Speak Softly and Carry A Big Hatchet

By BONNIE ANGELO/NEW YORK

There is no shortage of alarmist language to describe the fiscal vise that is crunching New York City. Disastrous, drastic, cataclysmic, catastrophic are some of the terms that Mayor David Dinkins, Governor Mario Cuomo and legions of curbstone commentators have used in recent weeks. The town that likes to think of itself as the capital of the universe is, in a word, broke. Within days there may be no money to pay its 243,000 employees, and on the horizon there is only more red ink and pain. In 1975 the city pulled itself up from a similar fate, but this time, officials insist, the situation is even worse. The recession -- added to the high costs of dealing with the rise in drugs and crime, homelessness and the AIDS epidemic -- has aggravated already overwhelming urban problems.

Seeking to close a $3.5 billion gap in the city's $28.7 billion budget for the fiscal year beginning July 1, Mayor Dinkins has proposed unprecedented cuts in public services, $1 billion in tax increases and the elimination of 27,000 jobs. In an exercise of political brinkmanship, the mayor has targeted many worthy projects. He would slash education by $579 million, which means fewer teachers and larger classes -- even as enrollment leaps by 18,000 this year. He has marked 10 homeless shelters for closing. With tears in his eyes, Dinkins announced cuts in the infant-mortality program.

The list of threatened programs goes on and on -- and every agency and special-interest group in the city is crying out in protest. "If Dinkins is using these programs as bargaining chips, it is a cynical and irresponsible position," says Mary Brosnahan, director of the Coalition for the Homeless.

What Dinkins calls "doomsday" comes on May 25. If by that date New York State's legislature does not enact a budget, which is already seven weeks late, the city will have no operating funds and its credit rating will probably be dropped below the A- currently given by Standard & Poor's. That could add millions of dollars to the city's interest payments when $600 million in bonds goes on the market June 4.

No matter what the state legislature does, Dinkins is headed for a showdown with his own city council. The council favors a different budgetary approach, based on $639 million in new taxes instead of the mayor's $1 billion. In addition, council members want to pare down the city's overgrown bureaucracy, targeting 14 agencies and offices for elimination or transfer of functions. In dealing with unions, the council would tie wage settlements to productivity, an innovative idea in a city where unions still have clout. Says council speaker Peter Vallone: "The days of tax and spending are over, not just in New York City but everywhere." The city council also opposes the heavy increase in real estate taxes that Dinkins is seeking. "Business and residents would flee," Vallone warns.

Evidence of bureaucratic bulge is larded throughout the entrenched establishment that serves the five boroughs. City comptroller Elizabeth Holtzman notes that 50,000 jobs were added in the '80s, "when times were flusher." According to the Census Bureau, the city has 575 employees per 10,000 residents, in contrast to 344 in San Francisco and 146 in Chicago. (Only Washington, with 788, is more bloated.)

Dinkins claims he inherited much of his fiscal problem from his predecessor. Back in 1981, federal aid made up 17.9% of the city's budget; now it is only 9.3%, which translates into a difference of $1.2 billion. Moreover, revenues have fallen steeply since the stock-market crash of October 1987. But this does not shield Dinkins, a gentle and well-liked man, from criticism that he failed to act more decisively when he saw the storm brewing. He is faulted in particular for giving in to the teachers' demand for a 5.5% raise, setting off similar demands from other unions. Council president Andrew Stein, who has an eye on the mayor's job, grumbles that Dinkins' painful measures are "an attempt to put pressure on the unions and set the stage for big tax increases. It is all too late and too risky." In spite of the sharp divisions between the mayor and his critics, however, both sides agree on two fundamental points: a budget will be passed, and some way must be found to keep the city functioning.

With reporting by Kathleen Adams/New York