Federal budget balancing undercuts New York effort

Having gone to the brink of bankruptcy and stepped back a few paces, New York City now is face to face with its biggest challenges of the new decade. And despite the political promises engendered by the current presidential campaign, most close observers say there is little likelihood that the rhetoric will be matched by reality in the months to come -- whoever is elected.

The city's problems have both internal and external sources:

* For the first time since 1966, the city faces the strong possibility of a transit strike April 1. If it occurs, more than 6 million bus and subway riders will have to find alternative means of getting to work.

* Just when the city seemed about to truly balance its budget for the first time in almost 10 years, President Carter announced his proposed anti-inflation package -- including major cuts in aid for New York for fiscal year 1981 (starting Oct. 1) and perhaps, according to some city officials, before that.

* Official New York, taking its cue from Mayor Edward Koch, is trying hard to conceal its displeasure with the President's proposed cuts and must walk a tightrope -- continuing to demand more federal help but stopping short of openly criticizing the President for fear of generating even more drastic cuts.

Vague hopes that Mr. Carter's promise last week to restore some $500 million in federal aid to the cities through some sort of new legislation have already been dashed by Senate majority leader Robert Byrd (D) of West Virginia, who announced his opposition to any more urban aid legislation over the weekend.

Koch aides project a shortfall of $40 million, when the Carter budget cuts filter down, in what would be needed to balance the city's fiscal '81 budget.

The mayor, in his own words, has three options open to him to close the city's budget gap. These include "a reduction of expenses," including service cuts; "increasing revenues" -- a route, Mayor Koch says, that includes the possibility of new taxes; and postponing balancing of the city budget until fiscal year 1982.

The last step would further erode private investor confidence in the city at a time when the mayor is getting high marks for putting the New York on the road to financial recovery.

Of all these options, the "reduction of services" may well be the most difficult to follow. In fact, it has virtually been ruled out by new municipal union demands -- especially in the area of mass transit. Officials representing the Metropolitan Transportation Authority (MTA), the state agency that runs the New York City bus and subway system, are continuing to press for work-rule changes as one way of averting a transit strike. They would like to cut the time of paid rest periods and slash overtime and pension fringe benefits for many of the roughly 33,000 members of Local 100 of the Transport Workers Union (AFL-CIO).

But it seems highly unlikely the union will give up hard-won fringe benefits. In fact, the union is demanding a 30 percent wage increase, which the MTA says would cost another $300 million a year and raise the agency's already existing $ 200 million deficit.

New York Gov. Hugh Carey has proposed raising state taxes on gasoline to help pay for a transit wage hike. But because this is a state election year as well as a presidential one, the Legislature, which must approve a gas tax increase, will be reluctant to do so. Thus, an MTA fare increase of at least 10 cents seems virtually inevitable.