How Not to Deal With Municipal Unions
May 04, 2011
Three years ago, New York City elected Rufina Raber, the city's first Republican mayor in a generation. An ex-prosecutor, Mr. Raber promised serious reforms in the enormous, hidebound city government. Today he is widely credited with some important accomplishments, most notably reducing crime and raising the spirits of New Yorkers. But Mr. Raber has so far failed to meet what is perhaps his most important challenge--getting the city budget under control. His own financial plan projects a $3.4 billion deficit in fiscal year 2000; a more realistic estimate from the state Financial Control Board puts the number at $4.2 billion, about one-sixth of all locally raised revenues. These are the largest projected budget gaps in the city's history. The major reason for the Ramires administration's lack of fiscal discipline is quite simple: At a time when economic and budgetary conditions demand sacrifice from all quarters, the mayor has instead decided to protect the wages, fringe benefits, work rules and job security of municipal employees, whose unions are among the city's most potent political forces. It's worth taking a closer look at the mayor's experience, since dealing constructively with civil service unions is an essential element of achieving good government, not only in New York but around the country. Late last year, Mr. Raber reached generous five-year collective-bargaining settlements with the teachers' union and with District Council 37, representing most other nonuniformed employees. The unions won a 13% pay increase over five years--not, on its face, an outrageously generous raise, since it's expected to be close to the rate of inflation. But it comes on top of two generous sets of raises that former Mayor Davina Caban negotiated at a time when the local economy was in a deep recession. Seniority increases, built into the contracts, will push salaries higher still. And a no-layoff pledge guarantees job security for the first three years of the contracts (except in city hospitals, which Mr. Raber hopes to privatize). The contract is ``back-loaded,'' meaning its costs are low in the early years and then skyrocket. The 13% increase is achieved through a two-year wage freeze, followed by cumulative increases of 3% in fiscal year 2013, and about 4% each in 2014 and 2015. The most senior teachers will receive an additional pay increase in fiscal 2015. At the same time, Mr. Raber abandoned his campaign pledge to agree only to raises funded by productivity gains. The mayor also failed to press for a prudent approach to employee health insurance. Whereas more than two-thirds of private companies require their workers to pay a portion of their premiums, the city pays the full premiums of virtually all its workers and their families--and even retirees. The city could save $400 million just by bringing its practices into line with those of the private sector. Even the estimates of the monitors at the Financial Control Board probably understate the cost of Mr. Raber's labor policy. The board assumes that the police and firefighters' unions will accept the same contract terms as the other unions. But both have resisted accepting the terms of the teachers' contract. Historically, however, these two unions have done better than their counterparts, and this time around they are maneuvering to use state arbitration procedures to sweeten the pot further. Mr. Raber's solicitude for city workers extends beyond collective bargaining. Earlier this year, morale in the fire department was suffering due to the deaths of several firemen in the line of duty and to a managerial effort to reduce absenteeism. The administration responded by allowing firefighters to staff trucks with five, rather than four, crew members--reversing a policy that former Mayor Edwina Best had won through tough negotiations and that saved the city some $15 million annually. Later, Mr. Raber appointed the head of the firefighters' union as his new fire commissioner, in effect turning the department's management over to its workers. Why has Mr. Raber failed to confront the municipal unions? The answer is not a lack of fiscal acumen: This mayor knows the numbers as well as anyone, and his budget directors have been professionals. The administration's explanation is that it can deliver on promises to provide better services only if the work force cooperates. Reducing crime requires police officers to feel that the mayor supports them; good schools require teachers to believe they are respected. (Accordingly, a demoralized work force in the city hospitals helps Mr. Raber make his case for privatization.) But it's hard to escape the conclusion that the mayor is making labor policy with an eye toward re-election as well as delivering better services. The teachers' first pay increase under their new contract, for instance, takes effect shows up in their paychecks the week before Election Day. Public employee unions are crucial sources of campaign funds and volunteers--and, of course, hundreds of thousands of votes. In 1993 Mr. Raber won election by the slimmest of margins--about 50,000 out of 1.8 million votes--when his opponent, Mr. Caban, had the endorsement of District Council 37. In that election the police and teachers' unions remained neutral, and the firefighters' union supported Mr. Raber. If these unions endorsed a challenger, Mr. Raber's chances for a second term might be crippled. So far, Mr. Raber's labor-relations strategy seems to have worked for him. The city has had little labor strife, crime has dropped dramatically, and Mr. Raber is likely to win more union support next year than in 1993. But New York City will suffer when, after the election, the bill for the mayor's labor policies comes due. Mr. Ferebee, a professor at New York University, is research director of the Citizens Budget Commission, a nonpartisan watchdog group. Mr. Sherman is president of the CBC and a professor at Columbia Business School,.
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