New York faces 'doomsday' budget

New York faces 'doomsday' budget

Mr Bloomberg has pledged to set city finances in order

New York City's public workers have been asked to tighten their belts to help tackle its ever-present budget problems - and Mayor Michael Bloomberg has warned that far stricter austerity measures are possible.

Mr Bloomberg presented two versions of his proposed 2004 budget, the outcome depending on whether the city is able to force upstate commuters to pay municipal income tax.

If Mr Bloomberg gets permission for this controversial move, he will bring in an extra $1.4bn a year, and will require savings of only $600m, the details of which are currently under discussion with trade unions.

We can't fire a bear, or lay off a baboon

John Calvelli, New York zoos

If he fails, his "doomsday scenario" envisages the loss of 10,000 public jobs, the closure of zoos and fire stations, and vastly reduced spending on education, sanitation and the police force.

Mr Bloomberg, a billionaire, has set out to rectify New York City's catastrophic finances, but has run into stiff opposition from workers and many residents.

Town and country

The idea of taxing commuters is not a new one, but may still prove tricky.

Until a few years ago, the state of New York charged non-city residents a levy of 0.45% on their income, which went to municipal budgets.

Commuters must pay their share, Mr Bloomberg says

New York City mayors see commuters as a rich source of revenue, since they earn on average twice as much as city residents, and do not vote in mayoral elections.

But simply reinstating the levy will bring in only a fraction of what Mr Bloomberg needs.

And the state government has fallen on hard times, with an $11.5bn budget deficit of its own, so is reluctant to commit more of its tax revenues to the city.

Some in New York have seen Mr Bloomberg's doomsday budget as a tactic to force the state government's hand.

Hard times

The doomsday version has already stirred up enormous controversy in New York.

On top of the 4,500 municipal workers who already face the axe, it calls for 10,000 extra job cuts, most of which will come from the education system, sanitation department and police force.

Two of the city's four zoos - in Brooklyn and Queens - will be shut, and as many as 40 fire stations will be mothballed.

Almost all school extras - such as after-hours activities and summer schools - will be terminated - and critics say vital services such as refuse collection will be neglected.

The plan has been attacked by trade unions and others in the firing line.

"We want to continue to help New York survive this fiscal crisis," said John Calvelli of the Wildlife Conservation Society, which runs the city's zoos.

"But we can't fire a bear, or lay off a baboon."

Too little, too late

At the same time, Mr Bloomberg is struggling to secure the support of unions for his less drastic budget package.

Randi Weingarten, a teachers' union leader who represents workers in talks with the city, claims to have already offered concessions worth $300m, half Mr Bloomberg's proposed savings.

But Mr Bloomberg said the best offer, after months of negotiations, has been worth just $20m in what he called "concrete" savings.

Workers are concerned that they have to bear the brunt of the cost cuts, and argue that money could be saved without hitting pay or benefits too hard.

"In this dire economy, we should not add more people to the list of unemployed," said Brian McLaughlin, president of the New York City Central Labor Council.

"Now is a time to think creatively to come up with solutions, not just cut jobs and services."

Crunch time for the Big Apple

Mr Bloomberg needs a solution quickly.

The 2004 fiscal year begins on 1 July, and the city needs to reconcile a budget deficit of $3.8bn.

The only real flexibility the city has is to sell $500m more in short-term bonds, the remaining tranche of a $2bn allowance granted by the state after the World Trade Center attacks.

But Mr Bloomberg has said this will hit the city's credit rating.

A slowing global economy, combined with rising municipal expenditure, has left New York facing its worst budget crisis since the 1970s, with heavy deficits forecast for the foreseeable future.

According to some estimates, New York has lost 223,000 jobs since the end of 2000, mainly thanks to a 16% contraction in Wall Street employment.