The New York State Financial Control Board yesterday blistered New York City's fiscal 1995 budget, saying it contains more than $1 billion in risks and fails to adequately address the long-term nature of the city's fiscal problems.

In a report issued only a day after the state comptroller's office blasted the $31.6 billion spending plan, the control board said the city faces so many budget risks in fiscal 1995 that recent steps taken by Mayor Rudolph Giuliani to help shore up his fiscal plan will not be enough.

Specifically, the report said the city's plan to collect $200 million in federal aid, $170 million in overtime expenses, $75 million through an airport lease, $50 million from pension investment earnings, and $45 million through tort reform are all in doubt.

The report also offered a stern rebuke of several budget balancing maneuvers undertaken by the city in fiscal 1995, including a recent refunding of city debt that stretched out debt service payments, and the continued sale of delinquent property tax receivables. Both moves prevent the city from taking decisive action regarding its budget woes and increase the structural nature of the city's budget gap, the report said.

The report said, for example, that the city faces a $2 billion budget gap in fiscal 1996 and gaps of at least $3 billion in both fiscal 1997 and 1998. Despite a modest decline in spending in fiscal 1995, the report said spending growth will expand more rapidly in fiscal 1996.

In addition, the report recommended that the Giuliani Administration take immediate steps to restructure government to allow the city to begin moving toward a structurally balanced budget sometime in the near future.

In fact, control board executive director Allen J. Proctor said in a telephone interview yesterday that the agency's biggest criticism of the city's fiscal 1995 budget and four-year spending plan is its lack of direction toward a true restructuring of the inner workings of city government.

Proctor cited Giuliani's plan to cut property taxes in fiscal 1996. Despite the pending tax cut, the city has not made plans to eliminate excess regulation that continues to stifle property tax revenues.

Giuliani has "got to free the property tax from all the statutory and regulatory restrictions that make the tax stagnate, even as rates go up," Proctor said. "If you can do that, you can hold rates constant and have statutory grow. That's a huge change."

Abraham Lackman, Giuliani's budget director, did not return a telephone call on the city's assessment of the control board's report and reaction to a report scheduled to be released by the city comptroller's office, which will also detail problems with the city's fiscal 1995 budget.

The drum beat of negative budget news for the city has yet to affect the prices of city bonds, analysts and traders said yesterday. New York City general obligations are rated Aminus by Fitch Investors Service, Aminus with a negative outlook by Standard & Poor's Corp., and Baal by Moody's Investors Service.

Michael Shamosh, a municipal market strategist for Cowen & Co., said very few New York City bonds have recently traded in the secondary market, even with the press accounts discussing problems in the city's fiscal 1995 budget, which began July 1.

But that doesn't mean prices may not change soon as more budget weaknesses becomes apparent, said Michael Brooks, senior municipal credit analyst at Sanford C. Bernstein & Co.

Brooks said he has informed executives at the money management firm that he expects spreads on city bonds to widen somewhat in coming months, but nowhere near the levels seen during the early years of the administration of former Mayor David N. Dinkins, when budget stress caused spreads between city bonds and triple-A-rated 10-year paper to widen to 240 basis points.

Brooks said money managers and analysts believe that Giuliani, unlike Dinkins, will take the steps necessary to balance the budget, including massive reductions in the city's workforce. Giuliani recently called on city agencies to begin cutting $250 million from their budgets and to prepare to slash $200 million more.

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