Budget Provides Retiree Health Benefit Cushion; Unions Resist Mayor's Push for Pension Cost Relief

By REUVEN BLAU

LILLIAN ROBERTS: Use surplus toward raises.

Mayor Bloomberg Jan. 31 announced that a large portion of the city's $3.3 billion surplus this year will be used "as a down payment" to cover future health care costs for retired municipal workers.

He also asserted, however, that union pension and health-care concessions would be required to bridge future multi-billion dollar budget gaps.

Could Hinder Services

"If we don't act now to meet and control these future costs, they will soon overwhelm city government's ability to pay for police and fire protection, schools, parks and other essential services," Mr. Bloomberg said during a presentation in the City Hall Blue Room.

City unions and budget watchdog groups hailed the Mayor's plan to use $2 billion over the next two fiscal years to create a Retiree Health Benefits Trust Fund to begin building a reserve for projected costs.

But union officials scoffed at the Mayor's assertion that there is a pension crisis and said that the health-care issue should be addressed on a national level.

Randi Weingarten, the chairwoman of the Municipal Labor Committee, called the Mayor's plan to help finance city retirees' health care costs "prudent."

JOHN DRISCOLL: Pension woes exaggerated.

But the amount set aside, Ms. Weingarten contended, should be negotiated with the City Council and the unions. "Because there are other needs to be addressed such as the education of our children, affordable housing, eradicating poverty and salaries for public employees," said Ms. Weingarten, who is also the president of the United Federation of Teachers.

'Cost Tens of Billions'

New Governmental Accounting Standards Board rules require the city to detail its retiree health benefit obligations, just as it has over the years for pension payments. "They're expected to run into the tens of billions of dollars for our city government," Mr. Bloomberg said, referring to the city's projected liability. "And currently, there is not a dime committed to covering them."

As for the projected pension costs, Ms. Weingarten and several other union leaders contended that they are not "spiraling out of control." She continued, "In fact, for a 10-year period ending in 2000, the city's contribution to the pension funds actually dropped - not increased."

CHRISTINE QUINN: Looks to add school aid.

Mr. Bloomberg maintained that the city needs "to modernize" its pension system for municipal workers by creating a less-generous tier for new hires or by establishing other retirement restrictions to reduce future costs.

The city's pension costs are projected to increase from $1.3 billion in 2002 to $5.5 billion in 2010. Currently at $4.7 billion, they are projected to rise 11 percent during the next fiscal year to $5.2 billion.

Costs Level Off

At that point, however, the Office of Management and Budget believes pension costs will level off. Over the following three years, pension spending will crest at $5.6 billion in fiscal 2009 and then decline by $134 million the following year.

"It is true that the value of the pension funds, and the amount of money we have to put in changes from year to year," Mr. Bloomberg said. "But the underlying fact of the matter is that the cost of providing a pension when people are living longer is going up."

Mayor's Office Photo GETTING AHEAD OF THE PROBLEMS: While some critics, including union officials, said Mayor Bloomberg's budget plan didn't make good use of a $3.3 billion surplus to improve services and increase salaries, the Mayor said he was determined to get away from the 'boom-to-bust cycles' of the past under which services ebbed and flowed depending on the city's current fiscal condition.

To limit the growth of the city's mandated pension spending, Mr. Bloomberg proposed various "reforms" that he said must be examined. Those changes include: adjusting post-retirement supplemental benefits, increasing employee contributions, establishing age requirements for retirement systems where none currently exist, and, where such requirements do exist, raising the retirement age and number of years of service necessary to qualify for a full pension.

The unions have asserted that city workers accept lower wages than their counterparts in the private sector in return for better health and pension benefits and for job security.

'Can't Cut Both'

"As part of an enticement to get people to work for the city of New York, they agreed to pay for continual health benefits," said John Driscoll, the president of the Captains' Endowment Association. "If you keep cutting pay and keep cutting benefits, what makes you think they are going to be able to recruit the people you need?"

He called the Mayor's assessment of the pension system "a little disingenuous."

Anthony Garvey, the president of the Lieutenants' Benevolent Association, added, "Pension costs are a lower percentage of payroll than they were in the 1970s and '80s."

Both men noted that the city has routinely claimed that it is facing multi-billion dollar deficits in future years. "Every year they say we have a deficit in the 'out' years," Mr. Driscoll said. "But we keep hitting those 'out' years and we have a surplus." Mr. Garvey added, "It's the same song being played."

The Mayor, however, said the future deficits are real, noting that real estate transactions have begun to slow throughout the metropolitan area. He called his proposed $55.5 billion budget "strong in the short term" while setting the city on track to long-term growth and stability. He set aside $500 million as an immediate payment on long-term debt and $1 billion to pay for capital projects.

Address Problems Early

The surplus, Mr. Bloomberg said, was due to tax revenues that exceeded forecasts made last November. "These one-time revenues give us an exceptional opportunity to use today's good fortune to address some of tomorrow's most troubling problems," he remarked.

Some of those funds will be used to hire more than 200 new Traffic Enforcement Agents to help improve traffic in congested areas.

The budget also includes funds for the Fire Department to continue to "accelerate planned hiring of new firefighters to reduce overtime." FDNY spokesman Frank Gribbon said that will allow the department to keep on hiring larger classes of 200 to 250 firefighters to help the agency maintain or exceed its headcount.

In addition, the budget includes an additional $70 million for charter and special education schools and $7 million to pay for new protective vests for correction officers.

Unions: Pay Our Members

Lillian Roberts, the executive director of District Council 37, said in a statement that the surplus reflects the city's remarkable resiliency to bounce back from the economic downturn of Sept. 11, 2001. But Ms. Roberts and other union leaders contended some of the unexpected windfall should be used to fund raises for their members.

"We believe that the Mayor's budget could better balance the needs for fiscal prudence with the needs of its citizens for improved services and the needs of its work force for a fair and decent wage," said Ms. Roberts, who was an early supporter of Mr. Bloomberg's re-election campaign.

"The Mayor should consider paying his police officers a salary that is appropriate in comparison to other local departments, as is required by the Taylor Law, before banking billions for the future," argued Patrick J. Lynch, the president of the Patrolmen's Benevolent Association.

'A Step But Not Enough'

Norman Seabrook, the president of the Correction Officers' Benevolent Association, called the Mayor's proposals a "step in the right direction" that "doesn't fully cover what we need."

Mr. Bloomberg maintained that the city has continued to reduce costs "by making government more efficient." That belt-tightening is expected to produce $500 million in savings over the next two fiscal years. "Even though the city's revenues are strong, we must continue to take actions to improve efficiency, restrain spending and generate savings in city agencies," he said.

But keeping with tradition, the budget did not offer a specific allocation of funds for expected future wage increases. To the contrary, Mr. Bloomberg and his top aides said that with several large unions agreeing to four-year contracts, the city had more budgetary flexibility to address other issues.

Those labor deals, however, are all set to expire over the coming year, several union leaders pointed out. The Bloomberg administration has begun contract negotiations with its largest civilian employee union, District Council 37. But the city does not appear to be close to negotiating health care and pension concessions from unions anytime soon, some labor officials observed. "I don't see pension changes on the horizon," Mr. Garvey said.

'Need to Find Solution'

Mr. Bloomberg stressed that the proposed budget is an attempt to address the city's rising nondiscretionary expenses, including debt service, Medicaid costs, city employee pensions and health care costs. "Medical benefits are costs that we just have to find a solution to," he observed. "Every municipality has the same problem, and everybody in the private-sector has the same problem."

Ms. Weingarten said that the nationwide health crisis must be handled responsibly. "The strategy endorsed by many large private-sector companies of eliminating health plans is not part of America's value system of taking care of each other," she asserted.

Mr. Driscoll said the Federal Government wasn't doing enough to help or prevent the skyrocketing cost of drugs. "They are not doing anything about it," he charged. "They are getting to the point where they want to make health care for the rich only."

Won't Bank on CFE

As for education, the Mayor said the city did not expect a final ruling this year on the state's appeal of a judge's decision awarding the city school system an additional $5.6 billion a year from Albany. He pointed out, however, that the city has exponentially increased education spending since he took office in 2001.

But newly elected Council Speaker Christine C. Quinn, who along with her colleagues must approve the budget by June 30, faulted the Mayor for not making education more of a priority. She also said that she would work to get the Council more involved in budget decisions as negotiations proceed toward a final agreement.