Wall St. Gets Drunk, Ask Unions to Detox

There was something incongruous about U.S. Rep. Anthony Weiner Jan. 12 launching a mayoral campaign in which he's trying to position himself as the candidate of the middle class by calling for reduced pension benefits for future city workers and requiring current ones to pay part of their health-benefit costs.

It wasn't an unprecedented move for a mayoral candidate seeking the Democratic nomination. Ruth Messinger tried something similar a dozen years ago when, also adopting positions put forward by the Citizens Budget Commission, she urged the privatization of some residential garbage collection, 10 extra tours a year for cops, and longer workweeks for civilian employees. By doing so, the lifelong progressive put herself to the right of Rudy Giuliani on labor policy.

It was speculated at the time that Ms. Messinger took those positions in the hope of getting the New York Times endorsement. She failed to do so, but she succeeded in giving 35 municipal unions an additional incentive for endorsing Mr. Giuliani's re-election, which he won quite handily.

STICKING PUBLIC WORKERS WITH THE TAB: U.S. Rep. Anthony Weiner (left) last week called for city workers to pay for a portion of their health coverage and for reduced pensions for future workers, but Teamsters Local 237 Greg Floyd (center) and Uniformed Fire Officers Association President John Mc- Donnell said that faulty assumptions about the sources of the city's budget problems and dubious calculations of employee benefits were unfairly skewing the debate on those issues.

Added Traction for Mayor's Plan?

And so that wouldn't seem to be a blueprint Mr. Weiner would want to study too closely if he was serious about winning election. But since Mr. Bloomberg's plan for a reduced pension for future employees has already been put forward by Governor Paterson as part of a statewide proposal, any official who echoes the call gives the idea traction it otherwise wouldn't figure to have among editorial writers, and perhaps the state legislators who will ultimately decide whether it goes anywhere.

So it was not surprising that criticism of Mr. Weiner's remarks at a Citizen Union Forum came from not only Municipal Labor Committee Chairman Harry Nespoli but also Greg Floyd, the president of Teamsters Local 237.

"Some people think they're going to balance the budget on the backs of public-service workers," Mr. Floyd said in a phone interview the day after Mr. Weiner's speech. "It's not going to happen."

What particularly bothers union leaders like Mr. Floyd and Mr. Nespoli is the implication by Mr. Weiner, Mr. Bloomberg and the CBC that the current financial mess is the result of overly generous treatment of city workers.

"The problem with pensions and health benefits was created by the Wall Street wizards who got greedy," Mr. Floyd said.

Mr. Weiner's former boss and political mentor, U.S. Sen. Chuck Schumer, was among the primary Washington officials who supported relaxed regulations governing Wall Street that are at the root of the financial services industry's collapse. The CBC is funded by business interests, and its board includes people whose firms are hip-deep in those questionable practices.

The group's research director acknowledged during an interview last week that it lacked the data to determine whether some of the costs it cited weren't short-term aberrations that resulted from matters that in the Fire Department—where pension costs were far higher than in any other city agency— were as diverse as decades-old underfunding of the retirement system and a spike in disability retirements connected to 9/11 and its aftermath.

Cost Rise Spurred by Rudy's Deal

And the huge overall increase in city pension costs over the past nine years that was cited by the CBC in its report is not the result of cozy alliances between the unions and state legislators. Rather, those costs are almost entirely traceable to changes that were endorsed by then-Mayor Rudy Giuliani in 2000 under a deal with the unions that allowed the city to take $800 million out of the pension system to be used for other spending.

At the time, Wall Street was churning merrily along, and the five city pension systems had grown so flush with profits from their stock investments that nobody figured the diminished city contributions would have any effect on their stability. Then the market went south, forcing the city to increase contributions at the same time that it was paying out more as a result of the improved benefits that unions secured for their members as part of the deal with the Giuliani administration.

Yet nobody—not Mr. Bloomberg, not the CBC, not a Daily News columnist who was an unabashed booster of our former Mayor— has invoked the great Rudy's name in discussing how we got to this juncture and advocating pension "reforms."

"It's a totally fair point—that the city opposed some of these things and the city asked for some of these things," CBC Executive Vice President and Director of Research Chuck Brecher said in a Jan. 14 interview. He said his organization was attempting to determine whether it could isolate data differentiating between pension costs that the city incurred voluntarily and those where the unions persuaded legislators to approve new benefits over various Mayors' objections.

But the lack of such data has not slowed any of the interested parties from implying or asserting that city employees have life too good, and it's time to change that.

Bloomberg's Flawed Comparison

In his State of the City speech Jan. 15, Mr. Bloomberg argued that the 20- year pension offered to uniformed employees was "something even the most-generous private-sector companies don't do," omitting the fact that those companies make up for it by paying employees significantly more than they would earn working in city government with equivalent pressures and responsibilities.

He contended the pension proposal he put forward with the Governor would "save taxpayers $7.4 billion over the next 20 years. Now if you remember, Governor Carey and legislative leaders stepped up and adopted pension reforms during the crisis of the 1970s. This time, it's our turn. Let's fix the problem before it's too late."

Conveniently overlooked in his parallel was that the reduced pension benefits that were imposed during the fiscal crisis, which for most workers are today encompassed in the Tier 4 system, were part of the response to government profligacy that created the problem. The current crisis is the by-product of Wall Street's excesses, and Mr. Bloomberg is basically arguing that the cure for that binge is to place future workers in rehab.

Mr. Floyd has problems with that logic. "We were fiscally responsible with our pension system, and we should not be punished for that," he said. "We've worked for the pensions, we've earned them and protected them. If there are going to be changes, they should not be major, and they should be discussed solely between the Mayor and the unions, along with the Governor."

'Generosity' Didn't Get Them Even

Mr. Bloomberg offered some criticisms of the CBC report when it was issued, even though it helped make his case for reduced pension benefits for future workers, because its denunciation of "generous" recent raises he provided to city workers without exacting productivity concessions gave Mr. Weiner some ammunition to use against him during his speech at the Citizens Union.

But Mr. Floyd noted that the raises he deemed reasonable under his current contract did little to make up for money lost by city workers over the past two decades as the result of previous budget crunches. "Our first contract with Mayor Bloomberg, there wasn't a first-year wage increase—all we got was a bonus," he recalled. "With Giuliani we had a two-year wage freeze, with Dinkins we had an 18-month freeze. Over that time, we've reduced salaries by 15 percent for new hires, and in some cases we reduced benefits."

'Won't Give Up His Own Benefits'

He continued, "I'm not siding with the Mayor, but I'd say he's doing everything possible fiscally to deal with this crisis. We're not looking to mortgage the members' future based on Anthony Weiner's comments. He's someone who enjoys a very generous pension and health benefits, and I didn't hear him saying he would set an example by pushing for Congress to reduce them."

The CBC contends that average compensation for city employees, once fringe benefits are included, is almost $107,000, and that for firefighters of all ranks it is $186,464 and for cops it is $164,045.

Uniformed Fire Officers Association President Jack McDonnell was among those convinced that the numbers were skewed. One union official, who spoke conditioned on anonymity, said that an analysis of compensation for Firefighters alone indicated that their average pay, including overtime, fell somewhere in "the mid-70s," compared to the average of $96,174 the CBC cited for all ranks.

Living Better Than Top Chief?

When the watchdog group's estimate of $90,290 in fringe benefits— $69,884 for pensions alone—for each employee was considered, it produced a figure that totaled "more than the Chief of Department makes" in base salary, Mr. McDonnell noted wryly.

Asked how the CBC might have arrived at that number, he said, "I'm sure they got all the calculations they were fed," implying that city budget officials doctored the numbers for maximum impact. "The information they're receiving is clearly prejudicial relating to the difficulties of the pension system."

Mr. Brecher acknowledged that the CBC's calculation on pension contributions focused on the city's costs rather than on how much of that money actually wound up going to individual firefighters, but said "the available data didn't permit us to" distinguish between the two. He contended, however, that most of what was contributed wound up funding benefits.

'Not a Fair Way to Calculate'

That did not take into account the amount the city has been contributing since the early 1980s to the Fire Pension Fund to make up for previous underfunding that went back to before World War II, one union official said. "To include that in the total pension costs isn't a fair way to [calculate]; it's a stupid way," he argued.

Mr. Brecher said one reason for increases in city pension contributions in recent years was an adjustment to reflect an average longer lifespan among workers. Asked whether that could explain why the city was contributing $19,000 more for firefighters than for cops, he replied, "A substantially greater proportion of firefighters go out on disability than among the cops."

Pressed on whether that was historically the case or was a more recent phenomenon traceable to a single extraordinary event—9/11 and the search for survivors and remains at the World Trade Center site in which more firefighters were involved for a lengthy period than cops—Mr. Brecher admitted, "I don't know."

The data is also affected by the sizable sums the city has had to funnel into the pension systems since 2000— a point when its contributions, the report noted, were "unusually low"—to make up for the stock market investment losses that began shortly after Mr. Giuliani reached the deal with the unions.

Unpaid Balance Skews Picture

Think of it like a credit card balance that expanded significantly because of unexpected spending and an inability to make the full monthly payments at the time they were incurred. Accrued interest would make the balance balloon as long as you had no additional source of money to pay it down, but if you suddenly got a big check for, say, a holiday bonus, you might reduce the debt to zero. If you controlled your spending after that, it would be possible to make the monthly payments in full without undue stress.

In the city's case, the windfall would take the form of the sort of robust pension stock earnings over an extended period that characterized a five-year period in the mid-1980s and a similar one in the late 1990s that led to Mr. Giuliani's pension deal with the unions. While there are certainly questions at this point about the likelihood of that kind of boom period in the near future, the pension calculations appear to discount the possibility completely.

Mr. Nespoli called the CBC report "a blatant attack on the middle class" that selectively focused on a sevenyear period to justify a radical restructuring of the benefits package for city workers.

'A Problem We Didn't Create'

"We should not throw out generations worth of struggle to meet a problem they did not create," he said in a statement a few days before Congressman Weiner proposed precisely that. "When Wall Street profits declined in 2007 but bonuses increased, did CBC say something is wrong? When the banks failed and CEOs walked away with retirement income in the millions, did the CBC say give it back?"

Those arguments brought to mind a scene in that classic meditation on greed and its consequences, "Prizzi's Honor." An attempt to kidnap a larcenous banker almost goes awry when a character played by Kathleen Turner tosses a doll she had been cradling as if it were a baby at the banker's bodyguard and he lets it fall in order to protect his client.

"What kinda creep wouldn't catch a baby?" she asks her husband, played by Jack Nicholson.

"He wasn't paid to bodyguard no baby," he replies.

The CBC isn't paid to advise Wall Street on how to avoid meltdowns. Its report furthers the cause of the Mayor, as well as Mr. Weiner, in making the argument that a defined-benefit pension is not only an anachronism in the world outside city government but an unaffordable one.

A Disparity With L.I.?

The fundamental weakness in that argument is that while a dwindling number of private companies offer such pensions, they are an industry standard in government. Mr. Bloomberg's proposal adopted by the Governor would, among other changes, require future cops and firefighters to work 25 years and be at least 50 to qualify for a full half-pay pension, rather than the current standard of 20 years with no age limit for retirement.

Since that provision does not cover state or municipal employees outside the city, it would seem that enactment of the bill into law would thrust the NYPD into an even deeper hole than it was in before a significant recent increase in salaries for cops of all ranks made their compensation more competitive with the pay and benefit packages offered in neighboring suburbs. How would it compete with the police departments in Nassau and Suffolk, which still pay veteran cops at least $20,000 more than their city counterparts and would suddenly offer far-superior retirement plans?

It doesn't add up. But the unions believe the deck is being stacked against them in the public-opinion battle as well. Mr. McDonnell said Mr. Nespoli told a Jan. 14 MLC gathering that he had fruitlessly asked the city's two tabloids for space for an op-ed piece rebutting the CBC report.

"The New York Post clearly refused," Mr. McDonnell said.

"They felt it was old news," Mr. Nespoli said regarding the Post and Daily News.

When a cop or firefighter is killed, the tabs pour forth editorial tributes to the valor of those forces. They find it a bit harder to get behind their being compensated decently while alive.