Unions Dismiss Mayor’s Warning of Rising Benefit Costs as ‘Misdirection’

Chief Leader - December 24, 2013

by RICHARD STEIER

Union leaders sharply disputed Mayor Bloomberg’s Dec. 18 claim that rising pension costs represented “one of the threats that is facing struggling cities,” countering that his assaults on such benefits were both unfounded and a growing threat to struggling workers.

Uniformed Fire Officers Association President Alexander Hagan took particular exception to the Mayor’s argument, during a speech to the Economic Club of New York at a midtown hotel, that “even if struggling cities escape bankruptcy, the funds that are spent on pensions cannot be spent on the future.” Earlier in the speech, Mr. Bloomberg stated, “Our children’s future should never be sacrificed for our own benefit.”

‘Ebenezer Bloomberg’ Mr. Hagan, who was among the police and fire union leaders who blocked the Mayor’s attempt two years ago to eliminate the Variable Supplements Fund benefit for their retired members, countered, “Only because of the retirement benefits the unions were able to get legislators to approve do our children not have to worry about supporting us in our old age. In a land ruled by Ebenezer Bloomberg, the parents would be a real burden on the children.”

Uniformed Sanitationmen’s Association President Harry Nespoli, speaking in his capacity as chairman of the Municipal Labor Committee, said of the Mayor, “Does he really believe there is something wrong with a city employee having adequate health care and a reasonable pension after 25-30 years of serving the public?”

Mr. Bloomberg had cited the impact pension costs have had on Detroit—where a Federal Judge recently ruled that in the wake of a bankruptcy filing, city retirees’ pensions were not entitled to different treatment than the claims of other creditors—as well as in Chicago and several financially-strapped California cities where payments have become a major issue.

On the one hand, he told his audience, “New York City has never been stronger than it is today, and I think it’s fair to say that our future has never been brighter.” But, he added, “When city governments fail to look ahead, cities fail.” And if there is trouble waiting around the bend, he continued, it is in the form of rising health-care and pension costs for public workers.

A Perfect Pension Storm

Over the course of his administration, he said, pension costs have risen from $1.5 billion a year to $8.2 billion at a time when the rate of inflation has been only 35 percent. He did not mention that at the time he took office in 2002, the city’s pension contributions were at an unusually low level because a booming stock market late in the previous decade had left the five funds with large surpluses, and that the financial crash of 2008 accounted for the steady rise in contributions since, until improved investment returns over the past couple of years leveled them off.

The Mayor noted that while his administration’s affordable-housing program is larger than in any other city in the nation, the city is spending far more money on pension costs than on housing. Speaking of the increase in contributions over the past 12 years, he said, “Unless something is done, that $7 billion will continue to grow and continue to harm our ability to do other things in the future.”

Some help was provided, he said, when then-Gov. David Paterson in 2009 vetoed a bill that would have continued to give Tier 2 pension benefits to new cops and firefighters at a time when all other city workers were covered by the less-generous Tier 4 of the retirement system, and by Governor Cuomo’s pushing through an even-more-stringent Tier 6 for all new city and state workers last year.

‘Only Slowed the Growth’

But that, he went on, “only slows future growth” in costs, rather than stemming it. He claimed that the city was paying out more in pensions to uniformed retirees than it was in salaries to active members of those services. He also lamented that he had “very little success” in convincing the unions to agree to changes he said were urgently needed.

Union leaders responded that he had no one to blame but himself for those stalled negotiations, which they say are a consequence of his having interrupted contract bargaining in mid-round five years ago and then refusing to consider any pay raises that weren’t offset by concessions.

“He doesn’t know how to negotiate,” said Communications Workers of America Local 1180 President Arthur Cheliotes, the senior municipal union leader in tenure. “All he knows how to do is dictate. And ‘my way or the highway’ doesn’t work in collective bargaining.”

Similar sentiments were expressed by Doctors Council President Barry Liebowitz, who is retiring next week after more than 33 years in office. “If somebody would talk to us and we would be shown some respect, things could be worked out,” he said. “There has been a dissonance between our government and the unions—there is no more dialogue.”

‘Obscuring His Blunders’

Mr. Hagan questioned whether the Mayor had really been interested in working out a deal to control health-benefit costs or addressing the pension situation honestly. “Like any good magician,” he said, “the Mayor is using the art of misdirection to confuse his audience. He’s used pension costs to obscure the overruns on things like his failed [911] system and his CityTime debacle,” referring to the payroll-timekeeping system from which consultants stole more than $600 million through fraudulent billings. An audit by City Comptroller John C. Liu spurred a criminal investigation that led to convictions and prompted the firm overseeing the project to make $500 million in restitution.