Mayor Rudolph W. Giuliani and the leaders of the City Council agreed yesterday on a $31.6 billion budget that would sharply curtail the growth in spending for the first time since the city fiscal crisis of the 1970's and begin to wrench down the size of New York City's government.
The Mayor and the Council leaders struck a tentative deal at 3:30 yesterday morning -- toasting it with champagne -- after two weeks of talks and a final day and night of haggling about what spending to cut and whether to merge the city's three police forces, which in the end was given the green light by the Council.
It then took 17 hours for Mr. Giuliani and the Council's Speaker, Peter F. Vallone, to announce a formal agreement on the budget as the leaders presented the details to restive Democrats on the Council, many of whom were angered by parts of the deal and the public announcement of the accord by the Mayor's office before they learned of it themselves.
Appearing with Council members in the rotunda of City Hall late last night, Mr. Giuliani said the budget sent a "strong signal" that the city could straighten out its financial affairs and start to turn around its economy.
"This is a budget that will very, very much help the economy of New York City continue the recovery that is under way," the Mayor said.
For his part, Mr. Vallone said that the Council had preserved at least some vital services from the Mayor's budgetary ax, but he acknowledged that it had little room to maneuver due to the city's feeble fiscal state.
The Council's 51 members must still vote on whether to adopt the agreement, but the Speaker and his aides said they had enough votes to pass it as soon as today, despite discontent from liberals and some black and Hispanic members.
"Not everything that we wanted was in this budget, " Mr. Vallone said. "It couldn't be in this budget. "
In broad strokes, the agreement preserved Mr. Giuliani's priorities: closing a budget gap of $2.3 billion for the fiscal year that begins on July 1, protecting the Police Department, slashing more than $1 billion in services, cutting the work force and modestly cutting taxes on hotel rooms and commercial rents.
Under the agreement, the Council members succeeded in restoring about $75 million in services cut by Mr. Giuliani -- only two-tenths of 1 percent of the whole budget. The restorations ranged from programs for young people to weekly recycling pickups in Manhattan, Brooklyn and the Bronx.
And for every dollar put back, Council leaders agreed to cut spending elsewhere, including a token $12 million cut in administrative costs for the Police Department, which Mr. Giuliani had declared all but untouchable.
"We had to take our cuts and take it in stride," Councilwoman Priscilla Wooten of Brooklyn said.
The Council also reallocated $111 million in capital projects that the Mayor's senior aide had decried as "pork" only four days ago but again matched restorations with alternative cuts. The largest restoration was a new police academy in the Bronx, with the Council allotting $11 million in design costs after Mr. Giuliani had abandoned the proposal altogether.
Test of Strength
The budget represented the first real test of strength between the city's first Republican mayor since the early 1970's and the Council, which still has a majority of 44 Democrats.
But with a projected budget gap of $2.3 billion and most of the Council's Democrats unwilling to raise taxes, Mr. Giuliani succeeded in pushing the major parts of his budget.
The budget agreement included modest cuts in taxes for businesses this year and deeper reductions down the road. It cut the size of the work force paid with city tax dollars by 15,000 jobs, to 201,000, the fewest since 1985. And it held spending by the Mayor's count at $31.6 billion, $100 million less than the current fiscal year, which Mr. Giuliani has said would mark the first time a city budget has shrunk in 16 years.
Other city officials said that the figure was largely symbolic, but even their count produced only a fractional increase in spending, far smaller than the growth from year to year between any recent budgets. They said the Mayor's office had undercounted at least $140 million in Federal aid that would push spending slightly higher than this year. The city's spending, which the Mayor's office directly controls as opposed to Federal and state funds, actually increases by $254 million, to $22 billion.
Measured Praise
Fiscal monitors offered measured praise for the tentative agreement. Allen J. Proctor, executive director of the state's Financial Control Board, said the agreement made "very, very important progress" toward restoring stability to the city's finances, although about $700 million of the budget remained at risk.
"There's a lot of ifs, ands and buts," he said, "but it's a major change."
Even with an agreement, the Speaker still has to push the budget through the full Council, which is expected to be done sometime in the next day or so. An aide to one member complained that the Council's negotiators had won little from the Mayor, saying, "There's nothing bold here."
Councilwoman Annette M. Robinson of Brooklyn, one of 21 members of the Council's black and Hispanic caucus, said the Mayor's austerity hurt neighborhoods like hers in Bedford-Stuyvesant. "This is a bad-news budget, " she said. "It reflects the priorities of this administration, and I am deeply dissatisfied."
Priorities Accepted
In fact, despite the differences in political party, the Council's leadership essentially accepted the priorities laid out in the Mayor's financial plan in February and in the executive budget in May -- a smaller government with less spending, leaner services, fewer municipal workers and no new taxes.
To close the projected gap between revenues and spending, the Mayor's budget cut spending by a total of $1.2 billion in virtually every city agency except the Police and Fire Departments.
The rest of the gap would be closed through a variety of steps, including saving $200 million in contributions to workers' health benefits and at least $560 million in state and Federal aid, including $75 million the Council won in a commitment from the state's ranking members of Congress, Senator Daniel Patrick Moynihan and Representative Charles B. Rangel.
Over the last two weeks of budget talks, the most vehement confrontations have swirled around the Council's attempts to restore less than $100 million worth of spending in agencies or programs, as well as more in capital projects, that are dear to members' constituencies.
One area that proved particularly contentious was spending for the Board of Education. The city's share of the board's $7.5 billion budget grew slightly from the current fiscal year, but was $358 million less than Schools Chancellor Ramon C. Cortines had asked for.
In the end, though, the Council restored no new funds for the public schools. The budget did include $115 million in new aid, earmarked for specific programs, included in the state budget approved early this month, and a $36 million surplus from the board's current budget.
The Council's leaders left the fate of more of the school board's financing to Albany, where the Assembly and the Senate have passed a measure that would require the Mayor's office to spend an estimated $75 million more on schools. That bill appears to have stalled, however, with the Republicans who control the Senate not moving it on to the Governor for a signature.
A Critical Statement
Mr. Cortines released a critical statement yesterday, saying the budget was "ultimately harmful" for the city's public schools. "It will continue the pattern of neglect that has come to be a hallmark of this system," he said.
At more than one point, the talks between the Mayor and the Council's negotiators broke down over the total amount of spending the Council wanted to restore. When the Council proposed adding new spending on capital projects under the members' discretion, the Mayor's chief aide, Deputy Mayor Peter J. Powers, lambasted the spending as "pork" and said the Council lacked "the vision you have to achieve" to control spending.
Although some Council members, joined by elected officials and fiscal monitors, pressed the Mayor to extract significant savings from the Police Department, the Council finally bowed to Mr. Giuliani's steadfast refusal to cut the department more than symbolically. The Council's leaders settled for the modest cut in administrative spending in the Police Department, as well as $1.2 million in spending in the Fire Department.
The Council mounted a stiffer challenge to the Mayor's proposal to merge the Police Department with the housing and transit police forces. Some members complained that the merger would jeopardize the number of officers on patrol in the city's housing projects and the subways.
The Council cleared the way for the merger to move ahead, but attached to the budget agreement a "condition" that would give the Council some say as the proposal moves forward and would require the Mayor to maintain "policing," though not specific levels of officers.
The merger would allow the Mayor's office to consolidate about 400 jobs financed by the city. The Council used those 400 positions, together with others, to restore a total of 720 jobs in the Department of Social Services.
The budget agreement also dropped the Mayor's proposal to consolidate the Taxi and Limousine Commission into the Police Department and to sell the commercial license of WNYC-FM, a city radio station.
