$4B shortfall - NYC may cut 23,000 jobs
Mayor says New York City may need to reduce payroll by 23,000 and increase sales tax to close $4 billion budget gap.
NEW YORK (CNNMoney.com) -- The Big Apple will have to tighten its belt as the city that leans heavily on Wall Street's profits is expected to suffer a dramatic decrease in tax revenues in coming years.
Mayor Michael Bloomberg said Friday that New York City may have to cut tens of thousands of jobs and it may have to increase the sales tax to make up for the city's $4 billion budget shortfall in the fiscal year that begins in July.
"We had prepared for a downturn, but I think it's safe to say nobody prepared for the severity of the downturn that we have been experiencing," said Bloomberg.
As many as 23,000 city employees might be cut from the city payroll as part of an effort to save roughly $1 billion in expenses, the city said.
The public school system would suffer. If new aid does not come from the state, 14,000 teachers could lose their jobs. Most of the remaining 9,000 positions would be lost through attrition and about 1,000 layoffs.
The tax hikes could raise an estimated $900 million, Bloomberg said, but that may be "nowhere near adequate," depending on the aid the city gets from the state and federal governments. He said he is hoping to get some concessions from city labor unions and aid from the state and federal governments totaling $2 billion.
The city will also save nearly $1 billion by cutting services and taking other actions. Reductions will be felt in the fire and police departments and at senior centers, among other areas. Some parking meter rates will increase, and the city will increase health code enforcement at "unsanitary restaurants."
The city has been hard hit by the recession because its economy depends heavily on Wall Street profits. The financial sector was rocked by the credit crisis, which led to the collapse of major investment houses and the loss of jobs.
Bloomberg said Friday that the city was expected to lose 46,000 Wall Street jobs by the second quarter of 2010.
"When Wall Street catches a cold, it is a very serious illness to us," said Bloomberg.
Cash bonuses paid to city employees of Wall Street firms plunged by 44% in 2008 to $18.4 billion, down from $32.9 billion paid in 2007, according to an estimate released earlier this week by State Comptroller Thomas P. DiNapoli.
"The securities industry has already lost tens of thousands of jobs and the industry is still continuing to write off toxic assets. It's painfully obvious that 2009 will probably be another difficult year for the industry," DiNapoli said.
The loss in Wall Street bonus cash was estimated to cost the city $275 million in taxes, according to the controller's office. Before the financial crisis, 12% of the city's tax revenue came from business and personal income tax collections from Wall Street.
"The mayor is cutting agency spending as much as he can without compromising our quality of life," said Deputy Mayor Edward Skyler in a written statement released Thursday. "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 capital."
-- CNN's Jennifer Rizzo contributed to this report. 
-
These 5 cities have the fastest-growing foreclosure rates. And they're not the usual suspects. More -
Now you can get the $8,000 credit through June 2010 -- or $6,500 if you're not a first-time buyer. More -
Home prices are forecast to plummet, but these 7 cities are predicted to post gains. More -
Home prices have grown in the beer-guzzling heartland and fell in the wine-sipping coastal states. More -
Investors think Detroit's foreclosed houses are a deal. Would you buy this one for $6,900? More -
Economic growth, affordable wages -- these spots have what entrepreneurs need to thrive. More
