Budget Woes To Spur Talks On Union Drug Pool;
City Sees Savings; School System To Take $500M Hit

By REUVEN BLAU

With a national recession looming, Mayor Bloomberg Jan. 24 unveiled the city's preliminary $58.5-billion budget, which leans heavily on a continued hiring freeze for non-essential positions and calls for further agency "belt-tightening" to help reduce spending.

Mayor's Office Photo/Spencer Tucker REVENUES NOT GOING THATAWAY: Mayor Bloomberg seems to be gesturing for an upturn in the city's finances, but a continued economic slump that is actually milder in New York than elsewhere has forced him to propose spending cutbacks at virtually every city agency.

"Things are slowing down and that's going to hurt us," the Mayor said before starting his Power-Point presentation in the Blue Room at City Hall.

Few Sacred Cows

The proposed budget includes across-the-board spending cuts to practically every city agency. Those trimmed expenses are expected to generate nearly $1.5 billion this fiscal year to help offset dropping revenues largely tied to the cascading financial markets.

City Hall officials revealed last week that they also plan to begin discussions with the Municipal Labor Committee about creating some type of consolidated prescription-drug purchasing plan, which is expected to generate $200 million in savings this fiscal year.

The Department of Education is facing the steepest downsizing, with $180 million in cuts this fiscal year and $325 million slated for next year. Individual Principals will be instructed to come up with ways to reduce on average more than $100,000 per school in 2008, Schools Chancellor Joel I. Klein told reporters.

The proposed reduction in education aid marks the first time in years that Mayor Bloomberg has sought to decrease funding for city schools, an area he has stridently worked to improve. If implemented, the cuts would likely force Principals to eliminate tutoring programs and after-school courses.

UFT: Protect the Core

United Federation of Teachers President Randi Weingarten urged the Bloomberg administration to maintain financial support. "Even though we are facing uncertain economic times, it is crucial for the city to protect core educational services in our public schools as we try to build upon the momentum of academic improvement we've made in recent years," she said in a statement.

During his 90-minute budget presentation, Mayor Bloomberg noted that his administration has already taken steps to prepare the city for an economic slowdown. Those moves include carrying over $4.6 billion in excess resources at the end of fiscal year 2007, which will be used to help close projected budget gaps in FY 2008, 2009, and 2010.

In addition, since 2006, the city has contributed $2.5 billion to a Retiree Health Benefits Trust Fund to help cover future liabilities.

In October 2007, Director of Management and Budget Mark Page requested that each agency reduce costs by 2.5 percent this fiscal year and 5 percent next year. Every city agency has complied for this year, including the Police Department, Fire Department, Education Department and Sanitation Department.

'Maintain Discipline'

"To stay on course, we have to show the same fiscal discipline that has characterized our administration for the last six years," Mr. Bloomberg said.

The proposed budget also called for an $8-million decrease in library subsidies this year. In the past, library cuts and other proposed social service decreases were later restored by the City Council, which must sign off on the final budget in six months.

Council Speaker Christine C. Quinn called the Mayor's budget "sobering and fiscally responsible." The Council, she added, will review his proposal and will closely watch budget negations in Albany, the national economy and Wall Street revenue projections.

Enhances Buying Power

City negotiators have long sought to take over and merge the 104 city-funded, union-run welfare funds, which individually provide their members with added health benefits like prescription drugs, eye care, and dental coverage.

Any changes would need to be approved by the MLC, which is working to schedule a meeting with the city's Office of Labor Relations.

A universal drug program would greatly increase the city's purchasing power, enabling it to buy costly medications in bulk. Combining the programs would help the city shore up projected out-year gaps of $4.2 billion in 2010, $5.6 billion in 2011, and $5.3 billion in 2012.

"We will be working with the MLC, as we always have, on health insurance issues," said Labor Commissioner James F. Hanley during a Jan. 25 phone interview. "And through that collaborative effort we've been able to achieve a great deal in the past, and we hope to in the future as well."

MLC Willing to Talk

Ms. Weingarten, who as chair of the MLC leads the unions in bargaining on health benefits, said that the labor organizations would be open to working with the city to reduce costs while continuing current benefits.

"We remain willing to explore - particularly in uncertain fiscal times - win/win ways to generate revenue," she said in a statement. "Also, we want our members, the dedicated city workers who are the real stakeholders who have contributed to the value of HIP/GHI for decades, to get a fair share of the proceeds should the HIP/GHI conversion to a for-profit move forward."

Expect IPO Windfall

In November 2006, Group Health Incorporated and the Health Insurance Plan of Greater New York merged, creating the state's largest single health plan. Between them, GHI and HIP provide health coverage to 560,000 employees and retirees - about 93 percent of the total eligible municipal workforce.

HIP/GHI is in the process of converting to a for-profit entity, which is expected to generate hundreds of millions from an initial public offering of its stock. The state had earmarked a large portion of those projected funds to pay for its expanded stem cell research program, but it is unclear if that plan is still in place.

The Bloomberg administration claims that the merger could drive up health costs and has sued to block it. But union officials say that GHI and HIP have such large shares of municipal-employee subscribers precisely because they offer cheaper, more-comprehensive services than their competitors.

Some Silver Linings

A mayoral spokesman said last week that the city was still opposed to the consolidation, but wants a share of the "windfall" from the conversion from non-profit to for-profit should the suit fall through.

"The time has come to look at health insurance in general," a city official asserted, noting that there has not been a specific approach laid out.

The budget news wasn't bad for all the city's unions. The Mayor's plan provides funds to enable the Fire Department to promote additional uniformed officers.

"We certainly welcome additional promotions," said John J. McDonnell, president of the Uniformed Fire Officers Association. "Our assumption is there'll be more Lieutenant promotions, creating a collateral effect for all positions."

He added that the UFOA hoped there would be enough of a personnel increase to expand the FDNY's building inspection plan, which was launched after lapses played a large role in the death of two firefighters at the Deutsche Bank building in lower Manhattan last August.

The preliminary budget also includes money to improve child protective investigations, as a continued response to the exhaustive 18-month probe by the Department of Investigation, which found "serious deficiencies" in how the Administration for Children's Services handled cases that led to 11 child fatalities and one near-fatality.

Last summer DOI recommended that ACS hire 100 more investigative consultants to buttress the agency's staff. The proposed budget also provides money to hire additional School Social Workers and Substance Abuse Counselors.

More DEP Inspectors

The city also plans to hire additional air and noise inspectors employed by the Department of Environmental Protection to help generate more money by 2009.

But the preliminary budget also calls for the reduction of 2,100 summer youth jobs overseen by the Department of Youth and Community Development. The Sanitation Department plans to reduce supplemental basket collections on weekends and will look to make collection routes more cost-efficient.

The Police Department generated savings in this year's budget by officially setting aside $14.1 million earmarked to pay for additional cops this year. That cut will have little practical effect because the NYPD has struggled to attract enough recruits to meet its recently downgraded projected headcount of 36,800 under the low salary rate of $25,100 for officers during their first six months of training.

Mr. Bloomberg once again highlighted the need to increase the starting pay, but stressed that the arbitration panel handling the Patrolmen's Benevolent Association contract dispute must maintain the uniformed pattern. "If that doesn't happen, all bets are off," the Mayor remarked.