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FINANCIAL ADMINISTRATION, BUDGET AND TAX

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WILLIAM A. PRENDERGAST

Comptroller of the City of New York

T the present time there is considerable public inquiry regarding the magnitude of our city outlay. There is also displeasure upon the part of some of our citizens that this outlay has reached so large a figure. It is not my purpose to apologize for what we are spending, but rather to explain in a simple way the facts of the expenditure and some of the reasons that have led to it. A budget, according to our interpretation in the city of New York, consists of a statement of the probable expenditures for the succeeding year. These expenditures are based to a great extent upon past experience, so that our budget in large part is based on fact, not probability. The difference between our budget and other budgets consists in this, that while we present a statement of our anticipated city expenditures, we do not accompany it with any general statement of the sources of revenue. This is due in part to the fact that most of our revenue is raised from one source, the tax upon real estate, which consists of land and buildings and the special franchises of corporations. A small part of the collections comes from the personal property tax. We are so used to taxing real estate that there does not seem to have been any necessity in the mind of the public or of our administrators for accompanying the budget with a statement showing the source of our expected revenues. We are now facing a situation which will require such a statement. The budget has assumed such large figures, and the tax upon real estate has become so onerous that it may be necessary to devise other means of producing revenue, and the people should be apprised of such proposed plans.

I state this as a possibility because, on the other hand, it may develop, as Mr. Vanderlip has suggested, that in order to conform to good economic practise and not overburden the city we must reduce our expenditures in certain directions. Personally, I

believe not only that it is necessary to reduce expenditures, but that decided measures should be instituted to bring about such reduction. I say this without unduly criticizing or impugning the propriety of such activities as the city has been carrying on up to the present time.

Our budget for this year is approximately one hundred ninetynine millions of dollars. That is the largest budget that the city of New York has ever had. It is probably three times the size of the budgets of the three largest cities in the Union, and I think that it is a larger budget than any other city in the world has ever had. The questions to consider are these: Is the budget justified? Is this vast expenditure necessary? Are there reasons why we should continue it or are there reasons why we should try to avoid such considerable expenditure in the future? We have been in a state of progressive expenditure in this city, just as in every large city in the country. The same fact holds true of the state and national governments. In the period from 1905 to 1909, the city expenses increased 40.15%; city and county expenses together, 39.65%. In the period from 1909 to 1913, the city's expenses increased 23%; the expenses of city and county, 22.87%. The increase was less rapid during the last four years than during the four years preceding, but nevertheless we as a city are in a state of progressive expenditure in respect to most of our outlays.

There are reasons for this. One reason is that there are more people to take care of from year to year. For instance, during the last fifteen years the register of our elementary and high schools increased 86%; the expense of conducting the schools during the same period, however, increased 330%. The expenditure grew more than three times as fast as the attendance, rapid as was the increase in the latter.

We are often asked, why do you spend so much money? For one thing, we have many social activities to support. Many of them should not be decreased, and the expenditures in connection with them consequently cannot be much decreased. I refer especially to the activities of the health department, particularly during the last year under the excellent administration of Dr. Goldwater. Its efficiency has increased much more rapidly than its expenditure, so that we are getting a great deal for the money that we spend. But the whole disposition of our city services

has been this: persons well-intentioned, thoughtful in most cases, high-minded, idealistic, have felt that any activity which would promote the health, comfort, or entertainment of the people could be construed as a part of our educational system, that all such activities should be carried on because they lead to general betterment. A great deal of our increase in expenditure may be charged to this desire for general betterment. The great question which the administration and citizens of the city face at the present time is this: Has this policy of general betterment been carried too far? Is there a good reason why this policy should be discontinued to some extent? Or is it desirable for the city not only to continue this work, but to develop and expand it? If you want to do that, the budget will have to continue to increase. I am making that as a general statement, but I could support it with figure after figure. That being the case, you ought to take up that issue thoughtfully and arrive at some clear-cut decision.

Some people imagine that the board of estimate and apportionment have the only responsibility in this matter. That is a mistake. The city government will do what the people want it to do; just as soon as there is a positive indication that the people of the city think the government to be going too far in expenditure, in betterment, in improvements, that indication will not be lost upon your government, no matter who is in office. It is for the people of the city to say whether or not they desire an extension of the activities of the city. From 1898 down to and including 1914, that is, since consolidation and down to the end of last year, we had issued in bonds, and notes which must be redeemed from the sale of bonds, $1,182,000,000. What has been done with this vast sum? 20.78% has been spent for water supply, and we are not yet through building our new system. 13.3% represents expenditures for rapid transit, and we still have about seventy-five million dollars to spend to finish the new subway system. 10.98% has been spent on schools and sites for schools, and 13.43% upon public works, streets and roads. I have given you the largest items. The others are all small. Of that great total of $1,182,000,000 worth of bonds issued since 1898, 33% has been spent for two purposes alone, water supply and rapid transit.

Do we need those things?

There is no doubt of it. Mayor

McClellan imposed upon the city of New York a great debt of gratitude for his foresightedness and force in bringing about the construction of our new water system, and the new subway system was certainly devised and is now being executed in accordance with public demand. If we want these things we must expect to pay for them; and if we don't want them, then we shouldn't start any public agitation for them.

But we also want many other things, some necessary, others in my judgment unnecessary and perhaps even undesirable. We want new schools, new hospitals, new station houses, new fire houses, new buildings for the department of correction, new recreation centers, new social services of all kinds.

By no means all of our city expenditures go for new improvements. During 1910, 1911, 1912 and 1913 we issued $20,000,000 worth of fifty-year bonds to meet deficiencies caused by uncollectible taxes. Mr. Metz during his term spent $3,000,000 in the same way, so that we have issued $23,000,000 in bonds to provide for uncollectible taxes alone. In addition to that, since consolidation we have paid off through amounts provided in our annual budget, deficiencies in the sum of $50,866,000. There are seventythree millions that have had to be provided, then, to pay up old debts which arose because all the moneys we expected to collect from our tax levy did not prove to be collectible. Now that we thoroughly understand the character of these deficiencies, it would be a great deal better to provide additional revenue to meet the entire expenses of our budget each year as we go along, rather than have these deficiencies accumulating and awaiting liquidation in the future. But that is a subject by itself and would require considerable discussion in order to explain all its ramifications. Still another large item in our budget is the debt service. I wish it had some more disagreeable name because then possibly the people would get better acquainted with it and try to correct its operations. The debt service means the money you must provide to pay interest upon bonds and also to provide a sinking fund to meet those bonds at maturity. Some persons have a strange idea about bonds. They seem not to understand that provision must be made for the redemption of bonds and that interest commences right away. They seem to imagine that when

you issue a bond you have discharged all obligation and that somehow the money to pay interest and to pay off the bond at maturity will find itself. I wish they could realize that from the moment we incur the obligation we face the problem of interest and redemption.

In view of the difficult financial position of the city I raise this question: should New York maintain and expand its present activities? If it does, it must increase the budget from year to year. Or is it proper to countenance reduction in those activities? My own position, frankly, is this: We have gone too far in developing our activities and I believe that we should now curtail some of them, not only because it will reduce the budget, but also because their reduction will not interfere in the least with the development of manly and womanly citizens. The particular function of government is to develop good citizenship and I think that can best be done by adhering to the fundamental requirements of government and not by furnishing the people with everything they see and everything they want. I think that we make better men and women by obliging them to work for what they get. I realize that this is considered as a somewhat reactionary idea, but I am not afraid on that account to voice it frankly.

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