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The battle over the budget for Fiscal 2005 has officially begun. City Council Speaker Gifford Miller is pushing popular items like reopening firehouses, reducing class sizes and cutting property taxes. Mayor Michael Bloomberg says we can’t afford such luxuries.

But even as the wrangling over spending begins, there’s an even more basic disagreement splitting City Hall: How much money we actually have to spend.

In January, the mayor set out a $45.7 billion budget plan that included an estimated $26.2 billion of local tax revenue, up 2.2 percent from 2004. Last week, the City Council revised that prediction sharply upward. Its finance office anticipates a whopping $581 million more in tax revenues than does the mayor’s Office of Management and Budget.

And those aren’t the only figures floating out there. The City Comptroller’s office predicts an additional $113 million in tax revenue. Meanwhile, the Independent Budget Office (IBO) predicts $370 million in added tax dollars.

So which numbers should we count on?

The OMB, City Council, Comptroller and IBO all follow roughly the same procedure internally to arrive at their estimates: Each uses professionally prepared data sets about trends in the national economy as the framework, and each applies standard economic models to assess how those trends will play out locally. Once they’ve calculated on an industry-by-industry basis how each sub-sector of the economy is expected to perform, they can make predictions about how much taxable income will be generated citywide.

The four groups purport to be in synch about the status and direction of the city’s economy. “If you look at all of the estimates, the overall picture is not dissimilar,” said Doug Turetsky, communications director for the IBO. “They are all in agreement that in the very near term, the city is in much better financial shape.”

But Turetsky cautions that the picture down the road looks much dimmer: “In the next few years, the costs of debt service, health benefits and pensions will continue to grow rapidly.” Mayor Bloomberg has also pointed out those burdens, and says his budget realistically addresses the long-term forecast.

The council, comptroller and IBO all assume that the economy will continue to rebound more quickly and solidly than originally asserted by the mayor’s budget office. They argue that, given local trends over the last few months, wages and employment will increase modestly for the rest of 2004, leading to increases in both personal and business income tax revenues in 2005. Miller predicted in his budget address last week—the same day Comptroller Bill Thompson announced a gain of 4,300 jobs—that personal income taxes alone would be $256 million higher than the OMB expected.

There’s another factor that’s harder to quantify: electoral politics. Both Miller and Thompson plan to challenge Bloomberg in next year’s mayoral election, and each aims to appear both fiscally prudent and socially conscious. One way to do that is to look to the nonpartisan Independent Budget Office for guidance. Miller has already defended his numbers by comparing them favorably with the IBO’s. “The IBO,” says Miller spokesperson Gur Tsabar, “holds some credence that we and the mayor’s office don’t have.”

Even the hardnosed Mayor Bloomberg may end up revising his revenue predictions upward, suspects Marcia Van Wagner, chief economist at the watchdog group Citizens Budget Commission: “If everyone is coming in higher than the mayor, the mayor is going to have to acknowledge a little higher revenue.”

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