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New York City Comptroller William C. Thompson, Jr. issued a report today identifying $484 million in risks in the adopted Fiscal Year 2004 budget, a reduction of $134 million from his prior analysis due to actions taken by the City. Thompson will discuss the report at the Financial Control Board meeting on Thursday.

“Analysis of the budget indicates that the City chose a set of responsible solutions to address the FY 2004 deficit,” Thompson said in the report’s Executive Summary. “The spending cuts, while significant and painful, were generally limited in scope. Similarly, the income and sales tax increases are scheduled to expire over the next several years.”

Comptroller Thompson’s report, which analyzes the $43.9 billion budget, pointed out that “the City has sufficient explicit and implicit reserves to be reasonably confident that the FY 2004 budget will end the fiscal year in balance.”

The Comptroller projects a shortfall of $137 million in the City’s revenue estimates for FY 2004. A key element of this analysis is the City’s assumption that airport rent payments will rise from $3.5 million in FY 2003 to $200 million in FY 2004 because of expected increases in base payments and receipt of back rent. Thompson notes, there is as yet no indication of an agreement with the Port Authority of New York and New Jersey for these payments. Additionally, the budget contains risks of $347 million in its expenditure estimates, more than half of it stemming from the City’s chronic under-budgeting of overtime expenses.

Comptroller Thompson further cautioned that the City still faces sizeable outyear budget gaps. While the City forecasts that the FY 2005 gap will exceed $2 billion, Thompson projects that the deficit will escalate to nearly $3 billion. The deficit will continue to grow and approach $4 billion in both FY 2006 and FY 2007.

Thompson noted that the fiscal problems facing the City primarily are the result of the ongoing impact of the September 11th attacks, compounded with rising pension costs, increased debt service costs due to capital planning decisions made during the previous administration, and steeper health-related expenditures reflected in increased Medicaid and employee health insurance costs.

“Over the past year, the City developed credible solutions to the FY 2004 budget deficit – which initially exceeded $6 billion - by acting expeditiously and decisively once the FY 2003 budget was adopted. Similarly, this year, the City must immediately begin to address the FY 2005 shortfall by developing the actions necessary to close the looming gap. The extent to which these initiatives are recurring will help determine whether the current budget problems will be contained or will be ongoing."