\n<\/p>\n
This week, U.S. Senator Bernie Sanders, America\u2019s perennial socialism-salesman, lauded New York City\u2019s Zohran Mamdani, saying the new mayor had \u201cinherited a huge budget deficit\u201d and \u201cbrought it down to zero,\u201d while still boosting spending.<\/p>\n
Sanders and others have been quick to cheer Mamdani\u2019s plan to balance the $125 billion city budget, which still must be approved by the City Council. But these boosters, quite conveniently, avoid getting into the details. That\u2019s by necessity. Closer inspection reveals how much New York City\u2019s problems were of its politicians\u2019 own making \u2014 and the extremes to which they\u2019re going to avoid making hard choices.<\/p>\n
Mamdani, with great alarm, announced\u00a0in January<\/span><\/a>\u00a0that the city faced a budget crisis. The city\u2019s looming fiscal crunch was hardly news; state officials\u00a0had been warning about it<\/span><\/a>\u00a0for many months.<\/p>\n There was a kernel of truth to the mayor\u2019s worries, though: the city was in its fourth year of spending more than it took in. The trouble, though, was exclusively on the expenditure side. There was no single culprit, but rather a systemwide expansion of costs, including newer programs \u2014 such as a housing-voucher system whose cost quadrupled to almost $2 billion in just four years.<\/p>\n One particular, and avoidable, trouble spot was a state-imposed \u201cclass-size\u201d mandate set to cost the city close to $1 billion annually by requiring the city to hire more teachers. Then-Assemblyman Mamdani, along with most lawmakers, had supported the rule in 2022, which was a thinly veiled effort to shield the NYC teachers\u2019 union from the pain of school consolidation driven by collapsing student enrollment. Part of the mayor\u2019s budget triumph came from Albany simply postponing the law\u2019s implementation.<\/p>\n Mamdani will eventually have to confront the gap between his vision for democratic socialism and the extent to which New York\u2019s public employee unions, and their stranglehold over city operations (and the state Legislature), prevent agencies from delivering, in his terms, \u201cpublic excellence.\u201d<\/p>\n But that fight for greater efficiency is not happening today.<\/p>\n The mayor, always quick to bemoan spending restraint as \u201causterity,\u201d instead seems to have squeezed more aid from the state government, though Albany hasn\u2019t yet approved a budget for the state\u2019s current fiscal year (which began six weeks ago).<\/p>\n That extra cash is only available because of the combination of Albany\u2019s steep personal and business income taxes and the recent strong performance of the NYC-based financial sector. When markets do well, cash rains in. But when capital gains dry up, so do tax receipts.<\/p>\n The Global Financial Crisis, and the resulting collapse in capital gains, flooded the New York state government in a sea of red ink, which washed thousands of state workers out of their jobs, and forced the state to close its aid spigot for local governments and school districts.<\/p>\n New York pols treat that as ancient history instead of a cautionary tale about the imprudence of counting on tax receipts that might not exist a year from now.<\/p>\n The mayor\u2019s antagonism toward the city\u2019s high earners, and recent expansions by financial heavyweights into Texas and South Florida, have put NYC at greater risk of tax-base erosion.<\/p>\n The biggest chunk of Mamdani\u2019s budget-balancing strategy is arguably the least responsible: he\u2019s simply punting costs into the future.<\/p>\n New York City pays into five public pension systems on behalf of current workers, expecting that the payments, plus investment returns, will be sufficient to fund each worker\u2019s pension in retirement.<\/p>\n But that often hasn\u2019t been the case. The City right now is about two-thirds of the way through paying off an extra pension debt that hit its balance sheet around 2010 as the pension systems acknowledged that retirees were living (and collecting pensions) longer and that investments couldn\u2019t be counted on to generate such high average returns (8% per year) over the long run.<\/p>\n Instead of paying off the last of that decades-old pension debt in 2032, Mamdani wants to \u201crestructure\u201d the city\u2019s pension payments in each of the next few years and instead stretch the costs out to 2037. That means deferring $1.6 billion in pension costs in the next fiscal year alone and forcing city taxpayers to pay it back, with interest.<\/p>\n New York\u2019s state constitution guarantees public pensions, meaning they can never be reduced, so if the pension systems\u2019 still-generous assumptions about future investment performances don\u2019t materialize, taxpayers will be hit up for even more to make up the difference.<\/p>\n Mamdani should be looking more seriously at the decisions that put New York City in the red, and use the time-tested methods of previous mayors (like \u201cprograms to eliminate the gap\u201d) to get costs back under control.<\/p>\n In the meantime, for the people eager to tout the weekly triumphs of socialism in Gotham, these inconvenient details about the city\u2019s long-term standing are a problem for another day.<\/p>\n ***<\/p>\n Ken Girardin is a fellow at the Manhattan Institute.<\/i>