(National Park Service photo)(National Park Service photo)

(Bloomberg) — New York Mayor Bill de Blasio’s first budget calls for setting aside money for retiree health care and expanding paid sick leave.

De Blasio says he wants to put $1 billion in a retiree health trust fund set up by former Mayor Michael Bloomberg and the city council.

De Blasio has proposed spending a total of about $74 billion. The budget would include a prior-year surplus of $1.8 billion

In addition to benefits provisions, the budget includes increased funding for education, identification cards for undocumented workers, and an inspector general for the police department.

De Blasio’s budget calls for raising taxes on New Yorkers making more than $500,000 annually to pay for early childhood education, building 200,000 units of affordable housing over 10 years and cutting a $6 billion backlog of capital projects at the public housing authority even as U.S. aid declines.

“This budget must reflect a progressive agenda,” de Blasio said at a news conference.

New York City, the most populous in the United States., has a budget bigger than that of every U.S. state apart from California, New York and Texas. De Blasio, 52, the first Democrat to run the municipality in 20 years, won election in a landslide by pledging to reduce the gap between rich and poor. He achieved the biggest margin for a nonincumbent in history and has said he believes he has a mandate.

Months of fiscal negotiations with the city council are ahead. A revised spending plan, called the executive budget, must be approved by members before the July 1 start of the 2015 fiscal year. State law requires that the city balance its budget, with no deficit financing permitted.

The proposed income-tax increase is subject to approval by state lawmakers. Gov. Andrew Cuomo, D, opposes the increase.

Cuomo said at a press briefing in Albany that the levy de Blasio is pushing wouldn’t be fair, because other jurisdictions don’t have so many millionaires to tap. Cuomo has already put forward a plan that would phase in statewide early childhood education classes without raising taxes.

“I’m ready, as fast he’s ready to move,” Cuomo said. “I will go drive down and deliver the check personally to New York City and help open the first pre-K site.”

Settling expired labor contracts and negotiating new ones with 300,000 public workers may cost $6.3 billion, the Independent Budget Office, a nonpartisan monitor funded by the city, said in December. De Blasio, who disputed the office’s projections, didn’t budget money to settle the contracts.

The retiree health trust fund, which was used by the previous administration to help close budget deficits, could help pay for settling contracts with the municipal unions, said Ronnie Lowenstein, executive director of the Independent Budget Office.

“I would argue the trust fund is a two-fer,” Lowenstein said. “It could be used to be working on remarkable liability for health insurance or can be drawn down to help sustain the city in a time of need.”

–Editors: Justin Blum, Mark Tannenbaum

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