New York City budget officials yesterday released the November revision to the city's four-year fiscal plan, showing a balanced budget for the current fiscal year but billion-dollar budget gaps starting in fiscal 1994.
In its six-page report, the city's Office of Management and Budget submitted a plan to the New York State Financial Control Board that shows a $1.6 billion gap in fiscal 1994, which begins July 1, 1993.
The fiscal 1994 gap was about $300 million larger than the budget office estimated in August, when it announced that the unexpected receipt of tax revenues combined with savings from a bond refunding helped eliminate a $300 million mirror-bond refinancing.
The budget report also shows gaps of $1.69 billion and $2.24 billion in the 1995 and 1996 fiscal years, respectively, but no gap in the current fiscal year.
Philip R. Michael, director of the Office of Management and Budget, termed the November financial update "a realistic" road map to guide the city in balancing. its fiscal 1994 budget and those in the remaining years of the financial plan. New York City is required by state law to submit balanced budgets according to generally accepted accounting principles.
In its report, the city said it will balance the budget gaps with a combination of agency reductions and savings, as well as tax increases that require state approval, increased federal aid, and state mandate relief.
Michael said he expects the state Legislature to approve a proposal to increase taxes by $297 million, despite last year's rejection by lawmakers in Albany. In addition, he said the Democratic administration of President-elect Bill Clinton should help the city receive $250 million in federal aid, which was also denied in the previous fiscal year.
Responding to several city finance observers who said the tax package is unlikely, Michael said, "By the end of the day, we will hold our own with the state" Legislature. He called the pending Clinton presidency a very important" factor in including federal aid in the city's fiscal 1994 gap-closing plan.
The city's November budget modification, dated by the Financial Emergency Act of 1975, provides details on the city's four-year spending plan as well as the condition of its current budget. The plan is the first step in the city's budget adoption process.
In January, city budget officials will again update the financial plan and present a preliminary budget for fiscal 1994. In April, Mayor David N. Dinkins will present his executive budget for the coming fiscal year.
Several fiscal observers said City Hall's release of this year's November modification came in stark contrast to plans released during the past two years, when officials announced more detailed policy measures to address near-term budget gaps.
In response, Michael said the city is not facing the same fiscal predicament it has in the past two years. As a sign of the city's improved fiscal condition, he cited last fiscal year's budget surplus of about $500 million, which was used to eliminate the proposed mirror-bond refinancing. This type of refinancing is a controversial technique that would likely have led to a downgrade in the city's credit rating.
Michael said another sign of the city's improved fiscal condition is its decision in August to eliminate $300 million of transitional funding for the fiscal 1994. Under the mirror-bond plan, the city would buy back bonds issued by the Municipal Assistance Corp., which was created during the fiscal crisis of the mid-1970s to finance city operations.
The refunding would allow city sales tax revenue that are dedicated for the corporation's debt service to flow back into the city's coffers. But the rating agencies have warned against the move, calling it another form of deficit financing. The city is rated Baa1 by Moody's Investors Service and A-minus by Standard & Poor's Corp.