NEW YORK -- For the first time in more than a decade, the nation's largest city lurched tumultuously toward the financial brink last week.
"In over 20 years of watching city government, I have never seen a week as chaotic as this one," said Raymond D. Horton, president of the Citizens Budget Commission, a fiscal watchdog committee funded by business. "You have to acknowledge that the city faces some severe external problems. But I wouldn't exactly call this an example of good management."
Mayor David N. Dinkins (D) began the week by announcing a hefty 5.5 percent pay raise for teachers and the next day proposed a massive $1.8 billion expansion of the criminal justice system.
Then the bill came due. On Wednesday, the city budget director announced a hiring freeze and suspended promotions and discretionary pay raises. As city leaders expressed dismay, Dinkins said he might lay off 15,000 municipal workers, the first such action since the city nearly went bankrupt in 1975.
Dinkins said he decided to deliver the bad news as soon as he got it "because the sooner you move the less deep you have to cut." Even critics agree that no mayor could do much about the city's rapidly shrinking tax revenue.
Nearly 40 percent of New York's income is from property taxes, and real estate values are falling fast. Budget director Philip R. Michael said collections for corporate, sales and general real estate taxes were lower than expected for the first quarter of the year. Social services costs, however, have risen faster than in most other big cities, and federal contributions to many programs have not nearly kept pace.
But by vastly expanding the criminal justice system and settling a generous contract with the teachers union in the same week, Dinkins has left himself far less flexibility in deciding how to close the looming $1.4 billion budget gap for the coming year.
The city's proposed layoffs would cut $800 million from the expected budget deficit. But labor leaders said they were astonished that they had not been consulted before the mayor acted.
"I was sitting at the bargaining table on Saturday, and the city doesn't have a word to say about layoffs," said Barry L. Feinstein, president of local 237 of the International Brotherhood of Teamsters, which represents 12,000 city workers and has strongly backed Dinkins. "Well, I have a word for the mayor -- war. Give my members the same 5.5 percent as the teachers got or there will be war."
Dinkins, caught off guard by the vocal outrage of Feinstein and other labor leaders, apologized publicly Friday, saying the unions were "justifiably annoyed."
But apologies may not be enough to keep the city out of the red. The settlement with the teachers has been viewed almost unanimously as a strategic error. Uniformed services, such as police and fire fighters, normally receive slightly higher raises than the civilian force, and those contracts have not been settled.
City officials repeatedly have insisted that only 1.5 percent is budgeted for pay increases. With the teachers union, negotiators used questionable new assumptions about the value of pension investments to help defray the difference. That might be much harder to do with the other unions, yet they may be quite difficult to satisfy with less money than the teachers receive.
"I will do everything I can to help the city get what it needs," said state Assembly Speaker Mel Miller (D-Brooklyn). "But it would help to have a cohesive plan. Right now, it looks like a lot of separate boxes."
Critics say the hard economic realities have been compounded by Dinkins's inability to communicate a coherent vision of his financial plans. Progressive activists have been upset that the man they helped to elect has spent such a huge portion of his political and economic capital on expanding the police force.
"The man said as soon as he came into office that he would do nothing that would jeopardize the city's fiscal stability," said Albert Scardino, the mayor's press spokesman. "And he has kept to that word. He is responding as responsibly as any elected official this city has had."
But some people say the mayor seems only to be responding to, rather than anticipating, problems. They cite lack of an overall strategy that might carry the city through what most assume will be hard times.
"I will accept the notion that we need more police," said Felix G. Rohatyn, chairman of the Municipal Assistance Corp., established to help save New York from bankruptcy in 1975. "But at the same time, 50,000 people have been added to the municipal work force in the past decade. I think there could be some productivity gains made there."
In the next two or three years, the city almost certainly must raise taxes, lay off workers and reduce the level of services.
With the new proposal that could add more than 7,000 new police officers and put 11,000 more on the streets, Dinkins is expected to face difficulty cutting that part of the budget. For political reasons, he also would have trouble reducing education spending.
That leaves social services and welfare, already savaged by federal cutbacks.
"There is going to have to be blood," Miller said. "Before we are done, there will be blood from here to Albany."