$1.7 Billion Budget Gap Greets New York Mayor

IN his first official day on the job Jan. 3, Mayor Rudolph Giuliani pored over the New York City budget with his top aides, looking for ways to save money.

Squeezing more fat from the New York budget will consume an increasing amount of the new mayor's time over the next month. Mr. Giuliani will be seeking ways to reduce the next fiscal year's projected budget gap of $1.7 billion. The mayor is expected to present his new budget (FY 1995) to the City Council by the beginning of February. By the time the new budget year starts on July 1, the budget must be balanced.

How the mayor resolves the city's finances is critical. Standard & Poor's rates the city an A-minus with a ``negative outlook.'' Any reduction in the rating will cost the city extra money in interest expense.

Under Mayor David Dinkins, past budget gaps were closed through one-time events, such as the sale of assets. Richard Larkin, a managing director at S&P, warns that if the city continues such budget moves, the rating agency may lower its credit rating. ``The new financial plan by the mayor will be our first indication of whether he plans to patch up the deficit or fix it so it doesn't happen again,'' Mr. Larkin says.

Giuliani admits that the city has ``difficult'' fiscal problems. However, he was exuding confidence that the problems can be resolved ``just as well as by our predecessors.''

One of the budget challenges for Giuliani will be curtailing the city's spending. In a mid-December report, the New York State Financial Control Board, a watchdog agency, warned, ``...the city must reverse the expansion that has occurred since the FY 1994 budget was adopted and replace it with a renewed momentum toward reduced spending.''

The report says ``effective restructuring will require fewer people on the city's payroll.'' In order to meet its FY 1994 headcount goals, the city would have to lay off 4,600 of its 215,000 employees this year.

While it is cutting the payroll, the city also has to increase worker productivity. This may prompt Giuliani to challenge the city unions. ``The unions have a stranglehold on the whole process of delivering municipal services,'' says Peter Salins, professor of urban planning at Hunter College and editor of City Journal, published quarterly by the Manhattan Institute for Policy Research. Some members of the institute are now part of Giuliani's team.

Mr. Salins recommends that Giuliani offer the unions a little more money in return for the procedural freedom to set work rules, hire and fire workers, pay more for smarter workers, and ``get rid of the deadwood.''

Instead of confronting the unions, Giuliani ought to try the ``carrot'' approach, says Robert Berne, associate dean at New York University's Robert Wagner Graduate School of Public Service. ``If the public sees he tried and failed, then he has a big lever. You can't go at the unions from Day One,'' Mr. Berne says.

City residents will also be watching the mayor carefully to see what he does about reducing crime and improving the city's quality of life - both campaign issues for Giuliani. Most of the questions at his first official press conference on Jan. 3 revolved around police issues.

Giuliani indicated that his administration would study using more civilians to do administrative work in the police department. This would free more police to combat crime. Giuliani suggested that he had already started to speak to members of the City Council about the issue. ``It depends on how much flexibility we have in the budget,'' he said.

Combating crime becomes a budget issue because more arrests mean longer waits for arraignment. To keep the arraignment times within court- mandated limits, the city would have to hire more judges, clerks, and court officers.

The mayor's approach to crime won't be totally geared toward locking up criminals. His new police commissioner, William Bratton, formerly Boston's police chief, says the police also intend to work with human-rights groups and outreach organizations to get more help for destitute people.

Giuliani says he still intends to pursue ``quality of life'' issues such as the city's aggressive panhandlers, youths with loud car radios, and individuals who urinate in public areas. ``The maintenance of law and order below the threshold of the explicitly criminal is an important issue,'' Salins says.

Although he is continuing to name officials to his administration, Giuliani has filled most top posts. Some key advisers date back to the mayor's days as a United States attorney. However, he has kept some of the officials from the Dinkins administration.

Berne says the appointments show a ``creative mix of knowledge and new ideas.'' For example, Giuliani's budget director, Abraham Lackman, has been working for the Republican-controlled state Senate.

Now, Mr. Lackman will have the opportunity of appealing to Albany for additional financial aid.

``He can tell people in Albany who denied aid in the past why things aren't the same,'' Berne says.