The economic downturn has hit New York City hard with Mayor Michael R Bloomberg announcing laying off 3000 employees, cutting expenditure on several other fronts, rescinding a popular 7 per cent property tax cut and suspending checks for annual property tax rebates.
Together, they will save some $1.5 billion but the city will still be in the red.
The measures, which are already drawing opposition, could affect the chances of third term for Bloomberg next year.
The latest measures come on top of several austerity steps already announced with a warning of more to come.
The mayor blamed the crash of Wall Street for the city woes, pointing out that some 147,000 jobs had been axed in the financial sector alone and $500 billion losses on the Wall Street would mean a projected $2.6 billion drop in the city's revenues.
"There is no magic answer to our budget challenges. We did't ask for our financial system's meltdown, and we didn't create it, but we certainly have to deal with it, and we have to deal with it honestly and straightforwardly, in order to protect the people of New York City," Bloomberg said.
The municipal unions promptly responded saying that the workers did not create the problem and should not be left on their own to resolve it.
The new austerity measures come at a time when the city businesses are feeling the pinch of the job cuts and several restaurants, who generally catered to those coming for neighbouring States to work in the city, are finding going hard.