Clouds over booming Boston

Boston is running out of timeouts. so say the politicians, businessmen, and financial analysts watching one of the gravest economic crises in the city's 350-year history.

For although Boston's private sector booms, creating more jobs than it has people to fill them, there is talk, if not of bankruptcy in the public sector, at least of a jolt so severe as to entirely reshape the way the city does business.

Whatever the outcome, the crisis will almost surely result in a redistribution of the tremendous power formerly held by Boston Mayor Kevin H. White, whose popularity appears to be declining. With well-known presidential aspirations and three years left in his present term, Mayor White, who has a reputation as a high spender, is under great pressure to put his own house in order.

The most immediate threat, however, hangs over the Boston School Department, which by June will have overspent its $210 million budget by about $38 million.Technically, it has already run out of money, and the school year may have run out, too. Easter recess began April 16, and unless something happens promptly, the schools will not be able to reopen when the vacation ends April 27 .

The state Board o; Education has filed suit to compel the school department to keep the system going for the full 180-day year required under state law.

Despite the shortness of time, the four groups of antagonists involved in the drama --and governor -- are still circling warily around each other, each seeking to avoid blame, searching for some kind of legislative bill that will resolve the problem, and deeply suspicious of the other groups and individuals involved.

Normally, the city would grudgingly provide the highly independent school committee with whatever it needed by borrowing against municipal bonds. But two other events have squeezed the city treasury in an unprecedented vice:

* A large bill for tax abatements. Due to poor assessing practices in the past, the city may shortly have to return between $75 million and $100 million to overtaxed commercial property owners.

* Proposition 2 1/2. The statewide property tax-cutting measure, akin to California's Proposition 13, has thrown the city into a frenzy of budget-cutting since it was passed last November. Unlike many cities, Boston depends heavily on property taxes, which generate some 55 to 60 percent of its revenue. The business-supported Boston Municipal Research Bureau estimates that the city's $ 878 million budget will need to be trimmed by $119 million. The result would be a cut of nearly 50 percent in so-called "discretionary" costs -- that part of the budget not irrevocably committed to such "fixed" costs as pensions, debts and interest, and state assessments.

But because of Proposition 2 1/2 -- and particularly because the city can no longer guarantee its bondholders that it will raise taxes to cover repayment of debts -- the city may not be able to borrow. Moody's Investors Service, which rates municipal bonds, suspended Boston's rating on March 27. And Merrill Lynch , Pierce, Fenner & Smith Inc., the nation's largest underwriter of municipal bonds, warned investors away from Boston in a recent report.

Hence the mad scramble to restructure the city's financial apparatus so that lenders will once again be attracted.

According to Roger C. Altman, senior partner in the Wall Street firm of Lehman Brothers Kuhn Loeb Inc. and a treasury official in the Carter administration who played a key role in 1978 in negotiating federal loan guarantees for New York City, Boston and NEw York are dissimilar.

"Unlike Boston," he told an April 16 breakfast meeting here, "New york truly was on the brink of bankruptcy." Among the several causes for New York's problem , he cited a declining private sector.

Boston's anomaly is its thriving private sector. "Our underlying economy in Boston is sound, improving, and will continue to improved," says City Treasurer Lowell L. Richards III. He adds that "the question is, How does that economy finance government services at a reasonable level?"

The answer, many would say, is "not very well." Accordin to Richard F. Syron of the Federal Reserve Bank of Boston, the city spends about 45 percent more er capita for its services than other comparable cities. What it needs, he says, is "better public management."

But the White administration, promising to lay off between 3,500 and 4,000 employees by June, has stripped up great public outcry. Critics accuse City Hall of intentionally chopping the most sensitive areas rather than making significant structural changes.

residents have spilled onto the streets in protest over the layoffs of 200 policemen and the closing of all seven neighborhood police stations. Protests have also been raised over a cutback of 200 in the number of firemen. The firefighters themselves voted overwhelmingly to remove an antistrike provision from their contract.

Several widely differing bills are bouncing between the mayor and the nine-member Boston City Council, each designed to raise some new taxed and borrow $75 million to bail out the schools.

"If we do not pass this bill or some bill like it," Councillor Lawrence DiCara told the Monitor, "the city will not be capable of meeting its obligations through the end of June."

But many observers feel that a greater danger is that no strong coalition of business, labor, financial, and political leaders will emerge. If it does not, they say that "politics as usual" -- borrowing to meet the crisis without attacking its causes -- may prevail.