State comptroller Thomas DiNapoli, in a quest to become the Ghost of New York City Yet to Come, released his report on the city’s budget yesterday. The document illustrates starkly what is going to happen in New York if we do not face the inevitable. We’ve been running an unsustainable budget based on fumes from the Wall Street bubble, but those fumes are quickly vanishing into the winter ether.

First, DiNapoli measures the city’s operating results for this year: that is, revenues and spending without the impact of surpluses from previous years. This year’s operating deficit is a whopping $4.3 billion, or a whopping 10 percent of city-funded revenues. Next year, though, the operating deficit will be $7.2 billion, or 17 percent of city-funded revenues, making one wish that there was a stronger word than whopping.

As credit-bubble-era surpluses from previous years finally dry up, next year’s actual cash deficit — as opposed to an operating deficit papered over from cash from previous years — could reach $3.5 billion, higher than the $1.3 billion that the city is projecting.

But it’s the year after that will be drop-dead time. In little more than 18 months from now, New York could face a a real, cash deficit of $8 billion, or 13 percent of total spending and 18 percent of city revenues. This projection already includes the extra cash from the recently enacted $1.3 billion property-tax increase, estimates of $1 billion-plus in projected agency savings, and a cash extraction out of what was supposed to be a “benefits trust” for future retiree healthcare costs.

This prospect is chilling for people who remember the Lindsay years (or at least read about them in a book). At the peak of the city’s 70s-era fiscal crisis, the deficit, as a percentage of total expected spending, was 14 percent.

It’s almost jawdropping that Mayor Bloomberg, faced with these projections, has actively made things worse. Consider that city workers’ salary and wage growth is projected to increase by 13 percent between now and this drop-dead year, largely because the mayor voluntarily, and recently, entered into labor agreements offering hefty raises to both civilian and uniformed workers. The cost of higher salaries and wages alone adds nearly $1.7 billion to the 2011 deficit. Plus, the city-funded work force has increased by more than 12,000 people in the past three years, meaning that even the 4,556 projected job cuts over the next 18 months won’t bring us back to 2005.

Higher wages for these greater numbers of workers, unnecessary anyway in the middle of a deprecession, make another big problem, future expected pension costs, higher in the long term, since pension benefits are based on wages. But even in the short term, DiNapoli expects pension costs to grow to more than $7 billion annually by 2011, up from about $1.5 billion or so annually in the late 1990s. Healthcare costs for public-sector workers, too, will raise from the $1-2 billion annual neighborhood in the late 1990s and early 2000s to more than $4 billion in 2011.

This week, the mayor came out in support of modest changes to the city’s expensive pension funds, asking future employees of the city to continue to contribute to their own pensions after 10 years of work and to vest their pensions after 10 years instead of the current five. For future uniformed workers, the mayor proposes to increase the number of years before eligible retirement from 20 to 25, and increase the minimum retirement age to 50.

Mathematically, though, these proposed reform are not enough. Nor can the mayor close future deficits with more across-the-board cuts to the agency budget, as proposed. Instead, the mayor must take outsized cuts to education, whose city-funded budget has increased at nearly 10 percent annually since Bloomberg took office, anda make real cuts to Medicaid, which consumes more than $5.5 billion annually.

Avoiding  these realities cannot be done for much longer; the deficits are too big, and getting closer.

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The Empire Center is an independent, non-partisan, non-profit think tank located in Albany, New York. Our mission is to make New York a better place to live and work by promoting public policy reforms grounded in free-market principles, personal responsibility, and the ideals of effective and accountable government.