Mayor Bloomberg announced his budget this afternoon for the fiscal year that starts in July. The mayor expects that a combination of federal stimulus, state funds, tax hikes, spending cuts, and labor givebacks will close a $4 billion budget gap that represents 10 percent of the city’s spending. Even after $1 billion in previously planned spending cuts, the projected gap had nearly doubled in the past seven months as tax revenues have fallen. (more…)

When Kodak announced its latest round of mass layoffs yesterday, the company’s hometown newspaper in Rochester gave the news prominent play on its web page — right next to an article reporting that the city “has finally received approval on a $4 million state grant for Rochester’s downtown soccer stadium to complete the luxury suites and press box.”

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New York City’s economy contracted 5.5 percent in the fourth quarter from the same period a year earlier, after a 2.7 percent contraction in the third quarter, according to the comptroller. The most recent figure is the worst in the nearly two decades since the city started reporting such data, save for a 6.4 percent contraction in the quarter after 9/11, the Times notes.

And in December, the city’s sales-tax collections fell by 12.2 percent from the previous December.

The House passed the $819 billion stimulus last night. The final version contains some amendments that affect the (tiny) infrastructure-investment part of the bill.

Two amendments are good, though not good enough to outweigh the fact that only five percent of the entire bill goes toward infrastructure.

One is bad. (more…)

In the waning days of the asset and credit mania, Macquarie and Cintra paid the state of Indiana $3.85 billion upfront for the right to run the Indiana Toll Road for 75 years and collect all of the toll revenues.

The concession company that Macquarie and Cintra created to own the rights to the road then raised debt to finance their upfront payment to the state as well as the capital expenditures they were going to make. As of the end of December 2007, $3.4 billion of that debt was outstanding, although at the time, Macquarie and Cintra had the right to access as much as $4.1 billion in pre-approved borrowing, so more or less may be outstanding now.

Can all of that debt hold up under the credit-bubble assumptions that the concessionaires and their financiers made — and if not, what happens to the road? (more…)

In a passage reflecting House Democratic spin on the supposed economic benefits of the stimulus package, today’s Washington Post reports that the bill includes aid “that many economists agree will enter the economic bloodstream quickly and trim further layoffs by state governments.”  But from the vantage point of New York State, where Gov. Paterson is not proposing significant layoffs, the increased federal funding will serve mainly to support increases in already generous pay and benefits for unionized public-sector employees.

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People worried about the state of America’s infrastructure haven’t received the House stimulus bill very warmly. After political promises of bold, smart investments in physical assets, a $40 billion allocation for transportation and transit in an $800 billion-plus bill is underwhelming. (more…)

House Democrats in Washington, D.C., claim their massive federal stimulus package will require “unprecedented accountability” for how the added money is spent.  In reality, they’re pushing an unprecedented intrusion by the federal government into state and local decision-making on how to reallocate scarce resources in a severe fiscal crisis.

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State and local governments face a total deficit of about $131 billion for 2009 and $181 billion for 2010, the Government Accountability Office figures. Honestly, this estimate seems low.

But, low or not, it may be as good as it gets.

The GAO notes that after 2010 and for the next 50 or so years, “absent any intervention or policy changes, state and local governments would face an increasing gap between receipts and expenditures in the coming years.” (more…)

NYU prof Thomas Philippon and U-VA Prof Ariell Reshef have written a paper tracing the trajectory of wages in the American financial sector over the last century. Not surprisingly, financial-industry wages broke away from the rest of the economy starting in the early 1980s and continued their stratospheric relative increase through 2006.

Toward the end of the period, financial-industry wages actually reached pre-Depression peaks relative to the rest of the economy, explaining New York’s huge and unprecedented jump-ups in tax collections.

If the history in the paper is any guide, New York (city and state) will have to get used to sharply lower wages in its key industry, and thus sharply lower tax collections. (more…)