An alarming and little known fact is a large slice of the New York City budget pie does not pay for current services. This giant slice, dedicated to “legacy costs,” claims more than 20 percent of the budget and will grow by 20 percent to more than $20 billion in annual spending by fiscal year 2020.
New York State will soon receive more than $4 billion in settlements from large financial institutions. It is an unprecedented windfall, coming from wrongdoing by banks, and it is rightly generating public discussion about what to do with the money.
Local governments in New York are under serious and growing fiscal pressure, and the Legislature isn’t doing enough to ease the burden. Unfortunately, the Legislature seems oblivious. There was no progress on important bills introduced earlier in the spring session, and in the final days of June a few bills passed that could even make things worse.
Borrowing by local governments to pay for operating expenses is bad financial management; it forces future residents to pay for services consumed by those living in a jurisdiction today, often burdening children with the cost of benefits enjoyed by the current generation.
The MTA has $32 billion in long-term debt outstanding – more than 41 states and more than $14,000 for each worker commuting daily into New York’s central business district. That is an impressively large sum, but public authority debt is not inherently a bad thing. Nonetheless, debt has become a problem for the MTA because its revenues are not keeping pace with its debt obligations.
The $500 million CityTime settlement announced today is welcome news to New Yorkers. It is important that the recouped funds be used, not for short-term budget relief and restorations, but to help defray the costs of the City’s capital program.
At the end of fiscal year 2011, New York City reached a milestone: the amount of debt outstanding passed $100 billion. As total debt outstanding has grown - by 83 percent since 2002 - the forms of debt the City issues have also diversified.