With a $2 billion surplus this year, Mayor Rudolph Giuliani has announced he will use part of the windfall to pay off some of the city's long-term debt.

But the city's Independent Budget Office (IBO)--which Giuliani is fighting to kill--says the mayor's well-publicized plans are based on faulty and fudged statistics.

In its most recent report on the city's arcane budget process, IBO says the mayor has underestimated the size of the city's revenue forecast by over a half-billion dollars in 1999 alone. Agency officials also say the mayor has downplayed the amount of taxes city residents pay. IBO's analysts accuse the mayor of creating a "skewed and incomplete picture of the allocation of resources" by removing two key items in the budget to make the city's tax rates look smaller and the government's debt burden appear less menacing.

"It distorts how we're spending our money and downplays the significance of the debt service," said Ronnie Lowenstein, chief economist and deputy director of the Economic Analysis Division. "Can he do this? Yes. Is it good government? No."

IBO also claims the mayor has miscalculated the future cost of public assistance based on his belief that he can continue to cut case rolls. The agency thinks the city can't expect to cut caseloads much longer. They predict welfare costs will rise $141 million above the mayor's estimate for 2001.

Calls to the mayor's press office were not returned. For a copy of the report call 212-442-8619.