N.Y.C. vs. N.Y.S., the Pension Battle
Mayor Michael Bloomberg wants New York City to take control of its own business back from Albany, especially pension costs.
The city negotiates wages and health benefits directly with its employees’ unions. But since the 1970s fiscal crisis — when Albany took over the city’s finances — the State Legislature and the governor have dealt with the city’s pension benefits. The way it usually works, the mayor negotiates a pension deal, which state lawmakers approve and then later “sweeten” for their friends in the unions.
Albany is notoriously compliant when it comes to demands from the powerful unions that represent the state’s public employees, which is one of the reasons the state is in such deep fiscal trouble. Legislators have been even more generous to city employees because the city, not the state, pays for their generosity.
Unless New York City gets relief, the spiraling pension burden will cripple the city’s finances for years to come. The city’s contributions to the pension fund — for 293,000 employees and about 235,000 retirees — have risen from $1.5 billion in 2001 to an estimated $8.4 billion next year. Payouts to retirees have nearly doubled from $6.6 billion in 2002 to more than $11 billion this year.
Those breathtaking numbers have several drivers, including Mr. Bloomberg’s own willingness to repeatedly raise city workers’ salaries, especially for teachers, which raises pension costs. The recession also pushed down pension fund earnings, requiring an increase in city contributions. And retirees are living longer.
But city officials estimate that from 1996 to 2009, the Legislature has added $1.7 billion to the city’s annual pension benefits. The costs would be even higher if governors had not vetoed hundreds of other sweeteners.
If Mayor Bloomberg wrestles back control from Albany, the immediate savings for the city’s budget would be relatively small. Under the state’s Constitution, previously approved pension deals cannot be renegotiated.
But with control, Mr. Bloomberg could immediately — without negotiations — cancel year-end bonuses for new retirees at a savings of $200 million in this next fiscal year. He also wants to negotiate new pension tiers for newly hired workers. The mayor’s budget experts estimate their proposal could save $1 billion over the next eight years in pension costs.
The list of Albany’s pension “sweeteners” — and the shabby political deal-making behind them — is long and well documented. In 2000, an election year, the Legislature agreed to annual cost-of-living increases for retirees that currently mean an additional $696 million annual payout. A second law that same year cost $406 million annually. It allowed nonuniformed city workers and teachers to stop contributing to their pensions after the first 10 years of employment. That law also allowed many police officers and firefighters to calculate their pensions based on their final year’s earnings — including sudden, last-minute bursts of overtime — instead of the average of their earnings in their final three years. The law also forced the city to double its share of extra pension contributions for the uniforms from 2.5 percent to 5 percent.
Then there are the “heart bills,” which automatically presume that a serious illness is caused by the job. With disability benefits, a city worker can often retire with 75 percent of pay instead of about 50 percent, a costly difference.
For all of his tough talk, Mr. Bloomberg’s own record on pensions has not always been stellar. In 2009, when Albany introduced a less generous pension plan for new state employees, the mayor, who was running for re-election, did not push hard to get the city’s new workers included. Now safely in his third and last term, Mr. Bloomberg sounds serious. His new tiers for new employees would be tougher than the state’s 2009 pension plan.
He has proposed allowing new teachers and nonuniformed employees to be vested after 10 years instead of the current five. And they would have to wait until after age 65 to receive benefits, not the current 55 to 57. (The state puts retirement at 62 in most cases.) Overtime would not count toward the final salary calculation the way it often does now, and pensions would be based on an average of the last three years of salary, with overtime no longer included.
The mayor is also calling for a similarly tough new tier for new uniformed employees — police, fire and sanitation workers. And he wants to end the “heart bills” and cancel those year-end bonuses — currently worth up to $12,000 — for new retirees.
These are undeniably stricter terms. But given the current fiscal crisis, and the spiraling pension burden, they seem sensible and fair.
Gov. Andrew Cuomo has argued for less costly pension terms for new workers, but he has not said anything about returning control to the city. He should push the Legislature to do what Mayor Bloomberg is asking. This would not cost the state an extra dime. And it would put the political responsibility of negotiating with the city’s workers where it belongs: back in New York City.
Egypt’s Unfinished Revolution
While everyone is focusing on the war in Libya, the revolution is still playing out in Egypt — a vital fact that its neighbors and other nations should not forget. The mostly peaceful protests that overthrew President Hosni Mubarak six weeks ago were just the first phase in a transition to what, we hope, will be a democratic future.
Egypt is the most important Arab country and the touchstone for change in the Arab world. Egyptians are going to have to exert maximum commitment — over decades — to get this right. The chances of success are greatly improved if the United States and other major democratic nations stand by ready to help.
On Saturday, Egypt held its first free and fair election. Millions voted and overwhelmingly approved nine constitutional amendments to set the stage for parliamentary and presidential elections that are expected later this year.
The amendments begin to jettison a cruel and repressive system. They limit how long a president can serve (two four-year terms), make it easier for candidates to get on the ballot and restrict a president’s ability to impose a state of emergency. Still, the process was flawed. The amendments were drafted by a panel appointed by the secretive ruling military council and rushed to a vote. They do not go nearly far enough and were not adequately publicized. A full rewrite of the Constitution will have to come later.
We share the unease of young protesters who made the revolution happen and worry their demand for democracy could be hijacked by the highly organized groups who campaigned hardest for the amendments: allies of the old regime and the Muslim Brotherhood.
The military government on Wednesday took another step toward civilian governance by easing rules on forming political parties. But it also laid plans to outlaw demonstrations. The draconian, decades-old state of emergency must be lifted and with it curbs on freedom of speech and assembly. It would be much better if protesters and civil society groups were involved in these decisions, including setting dates for elections.
Egyptians are justly proud of what they accomplished and wary of outsiders, especially the United States, which long backed the old regime. But they need to quickly make political reforms. If they resist American help, there are plenty of newly democratic countries that can advise on political parties and rule of law.
Where the United States and Europe can bring crucial assets to bear is with economic reform. Egypt’s state-run economy — where the military has a huge stake — has failed to create jobs for millions of young Egyptians. A recently announced multimillion-dollar American economic aid package is a good start. The Obama administration also promised to sustain its longstanding aid to Egypt, which runs about $1.5 billion a year, mostly for the military.
But more is needed. The West should pursue bilateral and regional trade agreements with Egypt (this would be a good time for Israel to reach out). Congress needs to expedite approval for an American-Egyptian fund proposed by the Obama administration, Senator John Kerry and others. Modeled after similar funds for post-Communist Eastern Europe, it aims to stimulate desperately needed private-sector investment. The total cost is unclear, but the money initially would be reprogrammed from already approved accounts.
This is a moment of great promise — and great risk — in the Arab world. Success is not assured. Washington and its allies must work creatively and urgently to help Egyptians build their democracy to make it a durable anchor of stability and tolerance in the Middle East.
Let Them Eat Cutbacks
Food stamps are part of the social safety net, but they work more as the ultimate ground-level crutch for Americans staggering against poverty. During the recession, food stamps were an important factor in helping an estimated 4.5 million Americans stave off the official poverty (no more than $21,756 annually for a family of four) that engulfed nearly 16 percent of the nation. The stamps are win-win: $9 in fast economic stimulus for every $5 spent on food for a hungry family.
Sad wonder, then, that cuts in food stamps are the latest proposal heading for the House Republicans’ budgetary chopping block. An attempt to set them back at the levels of 2007 — and cost a family of four $59 out of their $294 monthly allotment — is part of welfare “reform” legislation being proposed by leaders of the powerful Republican Study Committee. This group, embraced by two-thirds of the House majority, is the conservative engine driving much of the deficit-slashing mania to extremes.
Even last year, when the Democrats controlled the House, the political vulnerability of food stamps was clear as sleazy budget deals were attempted to tap the program to protect farm subsidies and other power blocks. Now the threat is worse as Republicans wildly estimate that they could save $1.4 trillion across a decade in cutting the full array of welfare programs — yet still help down-and-out families.
Vicious politics is already in the mix, including a surly provision to deny food stamps to any family that includes a worker on strike.
Surely hard times should find public servants protecting the neediest first, not targeting them for crumbs from a program more vital to society than another tired round of antiwelfare politicking.
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