thereby reducing future borrowing needs.
- The surplus funds could be spread over the entire financial plan period and beyond by reducing outstanding debt to help fortify the city's long-term fiscal position.
- Additionally, a true rainy day fund could be established for use in the event of an economic or fiscal downturn. While it has been argued that the establishment of such a fund would require state legislation, a rainy day fund could be created at the local level by simply having a local law (or other agreement) requiring that the city's current budget stabilization account be re-appropriated each year in an amount equal to its year-end balance.
Copies of the full 20 page report are available by accessing IBO's website at www.ibo.nyc.ny.us, by calling (212) 442-0632, or by writing to the Independent Budget Office, 110 William Street, New York, NY 10038.
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