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http://www.manhattan-institute.org/html/cr_23.htm

"Ostensibly armed with a new fiscal philosophy, Giuliani moved quickly to shrink the city payroll through a program of targeted severance. During his first 18 months in office, Giuliani eliminated 14,000 full-time jobs from the payroll. This reduction made it possible to deliver a fiscal 1995 budget that reduced spending by $194 million, or about 1 percent in nominal terms. His next two budgets continued to reduce spending. But it was not to last.

Temporarily tamed in the mid-1990s, city government once again is growing beyond New York’s ability to afford it. More than $2 billion in surplus funds will be needed to balance the 2002 budget. By the first year of Mayor Bloomberg’s tenure, if Giuliani’s own projections hold, the gap between expenditures and revenues will be wider than it has been for nearly a decade."

So they did have a surplus - I thought you were referring to an operating surplus - but at the end of rudy's reign they were spending money so fast that it was eating into it whatever suprlus funds they had.