NYC deficit rises to $4 bln as Wall Street slides

NEW YORK Tue Nov 4, 2008 6:48pm EST

Related Topics

NEW YORK (Reuters) - New York City's budget gap will climb to $4 billion in fiscal 2009 and 2010, an administration official said on Tuesday, underscoring the damage inflicted by Wall Street's financial crisis.

Mayor Michael Bloomberg, who this week persuaded the City Council to extend term limits so he can seek a third term, on Wednesday will present his detailed plan for closing the deficit.

In September, the mayor said he expects a tax revenue shortfall of $1.5 billion over the two years. Bloomberg previously forecast a deficit of $2.3 billion for next year.

His new proposals include laying off 500 public employees and shedding another 2,500 workers through attrition, said the official, who requested anonymity.

The city employs about 300,000 people. Only a small number have been let go since the downturn that followed the bursting of the Internet bubble and the September 11 attacks in 2001.

Deputy Mayor Edward Skyler, who oversees the budget office, said cuts were needed due to "the recent financial upheaval." He added in a statement: "It will require sacrifice from every city agency and in some senses, every New Yorker."

The mayor, an independent, has repeatedly warned he will not repeat the mistakes of the 1970s, when a budget crunch caused thousands of city workers to be laid off, and soaring crime and failing schools forced residents to flee.

But one Police Academy class will be canceled, the firefighting academy will cut 5 weeks from training programs and night-time operational hours will be reduced at five engine companies.

SCHOOLS AND PARKS MAY SUFFER

The mayor had already told all city agencies to slice 2.5 percent from their budgets. For the Department of Education, this means a total cut of $180 million, with $103 million borne by schools, which look likely to slash summer programs and school aides, said David Cantor, a school spokesman. About 500 administrative positions will be shed, he added.

Schools now get about $22 billion out of the city's total budget of $59 billion. Next year, the mayor has ordered all city agencies to trim their spending by 5 percent, which for the education department means an 8.65 percent cut in administration and 3.5 percent in school budgets.

This year, the Parks Department will lose 321 seasonal workers, 187 sanitation employees will be cut through attrition, and 127 vacant positions in the Administration for Children's Services will not be filled because the city now relies on private groups to find homes for foster children.

Wall Street's struggle, which forced the U.S. government to rescue local giants, including insurer American International Group, could hurt city revenues because it pays 35 percent of all wages.

The city may have to increase pension contributions after pensions lost 8.5 percent in the first fiscal quarter that ended in September.

New York state, which gets one out of every five tax dollars from financial companies, needs to close a $47 billion deficit in the next few years, and the city could be hit if it reduces aid.

(Reporting by Joan Gralla; Editing by Jan Paschal)

FILED UNDER: