Net Loss: Secondary Effects of City Budget Cut Proposals

Foreword by Comptroller Hevesi

New York City faces serious and continuing budget problems. After closing a gap of $2.3 billion in fiscal year 1995, the City now must find a way to close a fiscal gap in 1996 that the Administration in April estimated at $3.1 billion, close to the Comptroller's Office estimate of as high as $3.2 billion.

The City's current fiscal problems are as serious as those the City faced in the mid-seventies and may be tougher to solve. The City's economy remains weak, sharply limiting the City's resources. And, unlike the 1970s, now the state and federal governments are cutting back on their support for the City.

To create a long-term balance between New York City's spending and its revenues, major cuts will be necessary. Those cuts will undoubtedly cause pain for many New Yorkers.

Ideally, all the savings needed to close the gap could be gained by eliminating waste and fraud in both services and entitlements. Though we need to redouble our efforts to reengineer government to make it more efficient and effective, in the short term there is no alternative to some level of service cuts in both programs and entitlements.

The goal of this report is to identify and quantify to the best of our ability the service impact of some of the proposed cuts and their secondary effects. It does not cover every aspect of the budget, but selects major components -- for example, in the health-care area, home health care and Medicaid. It describes how some of our citizens may suffer from those cuts.

Our purpose is not to suggest that because a cut is painful that it therefore should not be made. Rather, we believe that informed public discussion is the only way to decide which cuts to reconsider and which ones to make and to gain the broadest possible acceptance for those cuts. When we are asking some New Yorkers, especially the least powerful, to sacrifice, it is important that we be honest and open about our choices and their consequences.

This report shows that the budget cuts may have some serious ramifications for the City beyond the first-round effects. These losses add up to a removal of a significant portion of the safety net that New Yorkers have woven over the years to protect the City's least privileged citizens.

We hope this document contributes to the public debate. We will present our own list of preferred options and alternatives shortly.

Alan G. Hevesi

May 1995