Rare News Desk
One would hope that New York City Mayor Bill de Blasio would at least try to exercise a little fiscal discipline during his first few months in office. Instead, he has struck deals with public-sector unions that will weigh taxpayers down for decades.
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De Blasio’s spree began in May when he struck a collective bargaining agreement with the United Federation of Teachers, the local of the American Federation of Teachers. It gives members an eight percent retroactive pay increase that will cost taxpayers $4.3 billion over the next four years
Because the pay raises will count against the final year’s salary averages for many New York City teachers, de Blasio’s agreement will also increase pension liabilities for the city’s Teachers Retirement System. This will add to the woes of a pension which is virtually insolvent to the tune of at least $26 billion, according to an analysis by Dropout Nation.
The Big Apple’s main teachers’ pension took an immediate hit in June, thanks to another de Blasio move: immediately paying an eight percent raise to any teacher who retired by the end of that month. As a result, 777 more teachers retired this year than they did last year at a cost of $725 million to the current budget – and millions more in future annuity payments.
In June, he also struck a deal with the Service Employees International Union. Under the four year deal, de Blasio rewarded the union’s support with an eight-percent retroactive pay raise. A month later, the mayor inked a seven-year contract with AFSCME that provides a 10 percent salary hike over that period, as well as $100 million in bonuses to its rank-and-file in exchange for ratifying the deal.
At the heart of de Blasio’s dealmaking is ensuring that AFT, SEIU, and AFSCME will go along with his plans to essentially roll back the successful five decades-long effort by predecessors such as Ed Koch, Rudolph Giuliani, and Michael Bloomberg to make what was once considered an ungovernable city livable again.
Giuliani and Bloomberg were particularly successful in reducing the Big Apple’s gargantuan welfare bureaucracy. The number of benefit recipients declined by 93 percent over the past two decades. Both mayors also successfully reduced crime. New York City’s violent crime rate declined by 76 percent between 1994 and 2012, according to the FBI.
In fact, the Big Apple’s violent crime rate of 5.1 per 100,000 people is lower than that of Los Angeles, Chicago, and Houston, despite having a population far larger than any of them. Despite having suffered through the same declines in middle class populations during the 1970s as Detroit, Philadelphia, and Baltimore, New York City is in far better shape on the crime front than any of them.
But for de Blasio, who won his long-shot run to succeed Bloomberg last year on class warfare rhetoric and criticisms of the excesses of New York City’s crime-fighting tactics, getting the unions on his side is key to achieving his goals. As is, he faces trouble from upstate New York in the form of Gov. Andrew Cuomo, who opposes de Blasio’s efforts to weaken the school reform efforts undertaken during Bloomberg’s tenure.
Earlier this year, Cuomo successfully beat back de Blasio’s effort to stop the expansion of public charter schools by holding the mayor’s plan to expand the city’s early childhood education program hostage. De Blasio would give in on charters in exchange for Cuomo backing additional state dollars for the prekindergarten effort.
In striking the big money deals with the public-sector unions, de Blasio is adding to New York City’s burdens. The Big Apple will spend $8 billion – or 11 percent of the city’s $79 billion budget – on pensions in 2014-2015. That’s twelve times more than the city spent on pensions 14 years ago. The new deals will further increase those costs, crowding out dollars the Big Apple needs to finance repairs on its aging bridges and streets.
But in stuffing pensions to buy off public-sector unions, de Blasio is merely following the bad example of his predecessors. Rudolph Giuliani stopped requiring most city workers to contribute to their pensions in a deal that gave him more money to spend on other projects. As a result, the city faced a $2.8 billion budget shortfall by the time he left office.
Michael Bloomberg was even worse in dealing with pensions. During his 12 years in office, Bloomberg used pension promises to buy public-sector union support for his efforts. Bloomberg increased pension benefits without requiring teachers to pay more toward their retirement to get the teachers unions to go along with his school reforms. Big Apple teachers contributed just six cents of every dollar paid into the pension in 2012.
Bloomberg hoped that investment gains on Wall Street would cover for his decision to not increase the city’s own contributions to cover those costs, but that didn’t pan out. The city’s main teachers’ pension anticipates a seven percent annual rate of return, far higher than the 5.2 percent five-year return rate experienced in the market, according to Wilshire Associates. Between 2003 and 2012, the pension fund’s investments grew by just two percent, while liabilities increased by a whopping 70 percent.
De Blasio had the opportunity earlier this year to put a stop to the pension mismanagement by refusing to strike generous deals with public-sector unions and by asking New York State’s legislature to take such steps as requiring city workers to pay more (and in some cases, pay anything) for their retirements. Instead, he pursued payback, buck-passing and log rolling on a massive scale.
His abdication of all responsibility here guarantees that the financial hole dug into the Big Apple will only get worse – and eventually rot the city to its core.
