Uncertainty Continues Over Implementation of
City's 1999 Budget

The 1999 budget season has seen a dramatil struggle between the Mayor and the City Council that produced the city's first non-negotiated adopted budget. The Council adopted the budget on June 5th. Within five days, the Mayor had vetoed $200 million in spending (86% of the Council's restorations). On June 16th, the Council overrode all vetoes. The Mayor and City Comptroller delayed certification of the 1999 budget while the Council considered a proposed year-end modification to the 1998 budget. The Council approved the modification on June 24th and the 1999 budget was certified just days before the beginning of the new fiscal year on July 1st.

Adoption left the Mayor with three major strategies to redirect the budget toward his priorities: impoundment, intentional underspending, and modification. While speculation initially focused on the first two, the Mayor moved quickly with the last strategy. In his report to the Financial Control Board on June 26th, the Mayor presented a four-year financial plan as required by law. In those projections-called the June plan-the Mayor indicated his intention to change the newly adopted budget. The centerpiece of the June plan is $402 million in unspecified agency reductions the Mayor asserts are necessary to keep the budget balanced. (IBO projects a surplus of $685 million for fiscal year 1999.) His plan largely offsets the cuts by $296 million in new spending. While the city is officially operating under the adopted budget, it is unclear whether the Council's or the Mayor's spending priorities will win out.

Implementation of the June plan requires a modification to the budget. To modify the expense budget by moving funds between agencies in any amount, and under certain conditions within an agency, the Mayor must obtain City Council approval. The Council cannot pick and choose specific items acceptable for modification. It must either accept or reject them as a package. The bluntness of this power forces the two branches of government to negotiate mutually acceptable modifications.

As a condition of the political agreement required to modify the 1999 expense budget, the Council will likely hold out for the recognition of additional revenues, requiring a revenue modification to be submitted by the Mayor. Consideration of a revenue modification then triggers the Council's full budgetary powers (to increase, decrease, add, or omit funds), putting it on equal footing with the executive branch. Therefore, the Administration is likely to delay requesting a revenue modification to limit the consequences of the Council's full exercise of its power. All of these factors make any modification unlikely before the Fall.

The Mayor's strategies are not mutually exclusive; in addition to modification he has the power of virtual impoundment- that is, the power to underspend-implicit in his responsibility to schedule and administer agency spending during the fiscal year. While the Mayor can use this power strategically and aggressively to keep agencies from fully complying with the appropriations provided in the budget, at some point during the fiscal year he will need to submit a modification to the Council to spend surplus funds accumulated from underspending.

Less likely to be exercised by the Mayor is his explicit power to impound funds-that is, not to spend the full amount of appropriations. That power is pursuant to provisions of the Charter and other statutes, and the Mayor by law must notify the Council of any impoundment. The power to impound is an emergency power to enable the city to stop spending while it assesses how to modify the budget to conform to a rapidly changing fiscal environment. One cannot govern by impoundment. Eventually, the Council would need to approve any modification of the expense budget that would necessarily follow if the Mayor were to impound funds.