NEW YORK (AP) -- New York City Mayor Michael Bloomberg's $70 billion budget proposal for his final stretch in office is pointing up an issue that could linger for his successor: expired contracts with city workers.
The spending proposal he unveiled Thursday holds taxes steady and avoids major layoffs while grappling with rising benefit expenses, increased spending on schools and growing demand for aid to the homelessness and other social services, officials said. They credit an improving economy and a dozen rounds of belt-tightening since 2008, with holding the line on taxes.
"The news today is, I think, reasonably good, as good as it's been in a long time," said Bloomberg, who leaves office in December after 12 years.
His plan launches negotiations with the City Council over the spending scheme for the fiscal year that starts in July. This year, the budget dance is unfolding against a backdrop of questions about whether the city may have to find billions of dollars for retroactive raises if new labor agreements are reached.
Teachers, jail officers and many other city employees have been working with expired contracts, some for several years. Bloomberg's budget proposal doesn't set aside money to pay for the retroactive raises workers may be owed.
The city Independent Budget Office has estimated that reaching new pacts could cost the city $4.5 billion in retroactive wage hikes and add $1.8 billion a year to costs going forward. Bloomberg pegs the costs at nearly twice that.
"It's just something the city cannot possibly afford" without a dramatic tax increase, he said. His administration said last month it would settle on contracts with unions if they agreed to forgo back raises and pay more for health insurance. About 95 percent of city workers don't pay anything, Bloomberg said.
Many workers haven't gotten cost-of-living raises since the contracts lapsed, although some get increases linked to longevity or acquiring new credentials. Bloomberg also noted the expense of employees' health and pension benefits has also risen, with health insurance costs doubling since 2002, to $6.3 billion this year.
Union leaders say Bloomberg is turning his back on workers, and some mayoral candidates say he's leaving a pricey problem for the next administration.
"The municipal workers of this city continue to contribute to making this city grow ... and in playing that role, we should be and must be compensated for what we do," Correction Officers' Benevolent Association President Norman Seabrook said by phone.
He and United Federation of Teachers President Michael Mulgrew noted that the city has ended recent years with surpluses.
Some mayoral hopefuls criticized Bloomberg for letting the issue go unresolved.
"Leaving this until the end, and offering a settlement almost as he walks out the door, really is leaving this for the next mayor," former City Comptroller William Thompson, a Democrat, said after an unrelated news conference. Current Comptroller John Liu, who's also running for the Democratic mayoral nomination, said in a statement the budget plan left "a passel of problems" for the next administration.
Republican candidate Joseph Lhota, a former city budget director, called it problematic that Bloomberg's proposal didn't set aside money for resolving labor matters. But Lhota praised the plan as straightforward and said in a statement it "provides the next mayor an opportunity for transformative change."
Council Speaker Christine Quinn, also a Democratic mayoral hopeful, praised provisions for increasing police recruits this year but frowned on some cuts, including to after-school and early education programs. The council has nixed such cuts before.
Another uncertainty is a challenged plan to raise money by selling new taxi permits, or medallions. While awaiting a state Court of Appeals ruling, city officials trimmed the amount of medallion money expected next year from $600 million to $300 million.
Some financial clouds have cleared, however.
While the city lost out on $250 million in state education money this year because of a standoff with the teachers' union over evaluations, state leaders have agreed to let the money flow in future years. That averts a need to cut up to 1,800 teachers' and counselors' jobs through attrition next year, schools Chancellor Dennis Walcott said.
And the federal government is expected to cover all of the city's $4.5 billion in expenses from Superstorm Sandy, Bloomberg said.
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