In an article several days ago, "Not A Good Week For New York -- But It Could Have Been Worse," I looked at de Blasio's newly released budget and the new teachers contract, and noted that the two didn't seem to add up. Where were the retroactive raises being hidden?
[U]nder any honest accounting, if you committed to that today, wouldn't you have to accrue the whole liability today even though you won't be paying for years? . . . So where are you hiding these pay increases, including the retroactive ones?
Turns out that new Comptroller Scott Stringer had the same questions. The New York Times reports the story today, "High-Power Tug of War Over Teachers' Deal," buried rather deeply at page A23.
[C]ity [C]omptroller, Scott M. Stringer['s] . . . team . . . discovered basic accounting problems with the deal. In a series of extraordinary weekend meetings that started with an evening summit at Gracie Mansion, Mr. de Blasio and his senior aides pushed back at Mr. Stringer’s critique, . . . arguing that their deal was in compliance with standard accounting principles. But Mr. Stringer insisted the administration had violated those principles, which have governed city finances since the 1970s, by spreading out the liabilities for certain back wages over several years, rather than booking the costs up front.
Result: there will be a $725 million "adjustment" to the accounting for the deal, to bring the costs of the retroactive raises into the current fiscal year instead of spreading them over the years in which they are expected to be paid. Here is the press release issued jointly by de Blasio and Stringer reflecting the agreement. Key quote:
In order to ensure that the city’s financial accounting reflects a preferred approach, the Mayor and Comptroller have agreed that certain expenses now shown over the four-year plan will be presented as Fiscal Year 2014 costs.
That leaves two issues unaddressed by both the press release and the Times article: (1) Is the current year budget going to be adjusted to put in this new expense? and (2) What about all the other retroactive raises that de Blasio is about to agree to and thought he could put in out years where nobody would notice them?
The whole incident is extremely discouraging in showing de Blasio as totally willing to hide known expenditures in out years so that spending on political paybacks can be maximized in the current year. I'll give the same advice to de Blasio today as I gave to new Newark mayor Baraka yesterday:
If you view the role of government as to spend as little as possible to accomplish its core functions, then Newark [New York} can resume a path to growth and success. But if you regard the government's role as to spend as much as it can get away with to please and pay off the people who put you in power, then Newark's [or New York's] decline will continue and accelerate.
And meanwhile, among what may well be many other problems that I don't know about, it is clear that the pension projections in de Blasio's budget are wildly optimistic. That has the effect of both deferring the problem and hiding it from public view. Sadly, it is hard to see how we are not setting ourselves up for a period of decline.