"The mayor and the City Council have taken a proactive approach to the city's budget problems," DiNapoli says in a release. "But the economic outlook continues to deteriorate with every new forecast. We don't know how long the recession will last, or how deep it will be, but it's clear that New Yorkers should brace themselves for possibly the worst fiscal crisis since the 1970s. And the city cannot look to Albany for much help. The state faces its own fiscal crisis. Balancing the state budget will require sacrifices that could hinder the city's efforts to balance next year's budget."

While the city has enough cash to balance this year's budget, a report issued late Monday afternoon by DiNapoli forecasts a gap of $3.5 billion for fiscal year 2010 and $8 billion the following year. The report says the weakening real estate market could cause real property tax collections to fall $425 million short of the city's forecasts by fiscal 2012-- although the decline in commercial and residential prices has lagged the rest of the nation--while taxes from Wall Street-related activities could plummet by 40% over the next two years. Overall, DiNapoli projects that tax collections could be lower by $575 million in the current fiscal year, $450 million in FY '10 and as much as $950 million by FY '12.

Reiterating his earlier forecast that the city could lose 175,000 jobs over the next two years, DiNapoli notes that last month's loss of 19,800 jobs was the largest since October 2001. "Job losses will continue to accelerate as the retrenchment on Wall Street and in other financial services companies ripples through the economy," the report states.