June 16, 2014
By Neal Tepel
New York, NY – The recent labor agreement between New York City and the United Federation of Teachers (UFT) removes the largest uncertainty that had been facing the city's budgetary outlook. But the city still faces challenges, including reaching labor agreements with the other municipal unions, obtaining anticipated health insurance savings and closing future budget gaps.
In early May, the city announced that it had reached a nine-year labor agreement with the United Federation of Teachers, which represents 37 percent of the city’s workforce. The city, which has a long history of pattern bargaining, assumes these terms will set the wage pattern for all municipal labor organizations. However, the unions representing the police officers are seeking larger wage increases than those offered to other unions by the city, and has begun the process that could lead to binding arbitration.
The city assumes that new labor agreements will cost $13.6 billion during the financial plan period. These costs will be partially offset by city labor contract reserve funds of $3.5 billion. In addition, $4.4 billion in new resources are expected to become available through health insurance savings, which will be built into the overall union agreement negotiated with the Municipal Labor Committee.
To the mayor's credit he has been fiscally responsible and conservative. While revenues collected are much stronger in the current fiscal year than the city had expected, the administration is continuing a policy of fiscal constraints. The Mayor has increased the city's reserves by rescinding plans from the prior administration to transfer $1 billion from the Retiree Health Benefits Trust into the operating budget. He has also doubled the general reserve to $600 million. Fortunately for the Mayor, real estate values and sales are increasing faster than expected.
The city's financial plan forecasts a surplus of $1.6 billion in FY 2014, which will be used to help balance the $73.9 billion FY 2015 budget, and out-year budget gaps of $2.6 billion in FY 2016, $1.9 billion in FY 2017
and $3.1 billion in FY 2018.
“The agreement between the Mayor and the United Federation of Teachers lifts a cloud that has hung over the city’s finances for years,” Said Comptroller Tom DiNapoli.