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FEBRUARY 2016

STATE of the CITY CIT YANDSTATENY.COM

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ARMAN DZIDZOVIC

EDITOR’S NOTE

WHEN NEW YORK CITY Mayor Bill de Blasio unveiled his preliminary budget last month, he called it “boring.” Indeed, the spending plan reined in some cost increases and lacked the audacity of the universal prekindergarten and affordable housing plans introduced in his first two years as mayor.

JON LENTZ Senior Editor

Yet 2016 is likely to be as exciting and attention-grabbing a year as any. De Blasio has to navigate his way through a policy minefield – the horse carriage debate, key votes on his wide-reaching rezoning overhauls, funding cuts in the state budget – and that’s just in the first half of the year. Even that “boring” budget aims to bail out the financially strapped Health and Hospitals Corporation, a critical safety net in the city, and the City Council is already complaining about favored programs that would go unfunded. In this State of the City special edition, we look ahead to these issues and many more. Plus, Deputy Mayor Richard Buery talks about pre-K and tackling mental health, two key de Blasio initiatives, and New York City Comptroller Scott Stringer and Public Advocate Letitia James offer their visions for the city in 2016. And that’s nothing to yawn about.

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ROB BENNETT FOR THE OFFICE OF MAYOR BILL DE BLASIO

IN PRELIMINARY BUDGET, DE BLASIO CALLS FOR HEALTH AND HOSPITALS REORGANIZATION By SARINA TRANGLE NEW YORK CITY Mayor Bill de Blasio unveiled an $82.1 billion preliminary budget last month that limited new investments to targeted initiatives the mayor said would bolster the cityâ&#x20AC;&#x2122;s health, including expanded mental health services, attempts to curb homelessness and additional ambulance tours. The mayor said the city must immediately direct $337 million to the Health and Hospitals Corporation to keep it afloat while the public health system maps out a restructuring plan. He

said the reorganization proposal will be released ahead of the executive budget this spring and before the City Council votes on it this June. De Blasio said he does not anticipate any hospitals closing because of the reorganization. The review will likely consider ways to consolidate multiple services in fewer buildings and to entice more New Yorkers with non-Medicaid insurance to rely on HHC, which operates a large network of public hospitals, clinics and other medical service providers in New York City.

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“We have to provide an immediate infusion proposal is about 0.05 percent larger than this of resources to continue the work that Health year’s budget. It includes some obligations, and Hospitals does,” de Blasio said. “Health including a roughly $600 million increase in and Hospitals is going to have to transform its pension contribution costs now that people are operating model intensely because the current living longer and $73 million to account for lowersituation is not sustainable.” than-expected returns in pension investments. A confluence of policy changes contributed The administration has proposed nixing a $24 to HHC’s fiscal stress, the mayor said. Because million summer program for youth, but said it HHC’s patients tend to be on Medicaid or was not otherwise planning to reduce services uninsured, de Blasio said it has suffered amid or raise tax rates. Some $1 billion in proposed cuts to federal “charity” funding for the uninsured savings has been identified from refinancing and declining reimbursements for care provided debt and other efficiencies, moving people out of under Medicaid. homeless shelters and HHC treats about into permanent homes 1 in 6 New Yorkers, (saving $20 million) according to the or even using red “HEALTH AND HOSPITALS IS administration. pavement to delineate GOING TO HAVE TO TRANSFORM “As the health care ITS OPERATING MODEL INTENSELY bus lanes rather than economic picture has having workers mark changed, we now BECAUSE THE CURRENT SITUATION boundaries with red IS NOT SUSTAINABLE.” have many more paint (saving $2.5 Medicaid patients million). not going to our The de Blasio public hospitals, administration is also going to our voluntary hospitals – an intense planning to invest $62 million in mental health increase in the pickup rate of voluntary hospitals training and services, $41.3 million implementing taking on those patients, leaving HHC with even an anti-violence plan at Rikers Island, $5.4 million fewer customers who come in with the ability to adding FDNY ambulance tours in select areas, pay,” de Blasio said. $12.1 million on 327 new traffic enforcement agents As part of the de Blasio administration’s and millions more on a handful of measures to agreement to cover the costs of contract mitigate the homelessness crisis. settlements with HHC’s major unions, the city is The proposal does not, however, shelter the planning to direct $192.7 million to the corporation, city from Gov. Andrew Cuomo’s plan to reduce according to budget documents. Another $188.9 state contributions to the City University of New million is slated to offset the corporation’s new York and Medicaid costs by a total of nearly $1 contract to provide care for those in the city’s billion. After unveiling his own state budget corrections system. proposal, Cuomo said he would work with the And when it comes to the city’s fiscal health, city to ensure it finds efficiencies and does not the mayor said he was protecting residents from have to pay a penny more. De Blasio said his an economic downturn by adding to the reserves, proposal was crafted with that in mind. paying off pension funds and limiting the number “I am taking the governor at his word, and I will of “splashy new things.” In all, the $82.1 billion hold him to that word,” the mayor said.

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SHANNON DECELLE

DOES NEW YORK CITY WIN OR LOSE IN CUOMO’S BUDGET? By SARINA TRANGLE

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AFTER HOURS OF testifying about the state budget proposal in Albany last month, New York City Mayor Bill de Blasio said there were too many details up in the air for him to describe Gov. Andrew Cuomo’s plan as a net gain, loss or wash. In all, the mayor said during the testimony that the city was looking at some positive news, such as a proposed $15 minimum wage, paid family leave policy and sweeping supportive housing initiative. But he said he was concerned that the initial proposal included nearly $1 billion in new city obligations. After Cuomo introduced his initial plan that included the cuts to New York City, he later said the city would not have to pay a penny more for at least two changes outlined because savings would be identified through efficiencies. If achieved, this could knock out $695 million of the $924.3 million in obligations de Blasio described. “There’s a lot we don’t know about this budget,” de Blasio told reporters after his testimony at a joint legislative hearing on Cuomo’s executive budget. “There’s a lot of question marks; there’s a lot of areas where we need to hear more detail before we can judge this budget.” By the state’s accounting, however, the city is slated to receive $322.2 million more than last year from the state. The multimillion-dollar difference of opinion hinges on changes to two categories of funding the mayor and governor view differently – money for Medicaid and savings stemming from the refinancing of debt the state assumed on the city’s behalf. And while de Blasio may not feel there is enough information to assess how the city came out in Cuomo’s proposal, some budget watchdog groups said the current draft does not favor the city. “The cuts as they were outlined in the budget – now, the governor has sort of walked it back a little bit – but as they were outlined in the budget, are more clear and certainly appear more significant

than the money that could flow from these other initiatives,” said Maria Doulis, vice president of the Citizens Budget Commission. Doulis also noted that it’s hard to gauge when and how much the city will benefit from various measures in the state budget, including a $20 billion, five-year plan to add affordable housing and expand homeless services across the state and a 15-year supportive housing initiative. “It’s unclear how much of the total pot will go to New York City at the end of the day.” De Blasio ticked through four major budgetary shifts, which could amount to roughly $924.3 million more in city obligations. These include about $485 million more in city obligations for CUNY, $209 more in Medicaid costs, and the loss of $200 million in sales tax revenue now that the governor is seeking to recoup savings the city achieved while refinancing the debt. The final shift the mayor identified was higher contribution rates for charter school tuition amounting to $30.3 million. However, Cuomo has said the city would not actually pay any more for Medicaid or CUNY, which the governor said could be achieved by trimming the bureaucracy at CUNY and reducing administrative costs for Medicaid. Setting aside efficiencies, state budget documents show $322.2 million in additional funding for New York City this year, including $145.9 million for Medicaid. A state budget official argued that Medicaid relief has been paid to municipalities to help ensure they do not raise their property tax levy by more than 2 percent annually, and the city has received such funding despite not being constrained by the cap. So in the state budget for the upcoming year, the city had been asked to handle 2 percent of its Medicaid cost increases. The state would pitch in the rest, resulting in a net gain of $145.9 million for the city in Medicaid relief. Not everyone would put the Medicaid money

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SHANNON DECELLE

De Blasio testifies about his concerns with the state budget in Albany last month.

in question in the positive column for the city. Doug Turetsky, chief of staff for the New York City Independent Budget Office, said the $145.9 million was money the city would not have to pay, but it was not a financing stream de Blasio’s administration could spend in the same sense as a $364 million bump in school aid for New York City that is also included in the proposed state budget. The city and state also don’t see eye to eye on some $600 million saved in 2014 by refinancing debt the state previously agreed to assume. Because the state helped bail out the city, it was entitled to the $600 million in question and would

seek to recoup it by appropriating $200 million in city sales tax revenue annually for three years, according to a state budget official. The de Blasio administration testified that a state Court of Appeals decision obligated the state to handle the debt. De Blasio also said the city lost more than $300 million in annual aid to municipality funding the state sets aside for other localities during the debt negotiations. “There is no justification for this action,” de Blasio told state lawmakers. “These cuts are particularly onerous because New York City is the only municipality in New York state that doesn’t receive direct municipal aid.”

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THE CASE FOR STRENGTHENING THE CITY’S BUDGET CUSHION By SCOTT STRINGER

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A LOT HAS happened in New York City over the last year. In February 2015, who would have imagined that the Mets would make it to the World Series and the Jets would again fail to make the playoffs? (OK – as a Jets fan, even I can admit that the latter isn’t all that surprising.) The lesson of 2015 for New York City is that some things will surprise us while others will stay the same. And our city’s finances are no different. The good news is that our economy is doing well. In 2015, New York City recorded its sixth consecutive year of economic growth, outpacing the national economy for the fourth time during that period. And, for the first time in seven years, the city generated an operating surplus by taking in more money than it spent. With nearly 3.7 million private-sector payroll jobs in the city – 443,000 above the previous peak in August 2008 – unemployment fell to 5 percent, another positive indicator. Yet even as we have come a long way since the Great Recession, we are still fighting to regain our footing in other key indicators, such as the slow growth in wages. Wage stagnation has remained stubbornly persistent throughout this recovery. However, plans by Mayor Bill de Blasio and Gov. Cuomo to raise the minimum wage will provide working families a real boost and put them on the pathway to the middle class. And, once again, there are warning signs on the horizon. Over the last six months, we’ve seen the Dow Jones Industrial Average drop more than 1,100 points, oil and commodity prices come crashing down and a slowdown in China’s economy significantly increase the risk of a global economic slump.

Thankfully, New York City has been preparing for a situation just like this. In August, my office released an analysis of how much the city has accumulated in its budgetary cushion using a new measure that we call PARR – the prior-year accumulated resources and reserves. By this new measure, my office found that our cushion, while increasing recently, is still $1 billion to $6 billion short of where we need to be to weather the next big economic downturn. Given that we can’t control the national economy, and our tools to influence the local economy are admittedly limited, the onus falls on the city to make sure that we are well-positioned to weather a potential economic downturn. This year, I’ve renewed my call for the administration to implement a PEG – a program to eliminate the gap. The current financial plan includes an additional Citywide Savings Program, but the proposed program doesn’t go far enough, and unlike PEGs, it is voluntary with no specific agency savings target. In fact, agencies account for just 30 percent of the savings in this new plan. In contrast, an analysis by my office found that if we had implemented a traditional annual PEG in FY 2016, the city would have saved $1 billion that year – and another $10 billion by FY 2019. The city has acknowledged that a PEG with specific savings targets may be needed to augment its current savings program. This money could be used to strengthen our budget cushion, and give New York City a strong foundation to ensure that we can protect our most vulnerable citizens in these uncertain times. Scott Stringer is the New York City comptroller.

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TO UNITE NEW YORKERS, FOCUS ON REAL ISSUES, NOT POLITICS By LETITIA JAMES

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FAR TOO OFTEN, we are broken down by factors that divide us, instead of being propelled forward by the principles that unite us. The differences in our race, gender, ethnicity, religion, political ideology, income and geography hold us back from accomplishing true change that benefits all of us. It’s why, as public advocate, I try to avoid these divisions and instead focus on what lies ahead for our city. Even as my office has continued to serve its oversight function over the mayor and his agencies, we have done so with a sharp aim toward issues, not politics, starting with the welfare of New York’s children and families. Over the past two years, I have been fighting to reform one of the worst foster care systems in this country. Thousands of children languish in the New York City foster care system, facing physical, emotional and sexual abuse that leaves them scarred for life. A series of policy reports, a city law and a multilingual hotline all led up to a class action lawsuit I filed against the city and state last summer. And we reached a settlement with Gov. Andrew Cuomo to place a monitor and research expert to oversee the system – important, substantive progress that was sorely needed. This year, we will work with the state to implement these reforms and build better lives for our most vulnerable children. And we’re not stopping until we ensure a bright future for all of our city’s children. Just this week, we filed a lawsuit against the city Department of Education for failing to fulfill its legally mandated duties to students with disabilities. Research and analysis conducted by the Public Advocate’s Office shows that the Education Department’s Special Education Student Information System, which is supposed to produce and track data

about students with disabilities and ensure compliance with federal and state reporting requirements, is unable to do what it was intended to do. This failure to collect proper data has led to a lack of services for children with disabilities and has deprived New York City of hundreds of millions of dollars in Medicaid revenue. But it is not enough to protect our children in school when they can’t even feel safe walking home in their own neighborhood. Every day, 48 children and teens across the country are shot by guns – seven die. I’m doing everything I can to get guns off our streets. This past year, I took on the big money interests that fund gun manufacturers and gun retailers, starting by calling for the city to divest public money from gun and ammunition retailers like Walmart and Cabela’s. And this past summer, New York City’s largest pension fund voted to move forward with beginning this divestment process, acting on a resolution my office sponsored. I also demanded that TD Bank end its support of Smith & Wesson, one of the world’s largest weapons manufacturers. Over the summer, the bank issued a $280 million loan to Smith & Wesson while simultaneously holding millions of dollars in New York City contracts. These were great first steps, but we cannot stop. Smith & Wesson is one of dozens of weapons manufacturers being funded by numerous banks, and we will continue to do everything we can to take on the financial smoking gun that enables gun violence. By working together and focusing on issues that have a real, meaningful impact on our communities, we can move beyond our differences and turn our public service into longlasting public benefit for all. Letitia James is the New York City public advocate.

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ARMAN DZIDZOVIC

MASTER STRATEGIST: MAKING THE MAYOR'S PROPOSALS A REALITY A Q&A WITH DEPUT Y MAYOR RICHARD BUERY

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WHEN RICHARD BUERY was appointed New York City’s deputy mayor for strategic policy initiatives in March 2014, universal prekindergarten was still somewhat of a mystery. But under his leadership, the city increased its full-day pre-K enrollment from 19,000 students to more than 68,000 by December 2015. New York Slant Editor Nick Powell spoke with Buery at City & State’s New York City Legislative Preview event Jan. 27 about getting pre-K off the ground and how the city is tackling mental health issues. The following is an edited transcript.

C&S: What was involved in getting the universal pre-K program off the ground and coordinating all of the moving parts, especially with the notoriously bureaucratic Department of Education? RB: First of all, I don’t remember those first seven months (laughs). They’re a blur. We are incredibly proud of what we were able to do. It was a tremendous effort by lots of folks. One of the things about the pre-K for all expansion is that it was truly an interagency exercise, not only led by the Department of Education but also the Administration for Children’s Services, the Health Department, the Department of Design and Construction, the School Construction Authority, the Buildings Department. And we sort of just took it in steps. We had to identify new seats for children. That meant going from 560 program sites when we started, we had 1,300 last fall, and then 1,800 open now. We had a very competitive process to identify both school-based and communitybased program sites. We had to develop a campaign apparatus to recruit these families and connect them with services. We had to make sure these programs were safe. We had to hire 2,000 teachers and teaching assistants each of

those years. So there were lots of moving parts, but ultimately it came down to two things: First of all, I think it’s a testament to what can happen when you have a leader who decides that something is going to happen, because the mayor was very clear to everyone that this was his priority. So that meant that every part of city government was willing to do whatever it took to make it happen. And the second thing I would say is that it required city agencies to work differently than they had worked before. That meant working collaboratively when there wasn’t a tradition of working collaboratively, and working proactively when there wasn’t a tradition of working proactively. To give one quick example, we had a number of sites, particularly private community-based organizations that were part of the program that had to do construction or work to get permitted and up and running for school in the fall. And normally the process for getting permitted can be a little challenging, as you can imagine. You need your Building Department permits, your Health Department permits, the Fire Department has to come out. And the Fire Department might come out and say “Well, the Buildings Department has to do this first,” and you get the Buildings Department back out. We just sort of flipped the process on its head. Rather than having each of those providers having to navigate the very complex process of getting permitted, we organized a list of providers who had to get permitted and then worked with the agencies to make sure they were doing what they had to do in the proper sequence to get work done, up to and including, when necessary, having staff from the city go out and do last minute work to get sites on board. It really is something that everybody who worked on it is very proud of and I think the families of New York are benefitting from it now.

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C&S: One of the early critiques of the universal pre-K program was that while it was successful in getting off the ground and getting solid enrollment in the first 18 months, it wasn’t necessarily serving the low- to middle-income communities it was intended to. Why do you think there was trouble attracting those families to the program, and how did you adjust your outreach and messaging on that? RB: I would start by challenging the premise. The truth is, the vast majority of the expansion of pre-K in both years happened in neighborhoods that were at or near the median income of the city. So that was not true. The growth was primarily concentrated in low- and middleincome neighborhoods. But it’s also important to say that the benefits of pre-K are enjoyed in all neighborhoods – wealthy neighborhoods, middle-income neighborhoods, low-income neighborhoods – and it was very important to us to have a program that truly met the needs of all New Yorkers. Everyone benefits from pre-K. We know that pre-K tuition in New York can be upwards of $10,000 a year or more. And for almost every family in New York, that is real money. And we think having this really benefits all New Yorkers across the income spectrum. That being said, there are really particular challenges in serving some high-needs populations and hard-to-serve populations, such as those who are in temporary housing or shelter. And so we’ve just had to make a big effort to make sure that we’re going out and reaching these families. We hired dozens of staff whose job it was to go out into the community, to identify families, to make sure they understood that pre-K was available to them. It’s hard to walk through any park in the summer or in the spring and not be tackled by a pre-K outreach worker if you’re standing anywhere near a 4-year-old. Because we’re out in the streets making sure that families

can go find the service. One of the things we’re most proud of is that we worked very closely with the Department of Homeless Services and the Department of Housing this year to make sure that we were reaching families in shelter, which was one population that in the first year was really not taking advantage of pre-K in the way that we wanted. We’re proud to say that more than half of 4-year–olds in shelter this year are enrolled in pre-K and we’re continuing to work to get those numbers up. There are a lot of complex reasons why sometimes low-income families are harder to serve, but we made sure that we had enough seats for all those families in those neighborhoods, and we’re really hitting the ground to make sure that those barriers to accessing service do not stand in the way of educational opportunity for the children who need it most. C&S: You’re involved with the mental health initiatives that the city’s been pouring money into. As part of the overall departmental review of Homeless Services, will there be interagency coordination on mental health, with Homeless Services and HRA? RB: Absolutely. One of the basic insights about mental health services is that promoting mental well-being is not only the work of the Department of Health and Mental Hygiene. It’s also the work of the Education Department, it’s the work of the Homeless Services Department, it’s the work of the Police Department, the Corrections Department. Every part of the city that engages New York has, as part of its responsibility, promoting mental health, promoting well-being, and making sure that you have appropriate responses for those who are experiencing mental illness. So there are a lot of investments we’re making as part of the roadmap and as part of

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ARMAN DZIDZOVIC

ThriveNYC, and I have to give a shout-out to the City Council as well, who’s been a great partner in this work. A lot of this work is about making sure all city agencies are working together more effectively. One element of ThriveNYC, besides the individual programmatic investments we’re making, is something called the Mental Health Council. This will be an interagency working group composed of the commissioners of about 20 city agencies, and its job is to do a few things. One is to track the implementation of the initiatives that we’ve already put into place, but also to have an ongoing conversation about what the city needs to do better to support mental health. That will be the primary

place where we’re asking commissioners to collaborate, to bring new ideas to the table and to make sure that mental health remains at the forefront of city policy, that we continue to prioritize the experience of New Yorkers. We know that 1 in 5 adult New Yorkers in any given year experience a diagnosable mental illness. Depression is the single leading cause of disability in the city, so we know that unless we can invest in doing better by adults and young people who are experiencing mental illness, the city is not going to live up to its full potential. The economy suffers, the school system suffers, and so we’re going to continue to make sure it’s the work of every part of the city government.

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ARMAN DZIDZOVIC

EVENTS

City & State’s 2016 New York City Legislative Preview forum at Baruch College last month analyzed the priorities of Mayor Bill de Blasio and the New York City Council ahead of the annual budget negotiations.

CITY COUNCIL MEMBERS RAISE CONCERNS WITH DE BLASIO’S PRELIMINARY BUDGET By JON LENTZ

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The forum featured City Council members Dan Garodnick, Julissa Ferreras-Copeland and David Greenfield, among other speakers.

WITH THE RELEASE last month of an early draft of New York City’s budget for the next fiscal year, the City Council has started to identify what it sees as gaps in the spending proposals. New York City Councilwoman Julissa Ferreras-Copeland, chairwoman of the Finance Committee, said that the de Blasio administration’s $82.1 billion preliminary budget reflects many of the priorities of the City Council that were discussed in previous years, but that some elements were noticeably absent. “The fact that, for example, when we talked about libraries, that half of it was baselined, we still need the other half,” Ferreras-Copeland said at City & State’s New York City Legislative Preview event in January. “So that is something the Council is going to engage during this process.” “One of the alarming things for us was also HHC’s current condition,” she added, referring to the city’s Health and Hospitals Corporation. De Blasio’s preliminary budget would provide a one-time infusion of $337 million to the Health and Hospital Corporation to keep it afloat

while the public health system maps out a restructuring plan. The mayor said the reorganization proposal will be released ahead of the executive budget this spring and before the City Council votes on it in June. Ferreras-Copeland said that she and her colleagues would carefully scrutinize the plan once it is released. Another sticking point for some council members is investment in youth programs. The administration has proposed eliminating a $24 million summer program for youth, but said it was not otherwise planning to reduce services. But some council members say the city should be spending more on young people, not less. City Councilman Jumaane Williams, who has made it a priority to reduce gun violence, said while the federal and state government should stem the flow of firearms, the city can do more with youth programs aimed at prevention, in particular by adding new slots to popular youth jobs programs. So far, Williams said, the mayor’s budget does not provide sufficient funding. “We really need to bend in that direction,”

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ARMAN DZIDZOVIC

At the forum, City Councilman Jumaane Williams, left, said that while the federal and state government should stem the flow of firearms, the city can do more with youth programs aimed at violence prevention.

Williams said during the panel discussion. “Too often when we speak of public safety, we only speak of law enforcement, which is one part, but you’ve got to get the other parts as well.” The preliminary budget did not feature any of the notable new spending initiatives, like universal prekindergarten, that marked de Blasio’s first two years in office, but another panelist, City Councilman Daniel Garodnick, said he is not disappointed. “It’s OK for a budget to be boring,” Garodnick said. “It is OK for a budget to not necessarily make grand statements other than the fact that it is functional and that it is responsible.” The City Council will hold hearings in coming weeks and submit a budget response by the end of March. Perhaps the most controversial new expense that could eventually find its way into the city budget is a new stable in Central Park, which by some estimates could cost $25 million. An agreement announced by the mayor would relocate carriage horse stables to Central Park

as well as limit horse carriages to the park, reduce the total number of carriages and restrict where pedicabs can operate. But as de Blasio looks to push the deal through and at least partially fulfill a campaign pledge, members of the City Council remain frustrated with the administration on the issue. City Councilman David Greenfield said during the panel discussion that he is highly concerned about government taking jobs away from horse carriage drivers and pedicab operators. He said that, in general, he is open to compromises, at least when they benefit both parties. “I view this as a lose-lose-lose compromise,” Greenfield said. “The animal rights folks are not happy. The Teamsters are not happy. And now you’ve just sucked in a new group that didn’t even know they had anything to do with this, the pedicabs, and now they’re not happy as well. And for that matter, we can actually add the folks in Central Park, because they’re not happy, because they feel like their public park is being appropriated for private use.”

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