Nicole Gelinas in City Journal writes about the history of New York City’s finances and its recent reliance on Wall Street. The piece warns of the danger ahead for the city as Wall Street’s fortunes have tumbled. The most interesting quote:
The city projects that spending over the next three years will increase by more than 20 percent, while revenues will increase by just 13 percent (neither figure is adjusted for inflation). If that happens, a $5 billion–plus deficit—more than 11 percent of tax-funded spending—will result in two years’ time. Moreover, that’s the best-case scenario, based on the city comptroller’s prediction of low growth this year and next and a quick, though weak, recovery after that.
Best-case scenario, indeed. There is no way that revenues will increase by 13% in next three years. New York City is looking at negative revenue growth starting immediately and continuing, at least, through 2010. The result? Massive budget gaps that must be closed. Gelinas writes (from a conservative perspective; City Journal is the house organ of the Manhattan Institute) of the compromises that she believes will need to be made.
I’ve written about California’s budget crisis as a harbinger of things to come. New York City (and New York State) are headed in the same direction.
Update (8/12/08): Here’s an even gloomier piece from Bloomberg today.