NEW YORK (Reuters) - New York City’s current budget crisis may be even worse than the one Mayor Michael Bloomberg inherited in 2002 from Republican Mayor Rudy Giuliani.
Today’s budget repair kit also has fewer tools.
Bloomberg has already overseen multiple cuts in spending and raised income, sales and property taxes to close previous deficits.
On Thursday, Bloomberg highlighted the paucity of budget fixes.
“We can’t afford to cut the critical services,” he told reporters, a day after winning a third term.
“We don’t have any more money and we certainly don’t want to raise more taxes,” Bloomberg said.
The mayor began his first term at a time when the city’s future as a global capital was in doubt following the September 11, 2001, attacks.
The last time around, “it was a very quick recovery,” Laura Porter, an analyst with Fitch Ratings said by telephone. That was partly because Wall Street recovered its footing so swiftly.
“This time ... if you’re looking forward, I don’t think there’s the expectation of a quick rebound,” she said.
The difference between then and now is again due to Wall Street, which pays about 9 percent of the city’s taxes. Banks and brokerages moved employees to the suburbs after the 2001 attacks, but later brought many of them back to the city. The city’s economy shared in the national upturn.
This time, however, the financial sector is undergoing what New York state’s budget office called a “fundamental restructuring” that could clip the bonuses that analysts say can average more than $400,000 in profitable years.
A newfound zest for financial regulation may reduce risk-taking and bonuses — and companies may replace some of the cash with stock, which often delays the tax bill.
Still, Steven Cohen, a Columbia University professor of public affairs, noted that the financial industry’s prospects look brighter than in the depth of last year’s credit crunch.
“Wall Street and the financial industry have certainly taken a body blow, but it’s not getting worse, and in some places, it’s starting to improve,” he said.
The U.S. stock market’s recent push higher, for example, may prompt investment and commercial banks to raise bonuses by 40 percent, Johnson Associates, Inc. said on Thursday.
But bonuses for other parts of the broad financial sector, such as insurance, asset management, and alternative investments, could fall 20 percent, the New York-based consultants said in a report.
The mayor dismissed concerns that the narrowness of his third- term victory — just five percentage points — would embolden his political rivals to oppose his policies.
“I’ve tried to reach out to everybody on both sides of the aisle,” Bloomberg said. He described the Democratic-led City Council as one of the nation’s best legislatures.
He also warned that the city’s recovery might not be dramatic or quick.
“We know we’re going through some tough budgetary times.
“I’ve said that the worst is over (but) there are still people losing their jobs and in danger of losing their homes,” said Bloomberg, who spent part of his day reviewing how to get more services to at-risk residents: children and ex-convicts.
Bloomberg has continued a recent mayoral tradition of underestimating revenues. Charles Braconi, chief economist for the city comptroller, said collections from July to September were about $225 million higher than the mayor expected.
Later this month, Bloomberg will update the current budget and he may spend part of that extra cash prepaying next year’s expenses to reduce an estimated $5 billion gap.
The mayor may continue another of his rituals: demanding that city agencies prune budgets and find efficiencies, or “do more with less,” in his parlance.
One big test for Bloomberg may arrive soon — thrashing out a contract with teachers, who could demand the same 4 percent hike in the first year previously granted other unions.
Reporting by Joan Gralla; Editing by Jan Paschal