While the media glows with reports of an unexpected budget surplus for the current year, the spreadsheets reveal a far dimmer future: the mayor's proposed $33.5 billion city budget for fiscal 1998 leaves the city with chronic annual gaps of $2 billion in 1999, $2.9 billion in 2000, and $2.7 billion by 2001. That means New Yorkers face the prospect of more severe cutbacks in city services, even deeper than those sustained during the last three years.
This is the modern corollary to the 1970s concept of “planned shrinkage.” The target is the many government services that make New York a livable place for the majority of its hard-working citizens, such as education, parks, mass transit, libraries, community centers, neighborhood-based arts organizations and code enforcement.
This version of planned shrinkage has been underway for years. Every recent budget has projected deep deficits, providing steady pressure for the permanent dismantling of necessary government functions.
The mayor's budget is also silent on the city's overall economy. The unemployment rate as of April 1997 was 9.7 percent, nearly double the national rate of 4.9 percent, the greatest gap in 30 years. His budget ignores this and other growing problems for city residents, including the continued decline in living standards for all but the wealthy.
We need leaders who will admit publicly that bold changes and vastly different spending priorities are required in our city. This is not just a question of finding additional sources of government revenue–although, if we are to confront our city's problems in a fair and meaningful way, the wealthiest individuals and corporations must pay their fair share. Even more important is redirecting the billions that the city already spends with the conscious goal of serving the average New Yorker.
By starving our core services, City Hall has taken the easy way out. The mayor's strategy is certainly not making this a more livable city for most of its residents.
All is not well in New York City. In truth, data available from a host of sources tell a far different story from the positive spin peddled by the mass media and the Giuliani administration. Indeed, in the last three years:
- Transit riders have sustained a 20 percent bus and subway fare increase, from $1.25 to $1.50. Thus the state has stuck riders with 76 percent of their commute's true costs–the highest burden of any city in the nation. Meanwhile, tolls have been jacked up 16.6 percent and the city has boosted taxi fares 20 percent.
- The Rent Guidelines Board has burdened tenants with a 5 to 7 percent increase for “stabilized” units–the largest increase in 10 years. The recent Bureau of the Census' Housing and Vacancy Survey showed an increase in the average share of personal income needed by every New Yorker for rent. The figure rose from 30.8 percent of gross income in 1993 to 32.3 percent today.
- The state increased tuition at SUNY and CUNY by $750 two years ago and another $400 is projected to be added this year–compelling many to suspend their higher education or burdening them with increased debt for using a system that was free for their parents.
- The city's inflation rate for 1996 was 2.9 percent–surpassed by only two other cities, Miami and St. Louis.
Meanwhile, the city's economy is deeply divided. While the banking and securities sectors are richly blessed with profits, many other sectors have been left behind. The slow rate of growth and uneven distribution of economic rewards are very troubling. In fact, if the latest Wall Street boom is subtracted, the city's economic performance is quite unimpressive. It is increasingly hard for ordinary workers to find jobs. February's unemployment rate climbed to its highest level in three years. In Brooklyn and the Bronx, the unemployment rates were 12 percent and 11.4 percent respectively. Some economists fear that the city may no longer be able to produce significant entry level jobs–jobs that the city has historically depended upon.
A few key indicators:
- Economic forecasts show no significant job growth over the next four years. The recent upturn in the national economy has bypassed the city. Despite the strong economy that the city enjoyed in 1996, mostly due to the Wall Street boom, its job growth lagged behind that of the rest of the nation.
- New York City was among the nation's weakest economies, according to a February report from City Comptroller Alan Hevesi. Of the nation's 20 largest urban centers, the city had the highest unemployment rate last year and was outpaced by all but five cities in the percentage of growth of new jobs.
- Wages have remained stagnant for 20 years. The hourly factory wage in New York City is $2 less than the national average.
- New York City can claim the nation's largest gap between its richest and poorest citizens, and the gap is getting wider. Such income inequality often signals a low rate of economic growth. Author Robert Fitch's analysis of one statistic tells us everything about this imbalance: 55,000 of the richest households in Manhattan have more wealth than the entire boroughs of Brooklyn or Queens. Since the 1960s, commuter income has been growing more than twice as fast as New York City residents' income.
- Beyond the unemployment statistics, there are some troubling signposts. In New York City, 44.8 percent of adults have dropped out of the workplace entirely–an all-time high. Of the 24 largest metropolitan areas, New York City has the highest non-working rate (proportion of residents who are either unemployed or non-participating).
- The number of 16 to 19-year-olds in New York City who have dropped out of school and are now unemployed is twice the national average.
- Sixty percent of the city's unemployed receive no unemployment insurance benefits because low-wage workers are frequently ineligible. Current federal and state laws deny coverage for part-time and seasonal workers.
- In 1995 there were an estimated 1.63 million people without health insurance in New York City–about 22 percent of the population. That's up from 19 percent the previous year. The United Hospital Fund projects that this trend will continue to worsen.
- According to the Census Bureau, 27 percent of New Yorkers–approximately two million–live below the federal poverty line, which is $13,330 a year for a family of three. The poverty rate for the elderly has grown to 16 percent in New York City, according to the Council of Senior Centers and Services.
The city has redistributed a significant amount of income and wealth upward without managing to raise the living standards of most city residents. As a city, can we tolerate increasing disparity–the wealthiest among us secured $6.1 billion in bonuses on Wall Street in 1995 and $8.1 billion in 1996–while jobs and wages stagnate and overall living conditions decline for the working classes and the poor?
As the economy suffers, city services continue to deteriorate because of City Hall budget choices. Already, officials have cut more than $4 billion and eliminated 21,000 municipal jobs. The new standard for government these days can best be described as “harsh minimums.” Year after year, the mayor announces a budget that further erodes the public services that form the backbone of the city's neighborhoods and environment.
- Mass transit, the essential engine of city life–is in decline once again after a decade and a half of an impressive comeback fueled by a massive infusion of capital. Buses and subways are running less often, overcrowding is increasing as are service breakdowns, fires, and graffiti; trains and track beds are dirtier; rats are commonplace on track beds; poor lighting and water drips are common in many stations; the sound systems are inaudible; and there are longer waits to buy tokens. The recent withdrawal of $1.75 billion in resources promises further decline. The current approach to funding mass transit will result in still higher fares, poorer service, more deferred maintenance, and increased debt. Shifting the burden to riders through fare increases like last year's 20 percent hike is a substantial assault on the mass transit system and all who use it. The LIRR and Metro North commuter railroads move 6 percent of the state's passengers but collect 21 percent of state aid. It is doubly hurtful when you consider that suburban commuters earn twice the salaries of city residents.
- Public schools continue operating in increasingly overcrowded space and with inadequate textbooks, supplies, equipment and desks. Class size has gone up: an average first grade class had 26.8 students in the 1995-96 school year, two more than in 1993 or 8 percent more crowded. And in the last year, class size increased to 28, according to a New York Times survey, while the mayor and Board of Education claimed that class size averaged 25. Reading scores in 1996 dropped to a nine-year low with only 41.6 percent of students reading at or above grade level. Two out of every three public school third graders read below grade level.
- In the next decade, the school system is expected to grow to nearly 1.3 million students. It will need space for 300,000 additional students by 2004. The Board of Education's five-year fiscal plan–which ends in 1999–has enough money to build space for only 30,000 more students. Every year since 1993, the city has devoted less and less money to capital construction. In 1997, it's $709 million. A recent Board of Education report outlining the dire physical state of the schools said that they need $7.5 billion for the rest of this decade or nearly $2 billion per year in capital spending.
- Over the past four years, more than $1 billion has been cut from the city's school budget. Per pupil spending is less now than at any time in the last decade. To compound these cuts, the state's education aid formula disproportionately benefits wealthy districts, shortchanging New York City schools by over $200 million annually.
- On the poverty front, there were 681 soup kitchens and food pantries when Mayor Giuliani took office. Today, there are 903 operating throughout the five boroughs. In other words, more than one of these facilities has opened every week since the mayor took office in 1994. Food for Survival, the central supplier of soup kitchens, distributed 27 million pounds of food from July 1995 to June 1996. That was 35 percent more than in the previous 12 months.
- Currently, some 3.5 million meals are served to 350,000 individuals. Yet it hasn't been adequate. The demand for food at soup kitchens and food pantries across the city has surged over the past three years, forcing neighborhood centers to turn away some 60,000 people a month in 1996 due to insufficient food supplies. As a new round of federal cuts in welfare and food stamps kick in, we can expect these numbers to increase.
Before we reduce the taxes of a major corporation by one more dollar, we need to put an end to the acceptance of harsh minimums as our standard for government services. The alternative is to embrace a grim and relentless prospect of a steady decline. With different choices, we can make this a livable city for all.
We need leadership that will be honest with us–to admit publicly that bold changes and significant spending in the near term are required in our city and that these changes cannot be achieved at the margins or on the cheap. Vast sums of public and private investments are required. We are a city of such enormous wealth that, if redirected and-yes-redistributed, these investments are clearly within our reach.
In order to get the city's fiscal house in order, substantial contributions are required from the wealthy, commuters, property owners, and the city's municipal labor workforce. We also have to help the poor become middle class, not through stop-gap workfare programs, but through education and the creation of living wage jobs.
First of all, we need to revise the city's tax structure. These would be some of the most controversial and difficult moves a politician could make, and only a strong leader calling for a true urban renaissance would succeed. Yet without these changes, the rich will continue to profit mightily while the city itself continues to decline.
Tax revisions could include:
- A tax on the elite nonprofit institutions, such as private universities, voluntary hospitals, and foundations. They currently pay no taxes, although some contribute modest Payments In Lieu of Taxes (PILOTS). A new tax formula could include a graduated tax for those institutions with a budget exceeding $5 million a year. More than $750 million could be raised from this sector.
- Top-bracket earners could also sustain a higher income tax rate. Their earnings have increased dramatically in recent years. A 2 percent increase in personal income tax would generate $600 million. New York would still rank highest among the 50 states in after-tax income for the richest 1 percent.
- Ask commuters to contribute their fair share toward the city that provides them not only employment and services, but also cultural activities. Since the 1960s, commuter income has grown more than twice as fast as New York City residents' income. Currently, the city receives 0.45 percent of commuters' wages (compared to 4 percent in Philadelphia). Nearly 750,000 people commute to work in New York City each day. Increasing the commuter tax to just 1 percent in the FY 1999 budget and to 1.5 percent in FY 2000 and 2.0 percent by 2001 would raise at least $500 million.
- End the other AFDC, Aid for Dependent Corporations. According to the City Project, New York loses more than $500 million in revenue annually on luxury and office building tax abatements and other corporate welfare–a massive redistribution of resources that will affect New York City for decades to come. If the city stood tall and didn't blink each time a corporation threatened to leave, their executives might feel less compelled to behave like billionaire S.I. Newhouse, Jr., the Conde Nast chairman, who snookered the city out of $10.75 million in tax abatements. The city should review existing giveaway agreements and renegotiate them where corporations have reneged on job retention and job creation levels. This practice must end. It is unfair to those businesses that are paying full fare now.
- The current property tax structure unfairly subsidizes owners of one, two, and three-family houses at the expense of renters and business. Private homeowners represent 44 percent of the total market value of taxable property, but pay only 12 percent of the total city property tax levy, while apartment buildings and businesses pay a far larger, unequal share. This is the city's largest tax and its most underutilized revenue source. A three-year plan should include a phased increase in property taxes to add $2 billion in city revenues.
Aside from boosting revenues, the city has to change the way it does business on a number of other fronts.
- City workers should make living wages and should be treated as respected partners in making the city livable. Workers must share the sacrifice so that needed services can continue to be provided. Their wages and benefits should continue to be good, but not better than comparable public employees elsewhere.
- In addition, residency requirements for teachers, police, fire, corrections, and sanitation workers–more than half of the city's workforce–should be imposed, through a voter referendum if necessary. This provision should extend to workers of the Health and Hospitals Corporation, Emergency Medical Services, and community-based nonprofit organizations that have contracts with the city. Commitment to work is more solid when employees live in the city that they serve. Residency also keeps local wealth circulating within our neighborhoods. Why not one standard for all city workers?
- Future economic development strategies should also make a priority out of securing a fair share of resources from state authorities. This means a fair redistribution of MTA and Port Authority resources. The city's transit system moves 81 percent of the state's transit riders but receives just 61.5 percent of state transit aid. The city should also receive 70 percent–not 50 percent–of the surplus revenues from the Triborough Bridge and Tunnel Authority. The current 50-50 split between subway and commuter rails favors commuter rails. And the Port Authority must spend a fair share of its capital on projects that help the city's economy, rather than redirecting funds to New Jersey as it has for so many years.
Approximately one-half of the city's operating budget is labor costs, paying for the existing workforce as well as retirees. Since 1994, City Hall has negotiated wage increases averaging 15 percent to most municipal workers over a five-year period, yielding little or no sustainable productivity savings.
A labor contribution of $1.5 billion with recurring savings, combining increased productivity and a roll-back in fringe benefits, must be a significant component in achieving fiscal stability. Generous fringe benefits and work rule changes won by unions in the past can no longer be sustained at current levels. And we should restructure the pension review process so that tax-free disability pensions are strictly awarded. Golden parachutes must end!
If the city's workers received benefits more in line with those of federal government workers–increasing the work week, reducing paid holidays, sick days, and vacation time, mandating a higher employee (and retiree) contribution to health care costs-savings of one billion dollars could be achieved.
Any increase in revenues should be dedicated to ensuring that public space, broadly defined, be clean, safe and in a state of good repair. This would include:
- Keeping libraries in every neighborhood open seven days a week, 10 hours a day.
- Renewing the parks.
- Maintaining recreation centers open seven days a week with schedules emphasizing after-school, night, and weekend hours, and creating night high schools in all five boroughs.
- Providing night and weekend activities for youth at schools, settlement houses, community schools, Beacon Schools, and community-based youth organizations.
- Supplying additional food and other resources to the city's 903 community-based soup kitchens and food pantries so that no hungry people are turned away.
- Establishing and strengthening neighborhood-based art and cultural institutions. There is now an increased awareness that the arts sector is important to education, the city's economy, and the quality of life in our neighborhoods.
- There must be a single standard for code enforcement. Unscrupulous landlords, sweatshop owners, abusive cops, corrupt contractors and those who illegally dump garbage in our neighborhoods should be put on notice that the days of lax enforcement are over. Expressions of outrage from the media and City Hall would go a long way toward telling those who exploit tenants and workers and despoil neighborhood space that they will be taken to task with the same tenacity that the city currently asserts toward fare beaters and teenagers who deface public space with graffiti.
- Get serious about restructuring services. The city must have purposeful, performance-based management. Nonprofit and for-profit contractors as well as city agencies should be able to produce clear, verifiable documentation of their performance. Clear quantifiable goals for every city service must be set and evaluated every year, and they must be understandable to the public. How long does it take to get a clinic appointment or lab test results? How smooth are our road surfaces? How many sweatshops have been closed? How many uncertified teachers are in each school? How many welfare recipients who have left the rolls have found work and remained employed beyond one year?
“Eight days a week.” All neighborhood services (e.g., libraries, recreation centers, art and cultural centers, youth centers) would be open 10 am – 8 pm, including weekends, so residents can take full advantage. At the turn of the last century, settlement houses and night high schools were “spaces” where people sought refuge from their tenement poverty and secured advancement through education.
To achieve all of this, City Hall must begin managing with a purpose, ensuring that the work of government gets done, and done well. By providing high quality, equitable services, the mayor would guarantee a new popular respect for government–and a new willingness to support government services through taxes.
Our leaders have to start making choices that favor those who live and work in the city. New York City residents have become accustomed to making do with less and tolerating harsh economic realities, declining living standards and decaying government services. We have to demand more.
The conventional wisdom has it backwards. Getting tough does not mean reducing government spending at all costs. It's about changing the way we spend our money and finding new revenues when necessary, so we can invest in high quality, effective and valued services that we all agree government has to provide.
Getting re-elected, by comparison, is an easy trick.
Harvey Robins worked more than 15 years in city government. He was director of the Mayor's Office of Operations during the Dinkins administration.