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NYC fire, police forces may fall to decade lows

NEW YORK (Reuters) - New York City's firefighting staff would fall to the lowest number since 1980 while its police force would be cut back to its 1992 roster under Mayor Michael Bloomberg's austere budget plan, a report said Friday.

Bloomberg, who has ordered 10 rounds of budget cuts since 2007, pins the city's fiscal health and its future on ensuring its residents' safety and improving public school education.

Budget cuts risk imperiling these priorities, reducing the number of firefighting staff to 10,282, and the number of uniformed police officers to 34,413. Bloomberg's $65 billion budget plan also includes just under 5,000 teacher layoffs.

"The city's ability to deliver needed and expected services while maintaining budget balance may be severely tested if state and federal cutbacks continue to mount," the Independent Budget Office's report said.

The study outlined the harsh fiscal realities driving service cuts, noting that the city has only won back about half of the 131,700 private sector jobs lost during the recession.

"The report shows the mayor has been making the hard decisions necessary to keep a balanced budget and that we face a very difficult road ahead," a mayoral spokesman said.

Thanks to low interest rates and the federal bailout, Wall Street, the city's most important economic pillar, has enjoyed a surprisingly swift and strong return to profitability.

However, that has not been the case for this industry's revenue, the fiscal monitor's report said.

Noting that Wall Street's 2009 revenue was just under $161 billion -- less than half of the $350 billion total in 2007 -- the report said: "Nor do we anticipate much of a rebound over the next few years." The report added: "This does not lend itself to rapid growth in hiring."

Real average wages paid to securities workers fell 27.2 percent in 2008 and 2009 -- "a drop off without precedent, even going back to the Great Depression," the report said. About 64,700 jobs in all sectors of the city's economy should be added this year -- but Wall Street is only expected to hire an average of about 2,800 people a year. The study added:

"The financial industry may become less profitable, and thus generate less tax revenue for the city, as it adapts to the Dodd-Frank regulations as well as new bonus restrictions proposed by the Securities and Exchange Commission."

Bankers and brokers may only see their compensation rise a "tame" 8.1 percent a year from 2010 to 2015, versus the 57.6 percent gain seen from 2004 to 2007, the report said.

For the current fiscal year ending June 30, the report forecast a $2.9 billion surplus -- $258 million less than the mayor predicted -- and a $195 million deficit in 2012.

But estimates for the 2012 fiscal year that starts July 1 assume the state comes through with $600 million more aid than Democratic Governor Andrew Cuomo has proposed. In 2013, the fiscal monitor projects an extra $1 billion of revenue for the city but says its budget gap will climb to $3.9 billion.

Risks to the city's budget the report identified include high fuel prices, which could clip tourism, the difficulty of getting unionized public workers to accept pension cutbacks and productivity increases, and the spiraling cost of Medicaid. The cost of the health plan for the poor, disabled and elderly has not stopped rising for four decades.

Cuomo proposed $2.3 billion of Medicaid cuts, which would hit the city's Health and Hospitals Corporation. The network of public hospitals gets 40 percent of its revenue from Medicaid.

Demonstrating his support for charter schools, Bloomberg proposed that the Department of Education spend $207 million less next year on public school classrooms but an extra $689 million on nonpublic and charter schools and systemwide costs.

The weather also poses a fiscal hazard: Central Park got nearly 61 inches of snow this winter and the storms, coupled with a tornado, cost the city almost an extra $100 million.

(Reporting by Joan Gralla; Editing by Diane Craft)

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