Net Loss: Secondary Effects of City Budget Cut Proposals


This report looks at the secondary effects on the City budget of proposed cuts in State and City spending, data that have not been provided by the Administration. This analysis does not include the additional cuts in the City's contingency plan.

Secondary effects, particularly in future years, are often ignored in a routine budget process. However, the City is not faced with routine budgeting. The cuts are enormous. Some of the secondary effects will begin to appear in the second half of FY 1996, while others may not be felt until FY 1997. They could not only hurt many New Yorkers, but also threaten the City's ability to balance its budget.

The savings projected from the spending cuts assume that people deprived of one service will not require another, sometimes more expensive service. In some cases, that may be a risky assumption. To test that risk, we analyzed the breakeven point for a number of cuts -- that is, the point at which secondary spending equals and thus wipes out the savings from the initial spending cut.

Home Health Care For Seniors & Disabled Patients

Services For Children--Foster Care & Day Care

Mental Health & Welfare

Jobs, The Economy And Taxes

The Administration expects that reducing the size of government and cutting some business taxes will encourage businesses to locate in New York City and those already here to stay and expand. It is unlikely that business expansion, it if occurs, would create the unskilled and semi-skilled jobs for which most of those who will be hurt by the budget cuts would qualify. Thus, even if the strategy is successful, sections of the City may not benefit from future job growth and the already large gap between the highly paid skilled workforce and the increasingly unemployed unskilled workforce may increase. Sharp social divisions can be a threat to social stability.

This analysis demonstrates that savings are not always as easy to achieve as they seem. Government action often has unintended consequences. The City must make cuts and balance its budget, which will require some sacrifices by people now benefiting from City programs. But the City has to avoid cuts that both hurt people and increase costs.

Economic Impact on City Council Districts
of State Welfare Cuts (in $millions)

City Council     No. Persons     Planned FY       Direct     Total Econ.
    District,          on PA     96 Welfare,        Loss          Impact
     Borough                       $million     $million        $million

     15, Bx           61,365          $190          $41             $67
     17, Bx           60,899          $188          $40             $66
     34, Bk           50,350          $156          $33             $54
     37, Bk           49,366          $153          $33             $54
      7, Man          49,302          $152          $33             $54
     14, Bx           47,233          $146          $31             $51
      8, Man          47,220          $146          $31             $51
     36, Bk           43,377          $134          $29             $48
      9, Man          40,532          $125          $27             $44
     42, Bk           40,436          $125          $27             $44

Sources: See notes to Table 16.