FOR IMMEDIATE RELEASE - Tuesday, March 4, 2003

NEW ANALYSIS BY CITIZENS BUDGET COMMISSION SHOWS THAT NEW YORK CITY'S HISTORIC 2004 BUDGET GAP IS DUE MORE TO INCREASED SPENDING THAN TO LOST TAX REVENUES

New York, NY - The City of New York is wrestling with a budget gap in the coming fiscal year of historic proportions, one that was estimated in November 2002 to be as high as $6 billion and that has already led to a City property tax increase of 18 percent. The prevailing assumption has been that the gap is caused primarily by lost tax revenues due to the weak national economy and the attacks of September 11, 2001. An analysis released today by the Citizens Budget Commission reveals that the budget gap is due more to increased spending by the City than to lost tax revenues.

The analysis, which examines how the gap developed and what the City has done to address it, shows that since June of 2001 City tax revenues have declined $2.4 billion and City expenditures have grown $3.1 billion.

The spending increases are due to: (1) rising costs associated with compensation of the City's workforce, including higher pension contributions, the raises given in collective bargaining, and rising worker health insurance costs; and (2) increased costs of City services, including health, education, and other agency spending.

Of the steps taken or planned to close the gap, $4.8 billion, or 54 percent, consist of new revenues. A smaller $3.4 billion are expenditure reductions, of which $636 million are service reductions.

"National and international events have hurt the City's finances, but a major part of the current problem is self-inflicted," said CBC President Diana Fortuna. "Spending increases of $3.1 billion in less than two years highlight the need for more discipline."

In December, the CBC showed how the City could save $1.2 billion per year through five productivity improvements: a 40-hour work week for civilian employees; restructuring special education; more rational staffing at the police department; streamlined procurement, and energy conservation at municipal agencies. Reports detailing these proposals, along with this new analysis, are available at www.cbcny.org.

Founded in 1932, the Citizens Budget Commission is a nonpartisan, nonprofit civic organization devoted to influencing constructive change in the finances and services of New York City and New York State governments.