His resume those last few years reads like a study in liberal excess. He added thousands of employees to the biggest municipal payroll in the United States. And he burned through a $3 billion surplus as the city economy sputtered, leaving his successor with a gaping shortfall.
Who was this profligate soul?
Former mayor Rudolph W. Giuliani, the man credited with taming the great American city.
As New York Mayor Michael Bloomberg today unveiled a proposed $44 billion budget that would cut city services and lay off city employees to close a $3.2 billion dollar deficit, a cold eye has been cast on Giuliani's second term as mayor, when budget discipline weakened and spending shot upward. In 2001, his last full year in office, Giuliani increased spending by 9 percent, more than twice the rate of inflation.
School construction -- overseen by an ally of Giuliani's -- was $2.3 billion over budget. His administration built the two most expensive minor league stadiums in America. And by the end of 2001, the city had 6,000 more employees than when Giuliani took office in 1994.
"The budget exploded in the last few years under Giuliani," said Diana Fortuna of the Citizens Budget Commission, a business-funded budget watchdog in New York. "They acted like they would never have to pay the piper."
Giuliani's was a much-repeated pattern across the nation, as mayors, governors and legislatures embraced the notion that the business cycle had been tamed and tax revenue would rise indefinitely. That was an illusion bred of fat times. Now, from California with its $35 billion budget deficit to Boston with a $55 million gap, politicians are trying to realign expenses with falling tax receipts.
"Politicians across the nation spent like drunken sailors during the boom -- I don't just fault Giuliani," said E. S. Savas, a professor and director of Baruch College's Privatization Research Organization, which helped design some of Giuliani's early management innovations.
New York's rise in spending during the late 1990s was nearly on par with many other major cities. Seen in this light, Giuliani's budget management provides a useful primer on how an American city clambered out its fiscal ditch in the 1990s -- and how it fell back in again.
Ask former Giuliani officials and they say budget discipline never wavered. Their revenue estimates were conservative, they said, and the mayor continued to push business tax cuts. They blamed others for the leaks in their ship of state, not least Gov. George E. Pataki, a Republican, who joined state Democrats in tossing out the city's commuter tax a few years ago. That tax -- which Giuliani favored -- brought the city $500 million a year. The state also increased Medicaid spending, of which the city pays a fixed percentage.
"No one wanted to control spending more than Rudy," said Adam L. Barsky, the city's former budget chief. "But we faced unfunded demands for more spending on Medicaid and pension benefits. And there was the national economic downturn, which was exacerbated by attacks of 9/11."
Giuliani's leadership after the terrorist attack was perhaps his finest moment. And Giuliani, who declined to be interviewed for this report, has tended to talk of that as the moment the budget went off the tracks. But that attack was not the sole cause of the city's fiscal troubles.
New York City had lost 60,000 jobs in the eight months before Sept. 11, as the high-tech and stock bubbles burst. (The city has since lost an additional 125,500 jobs). By the spring of that year, city fiscal monitors warned of a weakening economy and the Citizens Budget Commission graded Giuliani's last budget with two D's, for ineffective and irresponsible budgeting.
"When the economy was turning south, he kept spending," said Harvey Robins, a top official in the administrations of former mayors Edward I. Koch and David N. Dinkins who spoke at a recent Citizens Budget Commission conference. "Lady Luck played a great role in filling the coffers during the late 1990s, but he squandered it."
In his first term, Giuliani confronted deficits and declining tax revenue and slashed city payrolls -- shrinking them by 15,000 jobs. He cut taxes, wrested some productivity gains from the city's powerful unions and tried to close a few public hospitals. By the end of his first term, in 1997, city spending had declined 2 percent.
Even as he made these cuts, Giuliani inherited thousands of new police officers, hired in the last years of the Dinkins administration. That allowed him to embark on his popular and successful war on crime. "Those were terrific years for Rudy," Savas of Baruch College said.
But Giuliani never tackled the bureaucracy at police headquarters, where thousands of administrative jobs are filled by uniformed officers rather than lower-paid civilians. Budget experts urged Giuliani to put these officers on the street, but the department instead asked cops in the precincts to work longer hours. Police overtime rose sharply, topping $200 million in the mayor's last year.
"Absent inventive policies, you throw bodies at problems," said Charles Brecher, a founder of the Citizens Budget Commission. "The police department got huge and Rudy didn't manage it."
(Giuliani's war on crime had an expensive downside as well. His administration paid $50 million in 2001 to settle a federal lawsuit challenging the department's policy to stop and frisk young men on the street who were not criminal suspects.)
Giuliani also closed the vast Fresh Kills landfill in Staten Island, keeping his promise to the borough that was his margin of victory over Dinkins in 1993. But that left the city with nowhere to dump its garbage. Officials now pay an additional $200 million annually to cart garbage to distant landfills.
Giuliani's administration handed out $2 billion worth of tax breaks to major corporations in the midst of the biggest economic boom in city history. He agreed to spend $960 million to build a new trading floor for the New York Stock Exchange, and he promised to spend $1 billion on new baseball stadiums for the Yankees and Mets.
Many city and state officials dipped into the flush coffers to hand tax breaks to corporations, although few did so on the scale of New York. Former mayoral aides defend such decisions, and Giuliani's broader insistence on slashing taxes, as strategic. The former mayor, they say, wanted to pick the projects and cut the taxes he deemed necessary, leaving little money left over for the city council to spend on what he saw as ill-advised social programs.
"It's called starving the beast," said Barsky. "If the money isn't there, you force down spending."
Bloomberg is not enamored of corporate tax breaks, and has spoken of the illogic of subsidizing corporations to remain in a world business capital. He has delayed the Giuliani proposal to build new baseball stadiums. But the mayor, who ran for office in the role of Giuliani's acolyte, tiptoes carefully around the question of his predecessor's fiscal management.
So Bloomberg remained silent on Giuliani's most controversial move. Each year, Giuliani underestimated tax revenue, and ran up huge budget surpluses during the boom -- reaching $3.2 billion in 2000. But he did not use that cash to pay down the city's spiraling debt, as some urged. Instead he kept rolling the money into the next fiscal year.
When Giuliani came to his final year in 2001, and tax revenue began to fall off, the mayor declined to make cuts and used the surplus to plug the gap. The effect, said Ronnie Lowenstein, chief of the city's Independent Budget Office, was to strip the fiscal cupboard as Bloomberg took office. "He seemed to take the view that good times were forever, which is rather cynical," she said. "Now the surplus is just gone."
Bloomberg last year compared the city's gilded age to a symphony that had to end. "If you had a gap, you could just grow your way out of it," he said. "That music stopped."
What Bloomberg declined to add, noted a mayoral aide, was that Giuliani had been the orchestra conductor.