Bloomberg's Fragile Budget

Re-Election Year Politics Dictate Choices

City Council leaders insisted that their decision to forgo a major battle over the proposed alternate tax hikes was grounded in political reality and put them in good stead for the next budget battle.

"If we had stood and fought, we would have wound up trying to pass our own budget," said a council official. "The whole thing would have wound up in court and we would have ended up re-negotiating with [Bloomberg] anyway. We think we moved the mayor off the dime and put him in a box in which he acknowledged [the taxes] can't be done this year because of the governor."

Indeed, a day after the budget was announced, Bloomberg was openly talking about the need for "new sources of revenue" to bridge what is now expected to be a $3.7 billion deficit for 2004—a figure that leaped by $1 billion largely because of the new teachers' deal. Bloomberg refused to commit himself to seeking new taxes but talked of the need to have "credibility" in Albany when and if the city does seek a tax change.

The stance is ironic since it was Pataki, fully aware of the city's and the state's own looming fiscal troubles, who fashioned a $1.8 billion deal in January to provide wage increases for the health care workers' union, whose endorsement he won shortly thereafter.

"Both the mayor and the governor played a very expedient hand this year, and the losers are the citizens," said Robins. "There are some really treacherous clouds ahead."

Part of the hidden cost, analysts say, is also contained in the $1.5 billion in new expense-budget borrowing the mayor and council agreed to as a crucial part of the deal. The loans, along with a bizarre agreement to sell a city water tunnel in order to raise short-term cash, are reminiscent of the deals that helped cripple the city in the mid 1970s.

"We are getting out of today's problems but more and more tying our hands for the future," said Doug Turetsky of the Independent Budget Office. "The losers in this budget may well be future taxpayers and New Yorkers who need services in the future."

"There is a fairy-tale aspect to all this," summed up a veteran City Hall lobbyist who recalled watching former mayor Abe Beame vainly try to keep the word bankruptcy out of the newspaper lexicon in the 1970s.

Research assistance: Jen DiMascio

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