A prominent observer of New York City and New York State finances last week blasted both city and state leaders for mismanaging their fiscal affairs and burdening future generations with higher taxes and fewer job opportunities.
In a 34-page report, the Citizens Budget Commission, a nonprofit group financed by local businesses, said the budget problems found in both city and state government are the direct result of politicians "ducking hard choices and thereby inflicting unnecessary hardship on current and future New Yorkers."
The sharply worded report, released for publication Saturday, said city and state political leaders have "mismanaged" their budgets during the past three years by relying on what the group described as short-term relief measures, such as tax increases, bond refundings, and asset sales to plug budget holes.
These short-term techniques, the report said, often burden future taxpayers with higher costs, and do not help balance city and state budgets on a long-term, or structural, basis. The report criticized the way city and state officials use bond refundings to create only short-term budget relief, while increasing debt-service costs in future years.
Structural balance occurs when budgets remain largely in balance on a regular basis, through good times and bad. Credit agency officials regard structural balance as a key factor in their rating decisions.
The city is rated Baa 1 by Moody's Investors Service and A-minus with a negative outlook by Standard & Poor's Corp. The state is rated A by Moody's, A-minus by Standard & Poor's, and A-plus by Fitch Investors Service Inc.
The report shows that refundings and short-term budget-balancing measures have created billion-dollar budget gaps for New York City, and may force the city's fiscal 1994 budget out of balance. The city's fiscal year begins July 1.
The report says that the state has balanced its fiscal 1993 budget on a cash basis without relying on deficit notes and that state officials have made some recent strides toward structural budget balance.
But, the report adds, the state's use of one-shot revenue raisers and other budget gimmicks has produced a $4 billion accumulated deficit at the end of fiscal 1993. An accumulated deficit can occur even though a budget is balanced on a cash basis. Such a deficit arises when long-term liabilities are greater than assets at the end of the fiscal year.
The group also urged city and state leaders to adopt policies it said would bring revenues in line with spending on a more predictable basis. The group advised state leaders to increase statewide income taxes and adopt a new statewide property tax, while lowering "economically harmful" local taxes. The report says such a system would not affect the overall tax burden.
The report also calls on city and state leaders to reduce the number of government workers by making private some government entities and forcing workers to be more efficient. In addition, it calls on the state and city to overhaul the financing of health care.
New York City budget director Philip R. Michael could not be reached for comment.
Claudia Hutton, a spokeswoman for the state budget division, said the report ignored many of the steps taken by the administration of Gov. Mario M. Cuomo to balance the state budget and work toward structural balance. Hutton said the state ended fiscal 1993 with a surplus, and fiscal 1994, which started April 1, will remain in balance. Standard & Poor's recently removed the negative outlook clause on New York State bonds in reaction to the state's improved fiscal condition.
"The [Citizens Budget Commission] report was less analytical. There was more rhetoric, and that's a disappointment," Hutton said. "Most of the good ideas brought up in the report have been around for years, or have been implemented already."