With the City Council moving to back Mayor Bill de Blasio’s plans to borrow billions of dollars to cover red ink in the city budget, fiscal experts are digging in for a fight, contending that borrowing now is both premature and a threat to the city’s long-term health.

The issue will be decided in Albany, where legislation is needed to allow borrowing to cover operating expenses. But there may also be a cost for the mayor and his successor. The bill could serve as a vehicle to strengthen the powers of the state Financial Control Board, to which Gov. Andrew Cuomo just appointed three new members likely to take their cues from the governor.

Earlier this week, Council Speaker Corey Johnson announced in a television interview on Channel 5”s Good Day New York that he had changed his position and now backs the borrowing. He followed that up with a Daily News op-ed supporting the move, co-authored by union chief Michael Mulgrew of the United Federation of Teachers.

“I wanted to see if we were going to get any stimulus money from Washington and we did not get any,” Johnson said in the interview. “Albany must give New York City the authority to borrow to avoid the worst options like significant layoffs or service cutbacks.”

A resolution expressing the Council’s support for borrowing is to be introduced on Thursday. The mayor originally asked for the authority to issue $7 billion in debt and later reduced that to $5 billion.

The mayor has already cut the budget significantly and Albany allowed the city to borrow following the Sept. 11 terrorist attacks in 2001 to cover an unexpected budget deficit, spokesperson Laura Feyer said.

The Johnson-Mulgrew op-ed focuses on the harm of laying off municipal workers. Sen. Robert Jackson (D-Manhattan), who chairs the New York City Committee in the state Senate, likewise supports borrowing as well because of the impact of layoffs. He voted for borrowing after the terrorist attacks, when he was a member of the City Council.

“This is worse than Sept. 11,” he said.

Watchdogs Wary of Borrowing Addiction

But a critical report from State Comptroller Thomas DiNapoli in early August called a planned reduction in city staffing “modest,” noting that over the past eight years, the full-time city-funded workforce has grown by more than 24,000 employees, to the highest total ever in the city. He also pointed out that most of the budget reductions came from non-recurring spending, much of it from services like school busing that were not provided during the shutdown.

Some fiscal experts are much more blunt.

“There is no need for de Blasio to borrow,” said Stephen Berger, an investment banker who, as the executive director of the New York State Emergency Control Board for the City of New York,was one of the key players in the city averting bankruptcy in the 1970s and restoring its fiscal health. “You can take 4% or 5% out of the budget.”

The mayor has asked the municipal unions to come up with $1 billion in proposed savings to avert a threatened layoff of 22,000 city workers in October. But he also seems to indicate that if the federal government provides aid or if he is able to borrow he will no longer insist on the savings.

“Borrowing will likely be used to prop up unaffordable spending, leaving gaps in subsequent years,” said Andrew Rein, president of the Citizens Budget Commission. . “This sets the stage for more borrowing, and more borrowing — the dynamic that got New York into so much trouble 50 years ago.”

Any borrowing bill could become a reason for state lawmakers and the governor to put clamps on the city budget. The Financial Control Board, a relic of the 1970s crisis, can currently only critique a city budget, but for much of its history routinely possessed — and used — the power to reject city budgets for too much spending.

Some experts have suggested restoring more robust powers. Possibly in anticipation of such a move, the governor recently named to the Financial Control Board three longtime loyalists led by former City Comptroller Bill Thompson, who also chairs the board of the City University of New York. Since the financial board is composed of the governor, mayor, city comptroller and state comptroller and the three people appointed by Cuomo, he would have the votes to dictate the city budget.

In a webinar with Crain’s New York Business released Wednesday but taped last week, DiNapoli said he wasn’t ready to endorse borrowing.

“The real question is the outyear budget gaps,” he said, referring to future projections. “We need to know if the budget for this year stays in balance and if the outyear gaps moderate. There is a fair number of open questions that would decide whether the [borrowing] authorization is needed.”

In tune with the fiscal experts, he added, “We know that long term borrowing your way out of a budget deficit is not a good idea.”

Johnson in his interview said there should be “appropriate guard rails” for added debt, but a spokesman declined to be more specific about what he meant.

Jackson, too, said there would be conditions, especially that any bonds would have to be approved by the city comptroller.

Neither Rein nor Berger thinks such measures would be sufficient — invoking a principle known as “intergenerational equity.”

“The resulting debt service shifts costs for current services to future New Yorkers and locks up future resources resulting in less money available for services and/or requiring even higher taxes,” Rein said.

Berger sees an even darker future.

“It is a narcotic,” he argued. “You start small, and it solves lots of short-term problems. One day you wake up and you are in rehab with people in white coats strapping you to a cot.”

The Article was originally published on City Bid to Borrow Billions Could Lead to Renewed Power for State Budget Board.

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