New York City's finances continued to erode in fiscal 1994, and officials should rethink their strategy for balancing the city's fiscal 1995 spending plan, according to fiscal monitors.
The assessments, made respectively by the New York State Financial Control Board, and the Citizens Budget Commission, emerged yesterday in separate reports detailing the city's fiscal woes.
The reports came just days after city Comptroller Alan G. Hevesi said that a plan by the administration of Mayor Rudolph Giuliani to close a $2.3 billion gap in its fiscal 1995 budget contains as much as $543 million in risky revenues.
Giuliani's budget director, Abraham Lackman, did not return a telephone call yesterday.
The control board, a state-sponsored fiscal monitor, said that in fiscal 1994, which ends June 30, the city "has again demonstrated its ability to maintain budget balance despite numerous adverse developments."
But, the control board said, the city will face continued budget gaps through the life of its four-year financial plan because of several problems left unchecked in fiscal 1994. The problems include an increase in the number of city employees and a lack of control on overtime spending.
In fact, the control board said that overtime spending in fiscal 1994 should exceed $467 million, "an all-time record high."
One of the more serious side effects of this weak fiscal condition is its impact on the availability of cash to pay the city's bills.
The control board said while the city's budget remained in balance in fiscal 1994, the city at times has experienced cash shortages, forcing it to issue billions of dollars in short-term notes. Because the city will probably face a similar cash problem in fiscal 1995, it will probably sell similar amounts of short-term notes.
The cash shortage is in part the result of using fiscal gimmicks to balance the fiscal 1994 budget. One gimmick, the sale of delinquent property tax receivables, helped keep the city's 1994 budget in balance. However, the city will not receive these revenues until later this month.
In its report, the control board also attributed the city's cash problems to the state's inability to develop a fiscal 1995 budget on time, which has delayed much needed aid to the city.
The city does not have a mechanism to help keep its cash position in order, and officials should develop a "cash budgeting system ... as a means of ensuring that cash balance is achieved," the report said.
While the control board focused on fiscal 1994, the budget commission turned its attention to next fiscal year, which begins July 1. The budget commission, an independent group financed by businesses and Wall Street investment banks, lashed out at Giuliani's proposed gap-closing plan for fiscal 1995.
Specifically, the group blasted Giuliani's decision to exempt police officers, firefighters, and teachers from layoffs in the coming fiscal year. By not including the three groups in planned workforce reductions, the city could face drastic service reductions in other areas.
The commission also asserted that the $2.3 billion gap-closing plan includes $1.1 billion of "uncertain, or bad policies." They include a $225 million shift in debt service costs to future years through a debt refunding.
"The magnitude of uncertain or inappropriate gap closing initiatives ... is so large that the executive budget requires a major overhaul by the city council and the administration," the commission said.
As a result, the commission recommended a series of actions, calling for "productivity enchancements" in the police and fire departments, which it believes would result in a reduction of staff without cuts in service. The report also said that the city could squeeze greater productivity out of its teachers through a small reduction in the number of preparation periods.