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By Root 1190 0

crisis. But given the magnitude of the city’s problems, little had changed. “I would say we’ve only moved the ball from our own seven- or eight-yard line to our own 15 yard line,” observed Ray Horton, principal author of the Temporary Commission’s reports, in November 1977. In their final report of June 1977, the Commission used the word “decremental” to describe the actions of the Beame administration between 1975 and 1977. Which means going backwards. In the years since, Koch has tried to throw some passes. But the yards are gained slowly. “When I came here,” he told me after his first three months in office, “I thought, you know, I would look at something and say, ‘This is the reasonable, rational thing to do’—and I’d say, ‘It’s done.’ Oh, no. You have to every day go out there and ask, ‘What’s happened?’ And even then, it’s only half done.”

A review of the city’s finances suggests the snail-like pace of reform. In 1975, the city’s three-year fiscal plan predicted that by 1978—excluding the approximately $700 million of expense items sequestered in the capital budget—the city’s budget would be honestly balanced and the credit market reopened. By mid-1978, the public credit market was still closed and the city’s four-year fiscal plan projected that the budget wouldn’t be balanced till 1982. Despite the promises made in 1975, by early 1978 Mayor Koch announced that the city’s real deficit—the gap between what it took in and what it spent—would be $1,022 billion in fiscal 1979, and this tidy sum did not include the cost of expiring labor contracts.

The city’s future budget projections were still predicated on some big ifs. They cautiously allowed that local revenues would grow slowly. But the city’s chief revenue source, the property tax, was expected to decline between 1978 and 1982. And, according to a study by Ray Horton for the Lehrman Institute, “total proceeds from the four other general fund taxes are projected to grow only 22.7 percent” in that period—“a rate that may approximate the rate of inflation but will fall short of the ‘natural’ rate of expenditure increase by a substantial amount.” The budget plan also assumed no further subsidies for the City University, the Health and Hospitals Corporation or the Transit Authority, though in April 1978 the city agreed to increase its transit subsidy by $18 million; and experience suggests the others, particularly the deficit-ridden Hospitals Corporation, will also win increases. The city’s budget plan also assumed the continued expansion of federal and state aid, ignoring President Carter’s January 1978 budget message with its promise to curb aid, his anti-inflation pledge to slash federal spending; it also ignored the city’s dwindling share of the state’s population (down from 53 percent in 1950 to 42 percent in 1975) and pledges to cut state taxes; ignored the spreading taxpayer rebellion which threatened Congressional renewal of revenue sharing and helped eliminate countercyclical aid (costing the city $34 million in fiscal 1979), and placed new curbs on the Comprehensive Employment Training Act (CETA).

After the House and Senate passed new federal loan legislation, cracks in the city’s four-year plan began to surface. A June 21, 1978, Control Board staff report, which received scant press notice, projected a city budget gap of $928 million in fiscal 1981 and $1,014 billion in fiscal 1982, the year budget balance is supposed to be achieved. In fairness to the city, the staff report did not take into account Koch’s projected attrition savings, which would reduce the gap by $272 million in 1981 and $422 million in 1982; nor did it count local revenues, swollen by inflation, or such unanticipated windfalls as the $24.6 million the city received from Penn Central for back taxes in the fall of 1978. On the other hand, the Control Board report warned that their computations did not take into account the cost of new labor contracts which begin on July 1, 1980, when union leaders say they will seek “substantial raises.” (The same 8 percent wage hike won in 1978 would cost