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Follow The Money

by Ronnie Lowenstein

With its $40 billion in annual spending, New York City's budget is bigger than that of most of the states in the United States. But it's more than size that makes the city's budget so important.

The budget is a measure of the city's fiscal health, and an expression of all our key policy decisions and priorities. It reflects decisions about how much and who we tax -- and in a city where taxes are substantially higher than in other large cities those are very important decisions --- as well as how those taxes and other revenues get spent.

All of these choices are made as part of the give-and-take among the mayor, council members and other elected officials that goes into assembling the city's annual budget. Given the import of these decisions and the size of the city's spending plan, understanding the budget, and the budget-making process, is essential for anyone who wants to affect the final product.

That's where New York City's Independent Budget Office comes in. This week celebrating our fifth anniversary, IBO provides New Yorkers -- whether elected official, community activist or concerned resident -- with non-partisan information and analysis of the city's budget. IBO also develops detailed and balanced reports on the fiscal implications of proposed tax cuts or hikes, and expansions or contractions in city programs and services.

THE MONEY FOR ALL SEASONS

While it may seem that the city's budget is crafted during a finite "season," marked by the Mayor's introduction of the preliminary plan in January and the City Council's adoption of the budget in June, it is actually an evolving and ongoing year-round process. The road to making -- and remaking -- the city's budget is long and winding, with some key stops along the way, particularly for those interested in participating in the process.

The city's budgetary rush hour begins when the IBO releases in January its fiscal outlook report. This report projects the city's revenues and expenditures for the current year and the next three years based on the assumption that tax and spending policies will remain constant. This provides a starting point for consideration of the mayor's Preliminary Budget and financial plan for the upcoming years, which is released just after IBO's report. Some of IBO's key findings in its recent fiscal outlook report are that spending growth will eclipse revenue increases, creating budget gaps that will be increasingly hard to close as the city's economy slows. (Both the IBO report and a table providing an overview of the mayor's plan, along with other useful information, are available on IBO's web site.

THE MAYOR'S PRELIMINARY PLAN

The mayor released his preliminary plan this year on January 25. In his plan the mayor proposes a variety of tax cuts such as elimination of the commercial rent and clothing tax, a continuation of the property tax abatement for co-ops and condos, an across the board 10 percent tax cut for businesses, and an earned income tax credit for low-income working families. The mayor's proposals for tax reductions would cost some $400 million next fiscal year, growing to $1.2 billion by 2004. The plan also calls for new spending such as $77 million for quality of life and anti-drug policing initiatives, $12.7 million for the repair of senior centers, $8.3 million to increase the capacity at shelters for homeless families, and $5.5 million for more full-time faculty at CUNY. Proposed spending cuts include $29 million to branch and research libraries, some $20 million to youth development and after-school programs, $14 million in support of cultural programs, and $4.6 million in anti-eviction and other legal services for the poor.

INPUT IN THE PROCESS

The budget process provides the public and elected officials with opportunities to learn more and comment on these and other proposals. Each borough president, in conjunction with the city's five Borough Boards (comprised of the borough's community board chairs and city council members) holds public hearings. The Borough Boards then send their budget priorities to the Mayor and City Council. The City Council also holds hearings on the Mayor's budget proposals, with testimony from the administration and the public. The City Council then develops its own recommendations for the next fiscal year. And as the Council hold its hearings, IBO releases its analysis of the Mayor's preliminary plan.

BUDGET RUSH HOUR

The next big intersection along the budget roadway is in April, when the Mayor presents his Executive Budget. The Borough Presidents issue their responses some two weeks later, and the City Council again holds a series of public hearings that are completed before the end of May. IBO also publishes an analysis of the Executive Budget.

The City Council negotiates changes in the Executive Budget with the Mayor, and votes to adopt the new budget. The City Charter mandates that this happen by June 5, and in recent years the City Council has been close to meeting this deadline. Even in the most contentious years, the budget must be adopted by July 1, when the next fiscal year begins. Budget "rush hour" may be over at this point, but the process is soon beginning anew.

Just two months later, for example, the city's 59 Community Boards hold hearings on their local budget needs and present the Mayor and respective Borough President with each community's priorities. There are other important landmarks along the way such as the semiannual publication of the Mayor's Management Report, which reviews the performance of city services. And all through the year, modifications are made in the current year's budget as new spending needs arise, delays in implementing programs occur, and revenues exceed or fall below expectations.

Anyone traveling such a long and winding road would want to have a map stashed in their back pocket. Here, too, IBO can help. IBO has published a Roadmap to the New York City Budget Process, available for free by calling the office at (212) 442-0632 or on its Web site.

Ronnie Lowenstein is the director of the New York City Independent Budget Office

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