New York City's budget director told a municipal analysts group Friday that Mayor Rudolph W. Giuliani will use city charter powers to balance the fiscal 1995 budget if the city council cannot come up with $800 million in cuts.

"The mayor will move ahead and implement the cuts" by Dec. 3 if the council does not act, said Abraham Lackman, director of the Office of Management and Budget, at a luncheon hosted by the Municipal Analysts Group of New York in Manhattan.

The city's charter grants Giuliani "impounding powers," or the right to maintain a balanced budget, if the council cannot agree on a budget plan. The mayor's first-quarter modification to the 1995 fiscal budget recommends $738 million of cuts.

While Lackman acknowledged that "the city's budget is under a lot of stress," with a $2.4 billion structural imbalance, he said that the imbalance is "not a surprise." This year's budget deficit totals $1.1 billion.

One rating agency official who heard Lackman speak warned that although Giuliani has the right to invoke city charter powers, such an action could have dire consequences. Richard Larkin, a managing director at Standard & Poor's Corp., said the mayor and the city council are "playing a game of chicken" and the ultimate loser could be the city's fiscal stability.

But Lackman said the mayor and city council will spend the entire weekend hammering out a budget plan that does not rely on one-shot measures or tax increases. This round of budget cuts will not be the city's last, Lackman said, but he hoped they would be the last for fiscal 1995, which ends June 30.

He declined to say whether the council has come forward yet with $800 million of cuts of its own, saying there was a "blackout" on talking to the press during the negotiations.

Lackman also said he is not worried about reported political tension between the Republican mayor and Governor-elect George Pataki, also a Republican. Pataki has announced plans to cut the state income tax by 2.5% during his term despite a $4 billion structural deficit in the state budget.

"With or without the tax cut" and no matter who is in power, New York City will have trouble next year in its financial dealings with the state, Lackman said. Cities throughout the state should expect cuts next year, he said.

Even before the election, he said, "I was never in my own mind counting on extraordinary amounts of state aid" in fiscal 1996.

The city will begin planning the fiscal 1996 budget in January.

Lackman also discussed competitive versus negotiated bond issuance. New York City, the nation's largest municipal issuer, has historically issued most of its bonds on a negotiated basis.

However, with increased federal and regulatory scrutiny of negotiated issues. Lackman said the city is thinking of doing more competitive sales.

"A lot of evidence shows that if a sale is lower than $300 million, it's more cost effective to do competitive," Lackman said. The city plans to test competitive bidding with a few smaller issues and then judge its success. he said.

As to the city's choice of a financial adviser. Lackman would say only that the administration is "still talking" about which firm will continue to serve in that role. Public Resources Advisory Group and P.G. Corbin & Co. continue to serve as co-financial advisers. but a market source said that the city may have to cut Corbin when budget cuts start coming down.

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