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Spring 1993
   
A Citizen's Guide to City Government
Edwin Rubenstein
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New York City is one of the biggest governmental entities in the United States. With a budget in fiscal 1992 of more than $29 billion, the city spent as much as Texas, a state with more than 17 million people, and substantially more than any other state except California and New York. Even on a per capita basis, New York’s spending dwarfs that of every other U.S. city, except Washington, D.C., which has no state government. Much of the growth in city spending has been relatively recent: Even after adjusting for inflation, it has more than doubled in the past 25 years.

The city government comprises the offices of the mayor, comptroller, City Council, and five borough presidents, plus 19 mayoral agencies and a host of smaller offices. The city directly employs nearly 235,000 people, levies 28 different taxes and well over 100 fines and other fees, and has an intricate web of relationships with the federal and state governments as well as with numerous independent public authorities such as the Health and Hospitals Corporation and the Transit Authority. The sheer size and complexity of New York City’s government makes informed citizenship a daunting goal: The average citizen may have a general idea of his tax burden and the nature of the services he gets in return, but even for politically active New Yorkers it can be hard to find clear information on which to judge the city’s overall priorities.

Yet an informed citizenry is particularly crucial in a city that faces the likelihood of serious fiscal problems in the next few years. The city’s budget, the most complete and accurate source of information about New York’s governmental priorities, is also a document of enormous complexity. Therefore, the City journal presents “A Citizen’s Guide to City Government”—an overview of the budget and an agency-by-agency breakdown of the biggest and most important city expenditures.

Budget Overview
According to the city comptroller’s annual report, New York City’s 1992 expense budget (which covers the fiscal year beginning July 1, 1991) was $29.02 billion, a 4.7 percent increase since 1989 after adjusting for inflation. This does not include $3.9 billion spent on capital projects in 1992, financed with city bonds. Federal and state aid covered 33.4 percent of the city’s general fund expenditures; city taxes, 58.9 percent; and other local revenues, such as license fees and fines, 7.7 percent.

This article will analyze the city’s 15 largest expenditure areas as well as parks and libraries, two small agencies that rank 20th and 21st among city expenditure categories and are included because of their importance to civic life. More than half of New York City’s 1992 spending was accounted for by the top three items: the Department of Social Services (DSS), which consumed $6.83 billion; the Board of Education, $6.63 billion; and debt service, $2.97 billion. To some extent these are considered nondiscretionary expenditures, driven by state and federal mandates or, in the case of debt service, by the city’s obligation to pay off its bonds.

Between 1989 and 1992, DSS and debt service were among the fastest-growing city expenses. The 19.0 percent rise, after inflation, in DSS spending (mostly welfare and Medicaid) reflects the combined effects of a public assistance caseload that has grown by 220,000 people, or 27 percent, in three years and medical cost inflation that has pushed Medicaid outlays up at double-digit annual rates.

Debt service payments rose faster than any other major expense, growing by 47.7 percent after inflation between 1989 and 1992, versus only 9.2 percent in the preceding three years. Debt service accounted for three-fourths of the net real increase in city spending between 1989 and 1992. The primary reason for this recent growth was the city’s practice during the 1980s of deferring interest payments by refinancing debt. This brought debt service costs down for a while: They consumed 11.0 percent of the general fund in 1983, versus only 6.3 percent in 1990. But the bill is coming due today, just as the city is experiencing difficult economic times. And New York City’s total outstanding debt, including bonds issued by the Municipal Assistance Corporation for which the city is responsible, is more than $25 billion—again, higher than that of any state except New York and California.

The only other major expense that grew faster during the last three years than during the preceding three was employee benefits. This increase was driven primarily by growth in the cost of workers’ compensation and health insurance.

By contrast, the city has made considerable reductions in core municipal services. Between 1989 and 1992, the Police Department budget shrank 1.5 percent in real terms; the Fire Department, 10.1 percent; and the Sanitation Department, 16.4 percent. Two small agencies, the Parks Department and the public library system, bore a disproportionate share of the retrenchment, shrinking by 32.5 percent and 38.6 percent, respectively. The city also managed to reduce subsidy payments to the Health and Hospitals Corporation by 18.4 percent and to cut its Transit Authority subsidy by 8.7 percent.

Counting the Employees
City employment figures vary widely, depending on whether certain public authorities are included. Health and Hospitals Corporation employees are often excluded from the city head count on the grounds that, although HHC receives city funds, it is not directly managed by the city. The same is true of the Transit Authority, a subsidiary of the state’s Municipal Transportation Authority. On the other hand, teachers are invariably counted as city workers, though the Board of Education is independently managed.

At the end of fiscal 1992, New York City employed 234,108 people, not including 46,756 HHC workers or 42,663 TA employees. The Board of Education accounted for more than 35 percent of this total. Between 1980 and 1990, the city work force (again excluding the independent authorities) grew by nearly 55,000 positions, or about 30 percent. Between 1982 and 1992, personnel costs went up 39 percent in real terms, though city government employment rose only 19 percent.

Private-sector employment in New York City started declining in 1989. The city waited until fiscal 1992, however, to make significant reductions in its overall government work force. The latest figures show a net reduction of 12,450 full-time positions, or roughly 5 percent of the work force, between November 30, 1990, and November 30, 1992. The biggest cuts came in social services (3,751 jobs), education (2,272), and sanitation (1,663). Also cut were 1,252 positions in the Department of Housing Preservation and Development, 1,173 in the Parks Department, 1,067 in the Department of Transportation, 925 in the Department of Health, and 1,879 in various other departments. Although its budget did not grow, the Police Department added 1,565 new jobs as part of the “Safe Streets, Safe City” program.

The current round of cuts is small relative to those that followed the 1970s fiscal crisis. The number of city workers fell by about 20 percent between 1975 and 1978 and by another 6 percent between 1978 and 1980.

The average annual cost of a city employee—including salary, health insurance, pension contribution, social security taxes, and other expenses—was $61,561 in 1992. During the past two years, this total per-employee cost has risen at roughly the rate of inflation, although wage increases have amounted to only about half the inflation rate. Fringe benefits, however, rose by 9.2 percent per employee in 1992, after inflation. This mainly reflects health insurance costs, which have risen by 10 percent per year since 1983 and are expected to grow by 13 to 15 percent annually through 1996.

The Coming Budget Trouble
New York experienced a budget shortfall in 1990, as the city government began feeling the results of a declining private economy. But when Mayor Dinkins announced a $455 million budget surplus in early 1992, many New Yorkers thought the worst had passed. Two years of tax hikes, service cutbacks, and payroll reductions finally seemed to have borne fruit. Unfortunately, the turnaround was more apparent than real. The “surplus” reflected higher-than-expected revenues, especially taxes on unusually high Wall Street profits, and a one-time acceleration of state aid payments made possible by fiscal reforms undertaken in Albany.

The problems that underlay the troubles of 1990 persist and could ultimately lead to a fiscal crisis comparable to that of 1975. The city still spends more than its economic base can support, even at the current very high level of taxation. Since 1989, the recession has wiped out more than the 350,000 jobs that were added to the local economy during the 1980s boom. But city government spending, adjusted for inflation, is one-third higher now than it was in 1976.

The 1970s fiscal crisis forced large cuts in city government: Operating expenditures fell 16 percent in real terms between 1978 and 1982. The recent reductions have not approached that level of severity. In fact, total city spending grew by 4.7 percent in real terms between 1989 and 1992, while the city’s economy shrank by 7 percent.

Every city experiences fiscal pressure when its economy slows. New York’s problem is particularly pronounced, however, for two reasons. First, the city depends heavily on income and business taxes, which are sensitive to changes in economic conditions. Property taxes, generally the most predictable and stable local revenue source, account for only 44 percent of the city’s tax base, compared with 75 percent in the average American city. And even the property tax base is threatened by the collapse of Manhattan’s commercial real estate market.

Second, New York devotes far more of its budget than other cities to medical care, income support, and housing for the poor—programs that expand when the economy shrinks. As of 1986, according to a study by Steven Craig published in this journal, New York was spending 36 percent of its budget on low-income assistance. A typical Northeastern industrial city spent only 14 percent of its much smaller budget. In many cities, low-income assistance is entirely a state function.

Experts estimate that New York City’s “structural deficit”—the gap between the revenues the city can count on collecting and the expenses it can count on incurring—is somewhere between $1.5 billion and $3 billion annually. The city cannot “grow” its way out of this problem, and stopgap measures such as hiring freezes, spending delays, and temporary tax hikes can only buy a bit more time. Long-term structural balance cannot be achieved without a serious reconsideration of the size and scope of city government.

To help New York’s citizens and their leaders prepare for such an effort, we present this guide to the New York City budget.

1. DEPARTMENT OF SOCIAL SERVICES

Spending: $6.83 billion
(19.0 percent increase, 1989-1992)

Employment: 28,890
(1.2 percent decrease, 1989 -1992)

The Department of Social Services administers the city’s public assistance programs, including welfare and Medicaid, as well as foster care, homeless shelters, and services for the elderly, AIDS patients, and victims of domestic violence.

In 1992, DSS spent more than any other city agency, accounting for 23.7 percent of the total general budget. Because DSS’s primary mission is to transfer money directly to the poor rather than to provide services, it accounts for a much smaller share of total city employment, 12.3 percent, than of total spending. DSS spending tends to rise during periods of recession, when more people require its services. Thus, between 1989 and 1992, while the city’s budget grew 4.7 percent in real terms, DSS expenditures went up by 19.0 percent.

Welfare benefits account for more than 40 percent of DSS’s expenditures. The city distributes $2.89 billion to one million public assistance recipients, of whom 700,000 are enrolled in Aid to Families with Dependent Children, the program for families headed by single mothers.

Approximately one-fourth of DSS spending, or $1.70 billion, goes for Medicaid benefits. (An additional $520 million in Medicaid payments to city hospitals is considered part of the city’s subsidy to the Health and Hospitals Corporation.) Medicaid costs have grown rapidly: Between 1979 and 1990, they went up by 12.7 percent after adjusting for inflation, while welfare expenditures increased by only 3.4 percent. Medicaid’s double-digit growth rate has resulted both from the extension of benefits to new recipients and from medical cost inflation.

Welfare and Medicaid costs are far higher in New York City than in virtually any other major U.S. city, for two primary reasons. First, New York’s benefit levels are more generous. Second, Albany requires the city to pay for one-fourth of all welfare and Medicaid benefits. New York is the only large city in the nation subject to such a state mandate.

In 1991, Governor Cuomo proposed a state takeover of the city’s share of these costs. Under his plan, the state would gradually assume the responsibility for low-income assistance. In return, the city would transfer revenues from its personal income tax to Albany to cover the growth in state costs. Such a takeover, however, is unlikely to be feasible until the state solves its current financial difficulties.

The State Legislature has approved several Medicaid cost-containment measures, including higher copayments, elimination of coverage for some inessential services, and restrictions on home health care. The state has also mandated increased enrollment in a managed care system, under which medical providers are paid a flat fee for patient care and therefore do not have an incentive to perform unnecessary procedures. In the next year, the city plans to increase enrollment in managed care to some 137,000, about 10 percent of the city’s Medicaid population. The state requires 50 percent enrollment in managed care within five years.

2. BOARD OF EDUCATION

Spending: $6.63 billion
(1.8 percent increase, 1989-1992)

Total Employment: 83,863

Teachers: 76,1110
(0.2 percent increase, 1989-1992)

Administrators: 7,753
(11.6 percent decrease, 1989-1992)

The city’s public school system is the largest in the nation, with more than 960,000 students enrolled at more than one thousand elementary, intermediate, vocational, and high schools. The system is governed by a central Board of Education, whose members are appointed by the mayor and the borough presidents, and by 32 locally elected community school boards. In addition to basic classroom instruction, special and bilingual education, and vocational training, the board’s budget also supports school building maintenance, transportation, and breakfast and lunch services. Of the school system’s 1992 budget, 42.2 percent came from state aid, 9.5 percent from federal aid, and 48.3 percent from city tax revenues.

The central board reports that 119,000 new immigrant students entered New York City’s public schools between 1989 and 1992. Net citywide enrollment increased by some 35,000 during that period, reversing the 1980s trend toward smaller student populations. While total student enrollment increased by less than 2 percent, the number of students classified as Limited English Proficient, and thus eligible for more-expensive bilingual instruction, increased by 10 percent during the 1991-92 school year.

Despite higher enrollment, the board has slowed the growth of its budget during recent years. Between 1989 and 1992, total Board of Education spending increased by only 1.8 percent after inflation, versus a 16.5 percent real rise between 1986 and 1989. Spending per pupil fell from $7,029 in 1989 to $6,891 in 1992, after having risen from $4,965 since 1983. (All dollar amounts are in 1992 dollars.) The board cut its administrative staff by more than one thousand people and its spending for central administration by 18.1 percent between 1989 and 1992.

Among the fastest-growing components of the board’s spending is special education, driven by expensive state mandates. Special education was originally intended for handicapped students, but today most of those enrolled are classified as “learning disabled” or “emotionally disturbed.” In the last 12 years, special education enrollment has risen from 49,000 to 120,000. Between 1989 and 1992 alone, the special education budget rose by 12.7 percent after inflation, to $1.07 billion; during the same period, total expenditures on regular classroom instruction declined by 8.4 percent in real terms.

Though the Board of Education receives city funds, it is not directly managed by the city’s Office of Management and Budget. This gives the board a degree of fiscal autonomy not enjoyed by mayoral agencies. Moreover, under the Stavisky- Goodman Act, a 1976 state law, the city’s appropriation to the Board of Education in a given year must be at least as high a proportion of the city’s budget as in the previous year, unless the board requests a smaller appropriation.

The board’s independence has led to tensions with the city. The board, for example, says the city routinely underfunds many areas of the school budget and diverts state education aid to other city functions. The city has acknowledged, in effect, using some $67 million in state education funds to close its fiscal 1993 budget gap.

The city, for its part, has criticized the board for failing to achieve promised productivity enhancements, underestimating future state and federal funding, and concealing the amount of such aid when received. The comptroller’s office confirmed, for example, that the board failed to acknowledge $91 million in federal Chapter I money for disadvantaged students that it received in fiscal 1992, moving the funds instead to fiscal 1993.

City and board officials have criticized the state for favoring suburban districts in the formula it uses to allocate education aid money. The formula uses attendance rather than enrollment as the basis for allocating money, in effect punishing the city for its higher-than-average student absentee rate. As a result, with 37 percent of the state’s public school students (and a disproportionate share of the disadvantaged), New York City is scheduled to receive only 34.7 percent of the state’s education aid in fiscal 1993. A proportionate distribution would have meant an additional $185 million.

On the other hand, state aid to the city schools rose far more quickly during the 1980s than did the city’s contribution. Had city aid grown as quickly (in nominal terms) as state aid between 1982 and 1993, the board’s fiscal 1993 budget would be $1.4 billion higher than it is.

3. DEBT SERVICE

Spending: $2.97 billion
(47.7 percent increase, 1989-1992)

Gross City Debt: $25.04 billion
(22.8 percent increase, 1989-1992)

Debt service, payments on the city’s bonds, is the fastest-growing city expense. It accounted for nearly three-fourths of the real net increase in city spending between 1989 and 1992. The share of general fund spending devoted to debt service rose from 7.2 percent in 1989 to 10.2 percent in 1992.

Debt service costs are determined by the amount of city debt outstanding, the interest rate at which the money was borrowed, and the time at which bond payments come due. The city is legally forbidden to go into debt to pay operating expenses; it can sell bonds only to finance capital projects. New York City is unique in the nation, however, in the range of projects it finances through the capital budget. In most cities, capital projects are limited to basic infrastructure facilities such as roads and water systems, but New York also spends large capital sums on such things as hospitals, housing, and schools. Indeed, it spends more capital funds on housing than all other U.S. cities combined. New York’s total annual capital spending amounts to $533 per resident, more than any other city in the nation and well above the $256 per person the average U.S. city spends.

During the 1980s, while the city embarked on an ambitious capital program, the share of city revenues claimed by debt service actually fell by half. The decline, however, was temporary. There is a lag between the start of a project and the time when the first payment comes due on the bonds that finance it. Moreover, as the city was increasing its capital spending, it was also using various gimmicks to push debt service costs further into the future. The decline in debt service expenses enabled the city to increase its commitment to other programs in its general budget, exacerbating the current budget problems.

Among the methods the city used to defer its debt service expenses was the refunding of bonds in order to defer principal payments to later years. In many cases, such refunding is a prudent financial technique, akin to refinancing a mortgage: The city pays off a bond issue with money raised by selling new bonds at a lower interest rate. In some cases, however, the city has refunded debt by selling bonds with longer periods of maturity and different payment patterns. The total cost of paying off the new bonds will actually be higher than that of the bonds they replaced.

The city also employed various “one-shot” schemes, including one in which the Battery Park City Authority sold bonds to provide the city with $150 million to cover current expenses. The $150 million represented the present value of future authority revenues that would have gone to the city. Debt service expenses on the bonds will reduce the future revenues that the authority can make available to the city by $421 million.

Another way of deferring debt service costs is to capitalize interest payments. That is, when financing a project, the city will sell enough additional bonds to cover the first few years’ debt service payments. This practice saves on debt service costs in the short run ($37 million in fiscal 1994, according to an estimate by the city comptroller’s office), but only at the cost of putting the city deeper into debt and increasing long-term expenses.

Under pressure from bond-rating agencies, the comptroller, and the state’s Financial Control Board, the city has discontinued many of its practices aimed at pushing debt service costs to future years. The sharp rise in debt service costs in 1992 reflects this.

The prospect of ballooning debt service costs forced Mayor Dinkins to cut the city’s capital budget by some 16 percent beginning in fiscal 1993. Capital spending on housing construction was cut by 17 percent; on jails, by 43 percent; and on hospitals, by 46 percent. Not affected was capital spending on bridge reconstruction, courts, libraries, and cultural institutions. The city now expects to spend $2 billion less on capital projects between 1993 and 1996 than it had projected in its financial plan. The result is an expected reduction of $250 million in projected debt service costs for 1996.

4. POLICE DEPARTMENT

Spending: $1.69 billion
(1.5 percent decrease, 1989 -1992)

Total Employment: 34,217

Uniformed: 27,306
(3.8 percent increase, 1989-1992)

Civilian: 6,911
(2.8 percent decrease, 1989-1992)

The New York Police Department (NYPD) accounted for 5.8 percent of the general budget in 1992. Although its uniformed force has increased by about a thousand officers since 1989, its budget has declined slightly in real terms.

The number of uniformed NYPD officers took a big dip during the fiscal crisis of the 1970s, but since 1983 the number has been climbing toward its 1975 level of 30,552. As of December 31, 1992, it stood at 28,637, and it is expected to grow to 30,176 in summer 1993 with the next graduating class of the Police Academy.

Mayor Dinkins’s “Safe Streets, Safe City” program is largely responsible for the fact that the NYPD has been spared the brunt of the city’s budget cuts in recent years. Safe Streets aims at an increase in police presence on the streets of New York.

Originally, the Safe Streets program planned to redeploy officers from administrative jobs to street patrol by hiring new, less expensive civilian employees to take their place. This “civilianization” process has moved slowly, however. Safe Streets planned to replace 1,525 officers with civilians by the end of fiscal 1994, but only 323 officers had been replaced by the end of fiscal 1992. The City Council approved the hiring of nine hundred additional civilians in fiscal 1993, but in January 1993halfway through the fiscal year-only about 150 had been added. Moreover, since the Safe Streets program was launched, the NYPD has actually increased its use of uniformed officers in administrative posts, according to the Citizens Budget Commission.

The slow progress of the civilianization effort is explained by a memo of understanding signed in early 1991 by Governor Cuomo, Mayor Dinkins, and legislative leaders in Albany and city hall. The memo committed the city to increase its uniformed head count in exchange for state approval to raise taxes to pay for the Safe Streets program. The memo, however, did not require that the city increase the number of officers on patrol duty. The agreement thus provided no financial incentive for the city to redeploy police to street patrol or replace uniformed officers in desk jobs with civilians. As a result, the entire increase in street patrol has come from new uniformed hires-one of the most expensive ways to beef up police presence.

5. FRINGE BENEFITS

Spending: $1.38 billion
(22.3 percent increase, 1989-1992)

The fringe benefits category includes health insurance, workers’ compensation, the employer’s share of the Social Security tax, and other benefits for city employees.

While city wages have grown at less than the rate of inflation for the past few years, fringe benefit costs have exploded, more than doubling after inflation between 1983 and 1992. From 2.9 percent of the general fund ten years ago, this category now accounts for nearly 5 percent of all city spending and more than 10 percent of all personnel costs.

Not all fringe benefit costs are classified in this category; in particular, it omits $740 million in benefits for employees of the Board of Education, which are included in the Board’s budget. In 1992, the total cost to the city of all fringe benefits was $2.37 billion. Health insurance accounted for $1.40 billion, or 59 percent, of this total. Social Security contributions consumed another $756 million, or nearly one-third of the total. Workers’ compensation insurance accounted for $70 million.

Contracts between the city and most of its labor unions require the city to provide a fixed health care benefit package at no charge to its employees. As a result, the city has little or no control over health insurance costs: It simply pays the annual per capita contribution amounts required for comprehensive coverage by the Health Insurance Plan of New York (HIP). Most private employers, in contrast, have been able to control their health insurance costs by offering plans that require copayments by the employees or by reducing the level of coverage.

Workers’ compensation costs are expected to rise by as much as 20 percent annually for the next few years due to recent state legislation increasing the benefits disabled workers receive for lost wages.

6. PENSIONS

Spending: $1.37 billion
(30.5 percent decrease, 1989-1992)

The pension category reflects contributions made by the city to the trust fund that will pay the pensions of current city employees. Pensions are one of the few budget expenses that have declined substantially in recent years. Two factors explain this. First, an increasing proportion of city employees are covered by the less expensive plans created in the wake of the 1975 fiscal crisis. Second, the city has increased the projected earnings of its pension fund investments, thus reducing the required contribution. Actual earnings have exceeded the city’s earlier projections.

The higher rate of return on pension fund investments is expected to save the city more than $200 million per year over the next five years. The city has used some of these funds to finance permanent wage hikes for its employees. But the savings will virtually disappear by 1996, at which time the city will have to find new revenues to fund the higher salaries. There is also a danger that the city’s projections of future earnings will prove to be overly optimistic, leading it to underfund pensions.

7. HEALTH AND HOSPITAL CORPORATION

City Subsidy: $797 million
(18.4 percent decrease, 1989-1992)

Employment: 46,756
(1.1 percent increase, 1989-1992)

The Health and Hospitals Corporation runs a system of 11 acute-care hospitals, five nursing homes, a network of neighborhood health centers, and the Emergency Medical Service. It manages one in four long-term hospital beds in New York City and 6 percent of the city’s nursing home beds. New York is the only U.S. city with its own network of public hospitals; elsewhere, public hospitals are primarily a state or county function.

HHC is an independent authority, with a budget of some $3 billion, but it receives a large subsidy from the city, the bulk of which ($520 million) is in the form of Medicaid payments. HHC employees are not counted in overall city head count figures.

HHC facilities accept all patients regardless of ability to pay, and are generally considered the medical provider of last resort for the city’s poor. Thus, the HHC budget is under pressure from many sources. A weak city economy has increased the percentage of HHC’s caseload financed by Medicaid; because Medicaid reimbursement rates do not cover all costs, this shift has increased

HHC’s operating deficit. In addition, HHC must treat an increasing number of indigent patients suffering from AIDS, tuberculosis, drug abuse, and mental illness.

Nevertheless, in recent years HHC has achieved record revenue collections while lowering administrative costs. As a result, the share of total HHC expenses covered by general fund transfers declined from 33.6 percent in 1989 to 22.8 percent in 1992.

The city’s subsidy to HHC is expected to grow by about 5 percent in 1993, in part to pay for the cost of starting managed care programs for Medicaid recipients and Communicate, the mayor’s plan for community-based clinics. By cutting down on the use of expensive emergency room care, both initiatives are expected to reduce hospital costs in the long term.

8. DEPARTMENT OF CORRECTIONS

Spending: $761 million
(9.7 percent increase, 1989-1992)

Total Employment: 13,854

Uniformed: 11,820
(20.0 percent increase, 1989-1992)

Civilian: 2,034
(6.2 percent increase, 1989-1992)

The Department of Correction operates 18 city jails, four hospital prison wards, and court detention space. City jails are used to house inmates serving sentences for misdemeanor convictions and defendants awaiting trial; convicted felons are held in state prisons.

Correction Department employment more than doubled between 1983 and 1992 and continued growing even during the recent budget problems. This was necessary in order to keep up with the growth in the city jail population: The number of inmates on the average day went up from 9,948 in 1983 to 17,439 in 1989 and 21,449 in 1992.

The increase is partly the result of a severe backlog in the court system: The average length of time defendants spend in jail awaiting trial rose from 41 days in 1989 to 52 in 1992. Reforms aimed at making the courts more efficient have already reduced the city’s inmate population and are expected to bring the average length of stay down to the 1989 level by 1996.

The city has also been forced to house inmates awaiting transfer to overcrowded state prisons. Under a recent court order, however, the state cannot require the city to hold state-ready inmates for more than ten days. This enabled the city to close two upstate jails that the state had been operating for the city.

These administrative and legal initiatives are expected to permit a 5 percent reduction in Correction Department expenditures in fiscal 1993, as well as a small reduction in department employment.

9. FIRE DEPARTMENT

Spending: $688 million
(10.1 percent decrease, 1989-1992)

Total Employment: 12,571

Uniformed: 11,379
(5.7 percent decrease, 1989-1992)

Civilian: 1,192
(4.5 percent decrease, 1989-1992)

The Fire Department of New York (FDNY) is responsible for protecting lives and property from fire, responding to other emergencies, and investigating suspicious fires. The department’s budget has been cut considerably in recent years, declining by 10.1 percent in real terms between 1989 and 1992. The city did, however, increase the FDNY’s allocation of capital funds from $20 million to $40 million in 1992, in part to pay for new vehicles and firefighting equipment.

The ratio of Fire Department spending to the number of emergency calls to which the department responds has been declining steadily since 1983. But the department’s emergency response time remains far faster than that of other city emergency teams, including the Police Department’s Emergency Response Unit and the Health and Hospitals Corporation’s Emergency Medical Services. In 1992, for example, EMS ambulances took an average of 8 minutes and 21 seconds to respond to calls, while the Fire Department averaged less than five minutes. Proposals to train firefighters in emergency medical techniques have been stalled in negotiations with the firefighters’ union, which argues that such techniques would constitute an additional skill for which workers should be compensated.

The Citizens Budget Commission has recommended that the Fire Department rely more on small, inexpensive fire trucks rather than the large vehicles used to fight building fires. The number of such fires has been declining steadily over the past twenty years; they currently account for less than 8 percent of the department’s emergency responses. The bulk of the department’s emergency responses are false alarms (43 percent), nonfire emergencies (31 percent), and nonstructural fires (18 percent), including fires in cars, boats, and vacant lots.

10. DEPARTMENT OF SANITATION

Spending: $564 million
(16.4 percent decrease, 1989-1992)

Total Employment: 11,096

Uniformed: 7,782
(8.4 percent decrease, 1989-1992)

Civilian: 3,314
(14.2 percent decrease, 1989-1992)

The Department of Sanitation is charged with collecting and disposing of solid waste, collecting and processing recyclables, cleaning the streets, removing snow, and enforcing the city’s health and administrative codes. Cleaning and collection accounted for 58 percent of the department’s 1992 budget.

Though the sanitation budget has been cut considerably in recent years, there is evidence that worker productivity has declined. In 1982, the city and the sanitation union agreed to a reduction from three workers to two on each Sanitation Department truck, in exchange for a daily productivity bonus for each of the two. But the productivity gains from this measure have subsequently been eroded since the city started its curbside recycling program in 1986. As more garbage is recycled, the amount of ordinary trash has declined; in some areas, sanitation crews can complete their routes in far less than the allotted six hours.

The sanitation union contract bars the city from transferring sanitation workers from regular refuse collection to recycling duties. Partly as a result of this provision, the recycling program has not been implemented as quickly as had been hoped. The city had planned to expand curbside recycling from 26 to 40 community districts in 1991, but participation only increased to 29 districts. Moreover, the hoped-for market for recycled goods has not materialized: The city actually has to pay carters to take certain types of refuse away.

In January 1993, the city reached an agreement with the sanitation union to give workers a 3.5 percent raise plus a bonus for lengthening routes to offset the lighter trash collections. In effect, the city will pay sanitation workers an extra $900 per year to work the same hours they worked before recycling.

During the next decade, the city will face large expenses for building waste-disposal facilities. The Fresh Kills landfill, where the city dumps some 14,000 tons of trash each day, will reach the limits of its capacity within the next twenty years. The city also operates three incinerators, which burn 1,100 tons of trash per day. In August 1992, the city adopted a Solid Waste Management Plan that calls for two of the three incinerators to be closed by 1995, for the third to burn 750 tons daily, and for the construction of a new, modern incinerator at the Brooklyn Naval Yard that will bum three thousand tons a day beginning in 1999.

11. TRANSIT AUTHORITY

City Subsidy: $523 million
(8.7 percent decrease, 1989-1992)

Employment: 42,663
(5.5 percent decrease, 1989-1992)

The New York City Transit Authority (TA) operates one of the largest public transit systems in the world. Running 24 hours a day, every day, the system carried about a billion subway riders and 500 million bus riders in 1991.

The TA is a subsidiary of the Metropolitan Transit Authority (MTA), a state-level public authority. The MTA coordinates mass-transit services in the city and sets priorities and spending levels of the TA’s capital budget. The city plays little direct role in the governance and funding of TA operations; its financial aid to the TA is limited to matching the operating assistance provided by Albany and to subsidizing certain expenses, including fare discounts for students and senior citizens and the costs of the Transit Police. The city is under no obligation to close TA budget gaps.

The TA’s total budget was $3.5 billion in calendar year 1992, of which 17 percent came from the city subsidy, 46 percent from fares, 8 percent from federal and state aid, and 15 percent from special MTA taxes such as surcharges on telephone bills. The TA employs more than 42,000, including the Transit Police and engineering personnel, more than any local government entity except the Board of Education and the Health and Hospitals Corporation. Its employees are not included in total city head count figures.

12. CITY UNIVERSITY OF NEW YORK

Total Spending: $458 million

Spending on Community Colleges: $299 million
(0.7 percent decrease, 1989-1992)

Total Employment: 3,516

Faculty: 2,359
(10.5 percent decrease, 1989 -1992)

Administrators: 1,157
(3.0 percent decrease, 1989 -1992)

The City University of New York (CUNY) system comprises nine senior colleges, seven community colleges, a technical college, the Graduate Center, a law school, an affiliated medical school, and the Hunter Campus elementary and high school. Financial responsibility for the senior colleges has rested with Albany since 1979, but local governments are fiscally responsible for all community colleges in the state.

New York City’s community college expenditures were $299 million in 1992, about one-third of which came from state aid. No other U.S. city has a college system of comparable size; higher education is almost universally considered a state function. Indeed, as of 1990, the only other cities that funded higher education at all were Washington, D.C., which is not within a state, and Philadelphia, which spent a modest $16 million.

Because of an accounting change, the city’s expenditures on CUNY shot up 41.8 percent after inflation between 1991 and 1992. The entire increase resulted from the state’s passing $152 million through the city budget to the senior colleges.

Community college funding declined slightly between 1989 and 1992, even as enrollment rose from 32,383 students to 38,237. The city has been aggressively cutting its expenditures on the CUNY system. Since fiscal 1992 a hiring freeze has been in effect for all nonteaching personnel, and spending on such things as library acquisitions, laboratory and scientific equipment, and office and cleaning supplies has also been curtailed.

An increasing share of community college costs has been covered by tuition, which went up from $1,225 to $1,450 a year in January 1991, to $1,750 in August 1991, and to $2,100 in July 1992. The state’s 1993 budget authorized another $500-a-year tuition hike and eliminated all legal barriers to future increases. As a result, the proportion of the community college budget covered by tuition has risen from 22 percent in 1989 to 40 percent in 1993, while the share paid for by city taxes declined from 43 to 24 percent during the same period.

13. DEPARTNMENT OF TRANSPORTATION

Spending: $428 million
(8.4 percent increase, 1989-1992)

Employment: 7,806
(4.9 percent increase, 1989-1992)

The Department of Transportation (DOT) is responsible for maintaining and regulating the city’s roads, highways, and bridges. It also operates the Staten Island Ferry, regulates private bus companies, and manages city subsidies to the bus companies. (These subsidies, which are not considered part of the DOT budget, amounted to $94 million in 1992.)

The Bureau of Traffic Operations enforces traffic laws; maintains traffic signs, signals, and streetlights; and maintains and collects revenues from parking meters and municipal garages. The Bureau of Highway Operations is responsible for resurfacing and repairing city streets and highways.

The Bureau of Bridges is in charge of the operation, maintenance, and repair of New York City’s 880 bridges and tunnels (except toll facilities under the jurisdiction of the Triborough Bridge and Tunnel Authority or the Port Authority). The bureau’s 1993 operating budget is $65 million, but it plans to spend $3.4 billion in capital funds over the next ten years, essentially rebuilding the four East River bridges by 1998 at a cost of $977 million, and reconstructing 235 bridge structures whose condition is rated “poor” or “fair” at a cost of $1.6 billion.

Capital expenditures are subsidized by the Federal Government, so the city has an incentive to prefer such reconstruction to preventive maintenance. This policy is expensive, however, Department of Transportation studies show the cost of rebuilding a bridge is many times higher than the cost of maintaining a bridge optimally over its useful fife.

One example is the Honeywell Bridge, which crosses over the Sunnyside tracks in Queens. The bridge was allowed to deteriorate until it was closed in 1978. It was still closed in 1990, when an inspection revealed that it was in danger of collapsing under its own weight. Some $50 million was spent shoring up the bridge, which had deteriorated so badly that it could not be rehabilitated. Preventive maintenance would have kept the bridge in operation and saved the city the cost of the recent emergency work.

The Parking Violations Bureau (PVB) accounted for $51 million of DOT’s expenses in 1992, while generating $277 million in revenues from fines. The city has requested proposals for privatizing PVB and is also urging the state to eliminate certain DOT mandates, including the requirement that vehicle body type and license plate expiration date information appear on parking summonses (saving an estimated $1.5 million in fines that the city cannot now collect), and the requirement that scofflaws be notified by certified mail (saving $250,000).

The city’s 1993 budget forecasts a $22 million reduction in DOT spending, achieved in part by consolidating all scofflaw towing in the Office of the City Sheriff. The city currently tows 140,000 vehicles annually through three programs involving DOT, the city marshals, and the city sheriff.

14. DEPARTMENT OF ENVIRONMENTAL PROTECTION

Spending: $425 million
(19.7 percent increase, 1989-1992)

Employment: 5,664
(3.9 percent increase, 1989-1992)

The Department of Environmental Protection (DEP) manages the city’s upstate water supply and the aqueducts, water tunnels, and 5,800 miles of water mains used to distribute water to New York City residents. The department manages the sewer system, including 14 sewage treatment plants, and disposes of sewage sludge. DEP also enforces federal and state regulations dealing with air pollution, water quality, hazardous waste removal, and wetlands, as well as the city’s noise code.

The increasing emphasis on environmental issues at all levels of government is reflected in DEP’s employee head count, which rose by 1,438 positions, or 34 percent, between 1983 and 1992.

Until 1992, the city dumped its sludge about a hundred miles offshore in the Atlantic Ocean, at a cost of $10 million to $20 million per year, plus a $50 million federal fine for violating regulations designed to discourage ocean dumping. As of June 1992, the Federal Government banned such dumping outright. The DEP has contracted to have sludge hauled to disposal sites in several states in the Midwest, South, and West, at a projected cost of $125 million in fiscal 1993. By 1998, however, the city plans to build four local facilities for sludge disposal.

15. DEPARTMENT OF HOUSING PRESERVATION AND DEVELOPMENT

Spending: $380 million
(26.8 percent decrease, 1989-1992)

Employment: 3,754
(21.0 percent decrease, 1989-1992)

The main responsibility of the Department of Housing Preservation and Development (HPD) is to manage and rehabilitate city-owned housing acquired in rem (through property tax foreclosure). Other HPD offices enforce the Housing Code, stimulate the construction of new homes and apartments, and litigate on behalf of tenants in the city’s Housing Court.

The largest component of HPD’s budget, accounting for 64 percent of the total in 1992, is the Office of Property Management, which currently maintains 31,400 occupied residential and commercial units in apartment buildings, 1,500 occupied one- and two-family homes, and 23,000 vacant housing units. The recent cuts in HPD’s budget reflect, among other things, a reduction in the number of vacant housing units under city management, which had been as high as 56,000 at the end of fiscal 1987.

HPD’s Division of Alternative Management is charged with arranging the transfer of city-owned buildings to private hands. It is expected to dispose of almost 2,700 units this year, resulting in a net decrease of 500 units under city ownership.

New York is unique in spending substantial sums on what had been private housing. Some cities do not take in rem properties at all. Cook County (Chicago), for example, uses a tax sale auction program, in which buyers bid to purchase the right to the taxes owed on a property. If the original owner does not pay all back taxes and interest to the successful bidder within a specified period, the tax purchaser takes ownership of the property. Under this arrangement, Cook County realizes at least a portion of its uncollected property taxes and avoids the cost of maintaining the properties, which remain in private control and on the tax rolls. In New York, by contrast, most owners to whom in rem properties are transferred are nonprofit organizations that are exempt from property taxes.

20. DEPARTMENT OF PARKS AND RECREATION

Spending: $133 million
(32.5 percent decrease, 1989-1992)

Employment: 3,436
(25.7 percent decrease, 1989-1992)

The Department of Parks and Recreation oversees New York City’s 26,000 acres of developed, n2 al, and undeveloped parkland, as well as stadiums, recreation centers, tennis courts, golf courses, public beaches, and swimming pools. It conducts a variety of programs in athletics, physical fitness, environmental education, visual and performing arts, and crafts.

The Parks Department has been one of those hit hardest by the recent budget cuts. But it has been one of the most innovative agencies in the city in reducing bureaucracy and giving workers more responsibility and autonomy. For example, an agreement with the union representing Forestry Division employees allows work crews to develop their own work strategies, routes, and schedules, giving them more flexibility in carrying out their duties and responding to problems.

Private foundations such as the Central Park Conservancy, the City Parks Fund, and the Prospect Park Alliance are increasingly involved in maintaining the city parks, independently of the Department of Parks and Recreation. Between 1990 and 1992, such groups spent an estimated $55 million maintaining and improving city parks. In addition, some philanthropists donate money directly to the Parks Department. Such funds amount to roughly $3 million in the typical year, but in fiscal 1993 the total rose to $5 million, reflecting $2 million donated by the Sol Goldman Trust to keep municipal swimming pools open.

21. LIBRARIES

Spending: $129 million
(38.6 percent decrease, 1989-1992)

Employment: 3,079
(4.4 percent decrease, 1989-1992)

The library budget funds three independently operated public library systems, each administered by its own board of trustees. The New York Public Library operates 34 branches in the Bronx, 37 in Manhattan, and 11 on Staten Island. The Brooklyn Public Library comprises a central library and 59 branches, and the Queens Public Library has a central library and 62 branches. Because the library systems are not considered a city agency, their workers are not counted in total city employment figures.

The New York Public Library also oversees four research libraries: the Central Library at Fifth Avenue and 42nd Street, the Lincoln Center Library for the Performing Arts, the Annex on 43rd Street, and the Schomburg Center for Research in Black Culture in Harlem.

The New York Public Library system received $52 million from the city in 1992; the Brooklyn and Queens systems, just under $33 million and $36 million, respectively. The research libraries got a total of $8.5 million, which accounted for only about 20 percent of their budgets; the rest came from the federal and state governments, private donations, and investment income from the libraries’ endowments.

The library system suffered some of the harshest cutbacks of any city function during the recent fiscal troubles. As a result, many of the branch libraries had their operation cut to between two and four days a week. However, the fiscal 1993 budget allocates an additional $7.8 million to restore five-day-a-week service, and in his 1994 financial plan, Mayor Dinkins proposes an additional $15.2 million to expand service to six days a week.

 

 

 
A Map of the City's Budget Priorities
City Journal Spring 1993.
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