Hevesi Versus McCall

Two Comptrollers Take Wildly Divergent Positions on Rudy’s Fiscal Follies

A year from now, when a new mayor is announcing painful budget cuts and lamenting the daunting deficits that threaten his four-year term, it will become common wisdom that Rudy Giuliani mismanaged the city's golden years.

Just as Giuliani used to display an array of charts at his early budget press conferences condemning the profligate Dinkins era and justifying his own tough municipal medicine, the next mayor will rail about Rudy's misspent surpluses, soaring garbage-disposal costs, and debt, overtime, and workforce explosions. In the post-Giuliani era, the only choice, even without a recession, will be to slash and burn.

Yet, strangely, the Democrats running to succeed him are virtually silent about the fiscal house of cards they will inherit, especially the two with current, real budgetary power, City Council Speaker Peter Vallone and Comptroller Alan Hevesi. Vallone can't say much—now or if he is elected mayor—since he steered Giuliani's budgets through a compliant council year after year. Indeed Vallone's response to the latest financial plan, announced by Giuliani six weeks ago, has been just as obsequious, demonstrating once again the speaker's willingness to settle for a few hundred million in contrived restorations of expenditure reductions that the mayor pretends to propose.

The mystery is Hevesi, whose puny numbers in early mayoral polls have already been widely attributed to his over-identification with Giuliani, hardly a popular figure among Democratic primary voters.

Consider the contrast between the reports about the Giuliani financial plan issued March 1 by State Comptroller Carl McCall and Hevesi. McCall anticipates a $1.09 billion gap in the next fiscal year, which begins July 1. Ronnie Lowenstein, the head of the city's Independent Budget Office, predicted precisely the same gap in her City Council testimony on March 5. Yet Hevesi anticipates a $671 million surplus—heralded in the headline of the press release accompanying his report and its executive summary. At worst, he says in the fine print of the report, the city could get hit with a $290 million deficit.

McCall and the IBO also warn of gaps in the three subsequent years as high as $500 million more than Hevesi's—though all three sound alarms and see deficits exceeding $4 billion by 2004. A Hevesi spokesperson says that Hevesi's office has more information available to it about city "resources" than McCall, denying that he is in any way downplaying the city's fiscal crunch.

McCall's release—which, like Hevesi's, did not attract a sentence of ink in any newspaper—put the blame squarely on Giuliani: "Record budget surpluses afforded the City a golden opportunity to get on the path toward long-term fiscal stability. The opportunity is being squandered."

Citing gargantuan personnel reductions called for in the Giuliani plan but not scheduled for implementation until he is gone, McCall declared, "It's simply inexcusable for the City to be cutting police officers and proposing other cuts on the heels of the greatest economic expansion in our nation's history. The most responsible use of the record surpluses of the past few years would have been to reduce the City's mounting debt burden and build a reserve fund." This critique is identical to that of the IBO and the Citizens Budget Commission, a business-funded watchdog.

Hevesi's release, on the other hand, spends more space denouncing the state's inequitable education formula and Governor Pataki's anti-city policies than it does criticizing any Giuliani initiative. While the Hevesi statement expresses concern about future budget gaps and "the rapid growth of debt service costs," it does not offer a single word of criticism about Giuliani's decision to once again roll over the surplus from one year to close the deficit in the next. Neither does Hevesi's 60-page report, which estimates the rolled-over surplus at $2.3 billion, $326 million more than Giuliani expects.

Hevesi did not hesitate to blast these Giuliani practices last year when the mayor was running for the Senate and Hevesi was temporarily embroiled in a battle with him over city workfare contracts. In comments he made in late February 2000—while releasing the same annual report as he is now—Hevesi said the Giuliani plan "violates a fundamental principle," namely, "that in good times revenues should be invested for long-term purposes."

The comptroller then drew scathing comparisons between what he called the "huge gaps" Giuliani would leave and those left by Ed Koch and David Dinkins, adding: "These deficits are aggravated by decisions made by the mayor."

Hevesi also assailed the tax cuts Giuliani proposed last year as too generous, saying they worsened future gaps and could force teacher layoffs. Yet his report and press release say nothing about the reductions in this year's plan, which will cost $405 million immediately, and $1.2 billion by 2005 (his spokesperson says these cuts are smaller than last year's, but still "too large").

McCall counters that Giuliani "scaled back his proposed tax reductions last November" in an attempt to cope with the anticipated future gaps, only to "reverse course" now and push "a significantly larger program" of reductions.

The differences between the two comptrollers are reminiscent of February 1997, when McCall charged that Giuliani's financial plan would spend the revenue windfall "like the worker who blows Friday's paycheck that night," while Hevesi said, "I thought the mayor handled it quite appropriately. He hasn't focused on the long-term as well as Carl and I are recommending, but there's time to do that." Giuliani and Hevesi were up for reelection in '97 and were open allies despite Hevesi's nominal endorsement of Democrat Ruth Messinger.

McCall's current report emphasizes a laundry list of Giuliani fiscal follies that get less attention from Hevesi: Spending grew 5.2 percent—twice the inflation rate—from 1997 to 2000. It will grow 9.6 percent this year. The city has added almost 25,000 employees since 1997, raising the workforce to the highest in history, thousands more than when Giuliani took office. The mayor's plan now calls for $1.3 billion in agency cuts over the coming years—the equivalent of 20,000 positions—and actually recommends a reduction of 1200 cops.

In biting language that has no equal in the Hevesi report, the state comptroller concludes: "In any event, the City will have little choice but to cut spending to balance the budget. That could involve difficult choices, since most of the budget is devoted to core municipal services such as public safety and education."

Both the McCall and Hevesi reports hammer the skyrocketing increases in capital-construction spending by Giuliani, with Hevesi noting that the city is spending 90 percent more now than it did last year. They also question Giuliani's reliance on uncertain one-shot revenues like the Off-Track Betting Corporation sale, as well as his insistence on a labor set-aside that only covers the cost of two-year contracts when the current agreements are for five years.

But Hevesi is the most muted of the fiscal watchdogs, with little bark or bite. He once wooed Giuliani, and is still a favorite of such Giuliani champions as Randy Mastro, Bruce Teitelbaum, and Ray Harding. He knows that Giuliani's budgetary record, despite the Wall Street boom that hiked the city's bond rating, is a threat to his own potential mayoralty, yet he reviews it with such a flair for understatement that he gets no press. His passivity may have no political motive, but it does have a political consequence.

Unless Alan Hevesi challenges Giuliani's policy, it may be assumed he will continue it.


Research: Robbie Chaplick, Jesse Goldstein, Laurence Pantin, and Theodore Ross

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