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NYC Mayor-elect Will Face Immediate Fiscal Crisis

Last week, Bloomberg announced that his team had balanced the city's budget for Fiscal Year 2015, which begins in July, closing a projected $2 billion deficit. The city's budget must be balanced by law but doing so early sends a signal to the unions that the city's financial health is improving and could support larger raises.

Negotiations over the new contracts are expected to begin in January. De Blasio has been steadfastly noncommittal about retroactive raises, and his team declined to comment further.

"He's in both a political and fiscal bind," said Baruch College political science professor Douglas Muzzio. "It's damned if you do, damned if you don't. If you don't give the big raises, you're immediately alienating your base, who you need to work hard for you and help with your re-election."

"If you do, you're going to be attacked for being beholden to the unions, and you're blowing a hole in the budget," Muzzio said.

A compromise may be the most likely outcome, according to analysts. Instead of retroactive raises, de Blasio could offer one-time bonuses for employees that would not be factored into their future pensions, which are another financial drain.

He could also ask city workers to start contributing to their health care premiums. Currently, New York is one of only a handful of governments in the nation where workers don't pay any health care. The city's health insurance costs are growing at 7 percent a year.

The state's leading Democrat may have hinted this week that de Blasio will not roll over in negotiations.

"Going into the conversation, everyone needs a reality adjustment," Gov. Andrew Cuomo said in an unrelated Manhattan news conference. "The unions have understood that in the past, and they've acted accordingly, and my guess is that they will again."

But the fiscal challenges de Blasio faces won't end with the union contracts.

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