From The Mayor’s Desk...

News reports last week were full of dire predictions about the city’s budget gap. Those predictions don’t have to come to pass-if we act with intelligence and courage.

Let me give you the facts straight. The national economic downturn and the terrorist attack on September 11th have had a dramatic impact on New York City. Business activity is down and unemployment is up. As a result, the tax revenues that pay for city services have declined sharply.

Last Wednesday, I released the city’s proposed $41.9 billion budget for the 12-month period beginning July 1st. It shows that if city agencies continued spending at last year’s levels, we would face a budget gap of nearly five billion dollars. Unlike the Federal or State governments, the city cannot run a deficit; the law says that we must balance our budget.

My plan for balancing the budget has four basic elements. First, I’ve required all city agencies to cut spending by about $1.9 billion starting July 1. Second, we’ll use the one-time authority that State government gave us to borrow $1.5 billion to offset the devastating effects of the World Trade Center attack. Third, we’ve asked Washington and Albany for help, most of which involves simply loosening strings on federal and state funds already coming to us. And fourth, we’re working with city unions to get more flexibility in paying for fringe benefits for their members.

Combined, these four elements will give us a balanced budget for fiscal year 2003. It is important to remember that even with the budget savings I proposed, we will still spend more money this year than last year.

But if we do not get the help we need from Albany, Washington and the unions, we will have to cut spending even more, and that could include laying off city workers. As mayor, it is my duty to plan such contingency cuts, and that "worst-case scenario" was what dominated the budget news last week.

Will the worst case come to pass? Not if everybody faces facts and works together. The City Council must approve the budget by June 5th. Increasing taxes is not an answer. Higher taxes would put a chill on the business growth we need and the State Legislature would never approve most of the Council’s tax increase ideas during an election year.

So let’s get real. The city has a big budget problem this year, and for the next several years to come. By balancing our budget responsibly this year, we’ll make a good start on solving our long-term problems, too. That’s the challenge the city faces, and I think we can meet it together.