The Rube Goldberg Machine of Budget Implementation, or is There a Structural Deficit in the New York City Budget?

21 Pages Posted: 26 Nov 2013

See all articles by Dan Williams

Dan Williams

Baruch School of Public Affairs

Joseph I. Onochie

Zicklin School of Business, Baruch College CUNY

Date Written: Winter 2013

Abstract

This paper examines the case of continuous budgeting both preadoption and postadoption in New York City and considers matters of forecast bias, rebudgeting, and the belief that New York City remains in structural deficit which has been cited as a continuing source of concern since New York City's 1970s fiscal crisis. The asserted structural deficit is a rationale for reducing spending in the prebudget and postbudget adoption periods. Williams ([Williams, Daniel W., 2012]), shows that New York City's revenue forecasts are biased to underestimation, exacerbating over longer horizons. This paper examines expenditure estimates, reductions and within‐year modifications over the first decade of the twenty‐first century. If there is a structural deficit, expenditures would exceed revenues in forecasts by more than offsetting forecast biases. However, there are other reasons expenditures may exceed revenues in forecasts. Late term increases in expenditure estimates suggest deliberate choices, which cannot be termed “structural.” Expenditure changes follow changing revenue particularly in the postadoption period. This rebudgeting practice does not reflect fiscal stress; it is part of a complex method of producing a surreptitious budget stabilization fund, reallocations favored by the mayor, and possibly shifting of the budget towards capital uses with little broad public discussion. These observed effects are somewhat consistent with effective financial management, but are nontransparent and inconsistent with democratic participation. Policy recommendations aim at restoring transparency and democratic oversight.

Suggested Citation

Williams, Daniel and Onochie, Joseph I., The Rube Goldberg Machine of Budget Implementation, or is There a Structural Deficit in the New York City Budget? (Winter 2013). Public Budgeting & Finance, Vol. 33, Issue 4, pp. 1-21, 2013. Available at SSRN: https://ssrn.com/abstract=2359822 or http://dx.doi.org/10.1111/j.1540-5850.2013.12021.x

Daniel Williams (Contact Author)

Baruch School of Public Affairs ( email )

One Bernard Baruch Way D901
New York, NY 10010
United States
6466606836 (Phone)

Joseph I. Onochie

Zicklin School of Business, Baruch College CUNY ( email )

17 Lexington Avenue
Dept. of Economics and Finance
New York, NY 10010
United States
212-802-6380 (Phone)
212-802-6353 (Fax)

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