Labor agreements expected to cost $18B

With two of the largest municipal unions recently reaching contract deals that are expected to set the wage pattern for city civil servants, the Independent Budget Office has estimated that the labor agreements will cost the city more than $18 billion over the next four years.

The IBO had previously projected that the city would end the current fiscal year with a $4.9 billion surplus, in large part because of higher than anticipated tax revenues and a reduced payroll attributable to 23,000 vacancies within the municipal workforce. 

But in a report released last week, the IBO “forecasts that the new round of collective bargaining will lead to greater than budgeted city spending on personal services over the financial plan period.” Nearly all of the city’s labor agreements have expired.

Earlier this month, the city and the Police Benevolent Association reached a tentative eight-year deal that covers 23,000 police officers and includes annual raises ranging from 2.25 percent to 4 percent. The last five years of the contract, which has not yet been ratified, will set the economic framework for unions representing uniformed employees during the current round of bargaining.

In February, the city and District Council 37 announced a 65-month labor agreement that provides 3-percent annual raises for the first four years of the contract, a final 3.25 percent raise in May 2025 and sets an $18 minimum wage and a $3,000 ratification bonus. The deal, ratified at the end of March, sets the pattern for civilian workers’ contracts.

Using these two agreements as the framework for the rest of the city’s future labor deals, the IBO estimated that contracts for all city employees will cost $18.2 billion from Fiscal Year 2023 until FY 2027.

But the IBO noted that if the number of city workers remains at its current level, savings from city agencies’ headcounts being lower than their budgeted amount will help offset labor cost, with the city saving $6 billion if the staffing levels remain the same.

If the city fills the 23,000 vacancies by the end of FY 2024, on the other hand, the city’s labor costs would be expected to increase to $18.6 billion. If the city reaches its budgeted headcount by the end of FY 2025, personal expenses will grow to $18.4 billion.

City Hall has estimated that the city's labor contracts will cost $16 billion.

The city’s financial situation – including labor costs, lower tax revenues, and the cost of the migrant crisis, which could increase to more than $4.2 billion by July 2024 – has prompted “decisive action” from the mayor, City Hall noted. Earlier this month, the Mayor's Office of Management and Budget ordered agencies to slash their budgets by 4 percent. Agencies must save about $1.1 billion each year through 2027.

The cuts mandate drew strong criticism from local officials, among them Public Advocate Jumaane Williams, Council Speaker Adrienne Adams and Council Member Justin Brannan, who chairs the Council’s Finance Committee. They cited concerns that the cuts could hurt city services, particularly since agencies were already understaffed.

But in an April 14 analysis, the Citizens’ Budget Commission found that out of the $3 billion in budget cuts achieved through previous savings plans implemented by the city — the Program to Eliminate the Gap in February 2022 and November 2022, as well as the Vacancy Reduction Plan in January 2023 — the reduction in spending that affects city services is $200 million, or 0.3 percent of the budget.

“People have to realize we are not talking austerity,” Andrew Rein, president of the CBC, told news outlet The City.

The CBC also found that 11,386 vacant full-time positions were eliminated through the savings plans, although several thousand positions were also added, bringing the total number of vacancies eliminated to 8,115 positions.

clewis@thechiefleader.com