BY E.J. McMAHON
Well, that didn’t take long.
Late Thursday, as hailed in this space, Mayor de Blasio finally made a decisive move—or at least seemed to make a move—in the direction of actually saving some money on labor costs by getting tough with a powerful (and powerfully self-entitled) New York City municipal union.
Less than 24 hours later, the hapless mayor returned to form and folded—agreeing to an absolutely awful deal wrapped in a false claim of “labor savings.”
In the process, de Blasio made it clearer than ever that New York City simply cannot be trusted to take control of its tail-spinning finances in the wake of the coronavirus outbreak. Governor Cuomo needs to push for legislative reactivation of the state Financial Control Board, which he chairs, and which should be statutorily empowered to freeze all city wages.
The deal in question involved $900 million in pay raises the city was due to start paying members of the United Federation of Teachers (UFT) in mid-October. This was the final installment of raises unwisely agreed to by de Blasio in 2014 for work performed by teachers all the way back in 2009-10—the trough of the Great Recession, when Michael Bloomberg was mayor (and teachers were still showing up in classrooms).
Citing the pandemic’s damage to New York’s finances, First Deputy Mayor Dean Fuleihan late last week sent a letter to UFT President Michael Mulgrew informing the union that the city was “unable” to make the lump-sum payment.**
“It is the City’s desire to avoid the necessity for layoffs, and to make a retroactive payment at this time would therefore be fiscally irresponsible,” Fuleihan wrote—in what may have been the single most honest description of a labor relations issue to appear under the city’s official letterhead in recent years.
As if on cue, Mulgrew released the letter to the news media and posted a video message promising to seek arbitration of the issue—although, interestingly, the city had not expressly threatened to withhold the lump-sum payment.
On Friday, representatives of the mayor and UFT reportedly spent hours huddled behind closed doors with independent arbitrator Martin Scheinman, perhaps best known for his work on police contract disputes on Long Island.
By nightfall—lightning speed, by the standards of New York City government—de Blasio’s press office had issued a release announcing a settlement with the teachers’ union, headlined “Mayor de Blasio Announces $450 million in Labor Savings.”
In reality, the deal doesn’t ultimately “save” a penny; rather, it defers half the lump sum payment due this month into the beginning of fiscal 2022, next July, rolling even further into the future an operating expense obligation relating to teaching work performed more than a decade ago.
In exchange for $450 million in temporary cash flow savings, de Blasio also handed the UFT the invaluable gift of a no-layoff pledge through June 30, 2021, according to the mayor’s release, which adds: “If the City receives State and Federal assistance of $5 billion or more, the no-layoff pledge is extended to June 30, 2022″—which would be six months after the term-limited de Blasio leaves office. Temporary relief aid on that scale—no doubt targeted to prop up teacher unions across the country—could be forthcoming from Washington if the union-backed Joe Biden is elected president and Democrats capture control of both houses of Congress.
The Post reported that, as part of the arbitration deal, the de Blasio administration also reassured the union that a scheduled 3 percent base pay hike for UFT members will go forward as scheduled next May. Applied to the current UFT workforce, this will cost $287 million over a full year. Incremental longevity step increases for teachers will boost the total pay hike by another $119 million a year. All this with the city’s recovery from the pandemic disruption very much in doubt, with teachers seeking to minimize their physical presence in classrooms, and with de Blasio pleading poverty and threatening layoffs—a threat that will now be focused on other, lesser-paid city employees.
When de Blasio first signaled reluctance to go ahead with the UFT’s lump-sum retro raises, I praised him in this space, writing that “other school districts and local governments should be inspired by New York City’s example.”
Based on the UFT deal announced late Friday, it would now be more accurate to say that other local government officials around New York should view de Blasio’s approach as an example of what not to do.
** By the way, what took them so long? It’s been apparent since May, at the latest, that the city could not afford this payment. Yet the mayor never gave any hint of concern with the city’s ability to pay it until it came within a week of coming due.
UPDATE: Nicole Gelinas lays into the accounting trick at the heart of the UFT deal in today’s Post. She notes the city is supposed to balance its annual budget according to Generally Accepted Accounting Principles (GAAP)—and as normally interpreted, GAAP would prohibit the rollover of a current obligation into future years. Nonetheless, de Blasio’s 2014 deal with UFT allowed the retro raises for 2009-10 to stretched out between 2015 and 2020.
The city got around this with a strange insistence that the bonuses weren’t back pay; they were, um, “lump-sum payments stemming from the 2009-2011 [bargaining] round.”
Now, the city is broke, bleeding at least $10 billion in revenue — and, as Hizzoner’s deputy wrote in a letter to the union last Thursday, making this last payment would be “fiscally irresponsible.”
The teachers weren’t in the mood to compromise. “We’re in for another fight,” UFT chief Michael Mulgrew vowed.
Mulgrew, in a fit of temper, destroyed the illusion. He said what the city and the union have refused to acknowledge for six years. He reminded his members that “those payments are overdue wages that go back to 2009 and 2010.”
In other words, clearing up any remaining doubt about what actually happened here, Mulgrew made it clear the lump sum payments violated the balanced-budget requirement.
E.J. McMahon is a senior fellow at the Empire Center for Public Policy.