With tax revenues continuing to drop, New York City faces a $4 billion deficit for fiscal year 2010 and could resort to layoffs and attrition from the city's 310,000-member workforce to close the gap, city officials said late Thursday.
The cuts and layoffs could result in the elimination of more than 23,000 jobs, or just more than 6.5 percent of the current workforce, a number that has been projected by ABC News for the past several months.
On Friday, Mayor Michael Bloomberg will lay out his plan to close the budget gap, including new initiatives and about $1 billion in cuts for city agencies. The initiatives are aimed at reducing long-term spending on health care and pensions as well as Medicaid costs and debt service, among other programs.
For the heath care initiatives to succeed, labor unions will have to agree to change the terms of current contracts.
The city is seeking to require all city workers to contribute to their health care costs. Right now some contribute nothing, others a token amount. It is unclear whether the concessions will have to be won through reopening existing contracts or by the potentially simpler means of addendums.
For the city to reduce its long term pension costs -- one of the heaviest budget burdens -- it will require a change in state law. That change, which New York Governor David Paterson indicated he would support, would reduce the city's pension contribution for new workers and require workers to work 25 years rather than the current 20 under the "20-and-out" system.
The city's deficit projection is driven, in part, by the fact that tax revenues are forecast to have dropped by $800 million in 2009 and another $2 billion in 2010.
Even if all the initiatives succeed, the city still faces the prospect of trimming its workforce by 23,000 -- a number that would include at least 13,000 teachers, according to Schools Chancellor Joel Klein.
The preliminary budget proposal is the gloomiest news yet from Bloomberg, who has incrementally spooned out bad news over the past several months in a process one City Hall insider called "pain management."
"The mayor is cutting agency spending as much as he can without compromising our quality of life," Deputy Mayor Ed Skylar said in a statement released today. "But in order to close this deficit without destroying the core services New Yorkers rely on, the mayor will need help from all of our partners, from the municipal unions to the leadership in both the state and nation's capitol. We all will have to do our part to get through these tough times."
The city's agencies face the need to cut another $2.1 billion on top of the $1.6 billion they have trimmed from their costs over the past 12 months.
New York City employees weren't the only municipal workers to get bad news today. California Gov. Arnold Schwarzenegger won approval from a Sacramento County Superior Court judge to order twice-monthly furloughs for 238,000 state employees.
Schwarzenegger's press secretary, Aaron McLear, told ABCNews.com today that the furloughs are indefinite and will start Feb. 6. The governor and state legislature leaders have been tied up in negotiations over the budget for the next fiscal year, projected to come with a $42 billion shortfall.
The furloughs are expected to save the state about $1.3 billion.