The Streets Were Paved with Gold - Ken Auletta [129]
New York’s fiscal magic show has played in other cities. Mayor Poelker of St. Louis also invented the longer fiscal year. To save $4.1 million, he slipped his final 1976 payroll into fiscal 1977 and squeezed five quarters of federal revenue sharing funds into four city quarters. Buffalo “rolled over” $1.7 million of its 1975 school payroll into 1976. Cleveland played tricks with its capital budget. In 1974, Mayor Ralph Perk, a conservative Republican, sold the city’s sewers to a new regional authority for $32.2 million, using the proceeds to balance his budget. In a speech that could have been written by Wagner, Lindsay or Beame, Mayor Perk explained, “I realize this is a one-time only receipt and normally should not be used for operating expenditures. However, an examination of the city’s needs currently indicate there is no way we can provide the essential city services without these proceeds.…” Parroting the Citizens Budget Commission, the Greater Cleveland Growth Association—the local Chamber of Commerce—warned: “Such a policy allows the City to increase its expenditures to a level which becomes increasingly difficult, if not impossible, to maintain once the funds have been spent.”
Kafkaesque bookkeeping systems are common in other mismanaged cities. David Stanley describes two Cleveland State University professors who spent a decade deciphering Cleveland’s bookkeeping: “The difficulties facing citizens who seek to understand the City’s finances are substantial. The authors present numerous examples of potential confusion, double counting, inconsistency between financial figures, misinterpretation, as well as confusion between net and gross figures and between capital and current accounts.… Thus, there is no present source from which the individual citizen can secure a comprehensive and coherent picture of the City’s financial position.” Most city and state governments—which account for two-thirds of all government spending and 75 percent of all government employees—operate on a cash rather than accrual accounting basis. This invites budget manipulations since officials account for money only when it is spent, not obligated. Want a surplus? Governor Carey in 1978 slowed down state income tax refunds, giving him an election-year cushion. Want a deficit? Governor Malcolm Wilson pumped extra school aid into the first quarter of the state fiscal year, also an election year, leaving his successor to pay for it. There is a method to this seeming madness, which is why it is so widespread.
And yet New York has been so extreme as to qualify as unique. As Richard P. Nathan and Paul R. Dommel have written, “Most cities—New York is the major exception—have avoided relying extensively on borrowing for operating expenses.” The Congressional Budget Office reached the same conclusion. New York, they said, is “the only major city that has chronically run a large current operating deficit in both good and bad economic years.”
“Is New York the ‘bellwether’ city for America in its financial difficulties?” Terry Nichols Clark and three associates at the University of Chicago asked that question in a paper, How Many New Yorks? To find the answer, they monitored the fiscal temperature of fifty-one large cities and counties over eight years. Choosing twenty-nine indicators but relying on four—per capita expenditures for common functions, the ratio of local revenues to local taxable property, per capita long-term debt and per capita short-term debt—they devised what they called a Fiscal Strain Index. Using data from the fiscal 1974 period, they found that New York suffered the greatest fiscal strain. The average (mean) for all cities was 84. New York’s was 165.03. Boston was in second place with a score of 128.82, followed by Newark (105.91) and San Francisco (102.97). By their measure, many older cities were quite healthy, including Chicago (55.33), Pittsburgh (48.35), Schenectady, New York