The New York State Financial Control Board yesterday said a budget revision made by New York City falls short of securing balance in 1994, but applauded the city for substantially improving its fiscal recipe.

In a 54-page report released yesterday, the control board said the city should develop a contingency plan and maintain its $281 million general reserve because of $700 million of spending and revenue "risks" in its budget for fiscal 1994, which began July 1.

But the report, in contrast to several recent control board announcements critical of the city's budget, credited the administration of Mayor David N. Dinkins for taking steps that address problems in the fiscal 1994 budget.

The control board members, and other fiscal monitors, sharply criticized the Dinkins administration and the City Council for developing a 1994 budget that was likely to produce a midyear budget gap of close to $1 billion.

The critics also bashed city officials for failing to address the city's structural, or long-term, budget gaps appearing its four-year financial plan.

But in July, the mayor announced a proposal that cuts $131 million from the city's fiscal 1994 budget and promises further cuts throughout the life of the financial plan.

The proposal, which is currently in draft form, will generate substantial savings in fiscal years 1995, 1996, and 1997, city officials say. The plan calls for cuts in the city's capital program, head-count reductions, and other measures.

The mayor's budget revision helped the city fight off a probable rating downgrade by Standard & Poor's Corp., which was reviewing its credit assessment of city general obligation bonds following the passage of the 1994 budget.

Standard & Poor's rates city general obligation bonds A-minus with a negative outlook. Moody's Investors Service recently affirmed the city's bond rating at Baa1 and Fitch Investors Service recently rated city bonds for the first time, offering an A-minus.

"We are saying that with the budget revisions, the city is back in a neutral situation." said Allen J. Proctor, the control board's executive director. "The city's budget, in its current form, has a fifty-fifty chance of being balanced, and that's a lot different from the executive budget. It basically puts the city back where it was six months ago.

City Budget Director Philip R. Michael described the report as "pretty nice."

Michael said that the report underscored that fiscal 1994 "is not an issue," but that the city must make changes to address its structural budget problems.

These changes, he said, are in the works as part of the mayor's July budget revision, and may be ready for the next control board meeting, scheduled for Thursday. He said the city will provide the board with additional details on the plan sometime today.

Despite the budget's modest improvement, the control board, one of the city's legislatively created fiscal monitors, said much more needs to be accomplished by budget balancers at City Hall.

Although some of the approximately $700 million in projected fiscal 1994 budget risks will break in the city's favor, others will not, the board said in its report.

As a result, the board called on the Dinkins administration to hold its general reserve at current levels and to create a contingency plan that can address a budget gap of about $300 million in the current budget.

Michael said the city has no plans to develop the contingency plan.

"That's what the reserve fund is," he said. City officials had kept a reserve fund of $150 million, but increased its funding in the mayor's budget revision to $281 million.

Additionally, the control board criticized the city for relying on oneshot revenue ralsers to help balance its fiscal 1994 budget. These budget gimmicks, including bond refundings and a tax receivables sale, make it more difficult to balance budgets in future years, the report said.

"Had the city avoided one-shots and instead relied exclusively on recurring actions to close the 1991 - 1993 gaps, " the report says, "there would have been a $600 million surplus available for the [fiscal year] 1994 budget instead of the $2.1 billion gap that had to be closed."

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