By Joan Gralla
(Reuters) - New York City Mayor Michael Bloomberg on Thursday unveiled a $68.7 billion preliminary budget, closing a $2 billion gap without raising taxes or laying off teachers or uniformed workers.
"We will spend less in virtually every area except schools" in fiscal 2013, he said in a televised address that stressed the urgency of cutting soaring pension costs.
"The bottom line, I think, is that it's a responsible budget," he said, insisting that he was working "to keep the city safe, to keep the city attractive and growing, and to continue to make the kinds of long-term investments that will keep this city growing."
Bloomberg, a political independent now in his third and final term, has regularly demanded that city agencies "do more with less." The new budget plan is partly balanced with the $1 billion in cuts he ordered in November.
He defended the 11 rounds of spending cuts he has made over the last few years, saying the quality of city services has not been impaired. "It would be pretty hard to find many agencies that are not doing a heck of a lot of a better job than they did in 2002," he said.
A small number of non-uniformed workers will be laid off under the plan, he said. The city has cut its work force by 20,500 positions since 2002, largely via attrition.
Bloomberg last year had proposed laying off 4,000 teachers.
Although New York's tax revenue has staged a slow recovery from recession lows, Bloomberg remained cautious. The city likely will only get an extra $111 million in the current fiscal year, he said, while revenue should rise $278 million the following year.
"We expect the recovery of all the jobs lost in 2008 by the end of 2012," Bloomberg added.
The city-funded $50.7 billion part of the budget plan is down 1.9 percent on a year-over year basis. The rest of the budget, funded by the state and federal governments, will rise by $2 billion.
Spending on capital projects over the next five years would increase nearly $700 million to $39.4 billion under the plan.
New York City, along with many states, cities and towns, is struggling to afford workers' pension and health-care benefits. Bloomberg said the city's pension contribution will have soared nearly 500 percent to $8 billion from fiscal 2002 to fiscal 2013.
"We are already paying out more in pension and health benefits than we do in salaries and it is going to get worse," he said.
The rest of the budget gap is being closed with $1 billion from the sale of new taxi medallions.
Bloomberg's proposed budget plan is benefiting from a change in estimated pension costs. The city actuary's proposals for the cost of the $110 billion pension fund came in at $850 million less than the $2 billion that was expected for this year and the following year.
The actuary's proposals include cutting the assumed investment rate of return to 7 percent from 8 percent, which raises the city's contribution. But the actuary's other recommendations will save the city $850 million this year and the next year, instead of costing it $2 billion.
Bloomberg said the estimated investment rate should be even lower. The fund over the past decade has only earned an average annual return of 5.6 percent, he said. An even smaller return rate would force the city to contribute more, sparing future taxpayers.
Several years ago, credit analysts applauded Bloomberg for being the first politician to set aside money for retiree health-care costs, which are expected to cost the city more than $50 billion. But after taking $1 billion out of the fund last year, he is withdrawing the remaining $1 billion this year.
Comptroller John Liu, a Democrat, said the plan relies too much on one-shots -- steps that only raise money for one year.
Also under the plan, the city would lose 20 fire companies, a measure that drew fire from both the City Council speaker, Christine Quinn, and Public Advocate Bill de Blasio, both Democrats.
De Blasio also faulted the mayor -- whose signature issue is education -- for "refusing to invest the necessary resources in Head Start, universal pre-kindergarten and child care." And Quinn said she was concerned about major cuts planned for after-school programs, libraries and museums, and a reduction in the chief medical examiner's resources.
(Reporting By Joan Gralla; Editing by Leslie Adler)