A state-mandated monitor of New York City's fiscal affairs yesterday called on budget officials working for Mayor-elect Rudolph W. Giuliani to take "immediate action" in addressing the city's burgeoning structural deficit.
The New York State Financial Control Board said yesterday in a report that the incoming Giuliani Administration will face budget gaps starting in fiscal 1995, which begins July 1, 1994, that average more than $2 billion annually. State lawmakers created the control board to run city finances following the fiscal crisis of the 1970s. In recent years, the control board has monitored city financial and budget affairs.
In a report released yesterday, the control board said that a weak economy largely prevents the city from seeking additional revenues through higher taxes. As a result, the city is all but forced to restructure the way it spends money.
The report, entitled "The Importance of Immediate Action," said the Giuliani team should closely evaluate the spending needs of several key areas of government, including the city Board of Education and the city's Health and Hospitals Corp.
The report also recommended that Guiliani extend a planned reduction in the city's capital spending plan begun by current Mayor David N. Dinkins.
The plan, announced in August as the city's bond rating faced a possible downgrade from Standard & Poor's Corp's., would delay 25% of the city's bond-funded capital projects until 1998.
While the move helped stave off a rating cut, the control board said the city should not stop there. The city should reevaluate its capital spending needs and continue rescheduling capital commitments Postponed until 1998 to future years, the board said.
Implementing these. measures would reduce nonrecurring revenue sources, thus giving the Giuliani Administration a head start on its fiscal 1995 budget woes, said Allen J. Proctor, the control board's executive director, in a telephone interview.
Specifically, city officials would be wise to develop a plan that eliminates two nonrecurring measures used to balance the city's fiscal 1994 budget: the planned sale of $215 million in delinquent property tax receivables, and the use of its $281 million general reserve, Proctor said. Such revenue sources, once tapped by the city, cannot be relied upon to plug gaps in future years. Many of these funding measures, like the property tax sale, will create larger future budget gaps in fiscal 1995 and beyond, the report said.
"If the city takes prompt action [to eliminate these measures from the budget] it could reduce its 1995 gap by $500 million," Proctor said.
The control board's report, which evaluated the November modification of the city's four-year financial plan, said that despite the long-term difficulties, the fiscal 1994 budget is "manageable."
The report said, however, that the Giuliani Administration will inherit a budget from the Dinkins Administration that could need almost $400 million in budget balancing action.
"Without doubt, effective restructuring will require fewer people on the city's payroll. Equally important, however, is the need for the city to change the way in which it does business," the report said.
The report came as New York State Comptroller H. Carl McCall released his office's review of the city's November fiscal plan, also predicting multibillion dollar budget gaps starting in fiscal 1995.
McCall said in a press release that the city must continue to aggressively pursue more state and federal assistance" as it "reevaluates its tax structure and its system for delivery of services." McCall, as state comptroller, is also a member of the financial control board.
The control board's report also urged the Giuliani Administration to heed at least some of the recommendations made by a panel of budget experts appointed by Dinkins.
Gluliani has largely rejected the panel's recommendations. which included a series of painful reductions in city spending as well as tax increases.
But the control board said. "We strongly encourage careful study of this dense and closely worded report. for we believe it lays out the fundamental framework for a comprehensive understanding of the nature of the city's structural problems and the wide range of changes which the cit" must consider to close its structural gap."
In response to the control board's recommendation. Richard Bryers. a spokesman for Giuliani. said: "We've got to downsize government, That, more than anything else, will reduce" the city's structural deficit.