Bloomberg Mortgaged the City’s Future With the 2008 UFT Pension Deal Not Labor Contracts

Mayor Bill DeBlasio accused Mayor Bloomberg of mortgaging the city’s future by not paying its unionized employees more money before he got there.  But that is not so.  Did Mayor Bloomberg not settle the contracts so he could cut taxes?  No, Mayor Bloomberg increased taxes, including an 18.0% property tax increase that we were promised would go to better schools.  Schools that Bill DeBlasio and ever other candidate for Mayor except Christine Quinn said were not better, despite a big increase in per student spending.  Sales taxes were increased.  State income taxes were increased.  Did Mayor Bloomberg not settle the contracts so he could reduce fees?  No, fees were increased.  Did Mayor Bloomberg not settle the contracts so he could hire more public employees and increase services?  No, because the number of public employees has gone down.

So where did all that money that should be already be going to unionized public employees, according to Mayor DeBlaiso, actually go?  You know where.

The fact is that New York City’s unionized employees have gotten raises. Big raises, relative to the incomes of those who are forced to pay the taxes to cover them.  Raises compared with everyone but the one percent before 2008.  And raises relative to even the one percent after 2008.  They’ve become better off while most others have become worse off, at the expense of those who have become worse off, including those who were worse off to begin with.

But not in cash pay, pay that everyone could see and the public employees themselves might have appreciated, and felt some obligations to the rest of us in exchange for.

In pension increases.  In reductions in employee contributions.  In early retirement pension incentives.  In 1991, 1995, 2000 and, for the United Federation of Teachers alone, 2008.  The last one can be blamed on Mayor Bloomberg. These deals were not paid for at the time.  They are not being fully paid for now.  They will be paid for decades into the future.

In addition to the 2008 deal, Mayor Bloomberg could perhaps also be blamed, for not gutting city services, and raising taxes further, so he could increase pension contributions even more.  So that there would be some hope that the city would eventually get out of this mess.  Or, more realistically, that it would be in better position to avoid bankruptcy when the unions order the state legislature to make the next round of pension increases and incentives.

Perhaps, in fact, Mayor Bloomberg should be blamed for not diverting even more in taxpayer payments to the pension funds to cover the cost of future pension deals, so the city doesn’t take yet another huge it when higher wages are awarded for past work over and above the union contracts.  The UFT gets a deal in Albany that increases pension payouts by 30 percent or so every 5 years or so, on average.  They’re up in Albany, and they’re overdue.

Elsewhere in the country, where the serfs have woken up to just how much worse off they are going to be, the public employee unions make the following point.  Yes, their pensions are richer than the retirement benefits other workers receive.  Yes, they were richer than other workers received even before they were retroactively increased.  But as a tradeoff for those richer pensions, public employees settled for lower pay.  One balances the other, and the public gets dedicated workers for a fair price.  It would be wrong to go back on that deal now.

The expired contracts are the test of this assertion.  If richer pensions balanced lower cash pay before all the retroactive pension deals, then shouldn’t the added cost of pension the enrichments be balanced by cash pay that is lower still?  With public employees being just as motivated and pleased as before?  Or did the unions just use their political power to rip off the rest of the people?

Having already soared previously, NYC’s pension contributions increased from 27.4% of payroll in FY 2008 to 37.7% of payroll in FY 2014 (as proposed). And that needs to go up more.  Compare this figure with the employer match for your 401K, if you are among the half of Americans that has a retirement plan other than Social Security at all. That sounds like a raise to me.

Suddenly, however, the unions don’t want to talk about the relationship between their pay and their pensions.  They don’t want to talk about their pensions at all.  They don’t want to talk about the difference between what newly hired public employees will be paid, in pay and pensions, relative to those public employees cashing in and moving out, those the unions actually represent.  They don’t want comparisons between their total compensation and other people’s total compensation, except perhaps with people on Wall Street.  They don’t want a comparison between New York’s tax burden and other places’ tax burdens.  They just want more.  We owe them $billions, and need to become much worse off to pay them.

What do all these demands mean?  Are the unions upset that the minimum wage might go up?  Do they want higher taxes?  Not on themselves.  I remind you again that the pension payments of retired public employees are exempt from New York State and New York City income taxes.  And the unions are pushing a bill in Albany to get their pension income excluded from consideration when considering eligibility for property tax breaks for “poor” seniors.  Only the little people pay taxes.

The public employees that actually deserve cash raises are those who were screwed by their own unions as part of the perpetual “screw the newbie, flee to Florida” cycle.  Particularly those in Tier VI.  Those workers need to earn more cash over their careers, compared with those who came before, to equalize their career compensation (including pensions received and contribution) with those who came before.  Any raise for those soon to be eligible to retire will just boost their pensions further.  And there has been enough of that already.

This is an unprecedented dynamic and we’re going to have a huge fiscal challenge ahead,” the new Mayor said.  The problems are not unprecedented.  After the huge retroactive pension increases for public employees during the 1960s, at a time when most New Yorkers were getting poorer (and most public employees were moving to the suburbs), New York City faced soaring taxes, a collapse in public services, and a deterioration in the infrastructure. The bag ladies were literally left to die in the streets.  We’ve repeated the pension deals.  We’ve repeated the debts.  The unions want to see the city in ruins.  It’s only what’s “progressive” – under the current definition.

Where did the money go?  They took it all, off the top, before a dime goes to anything else, in richer retirement benefits.  To the executive/business class I can point out the effect of inequality on consumer demand:  “you are paying people less, but you also need to sell them more to make money, but now people have borrowed until they are broke, so who are you going to sell to?”  But the political/union class knows it can force people to pay more and accept less no matter what.  Which is why 100 years ago “progressives” were those who fought against the abuse of monopolistic power by large corporations and political machines alike, to get a Square Deal for everyone else. We don’t have those sorts of progressives anymore.

No excuses Mayor DeBlasio.  If you make city residents accept less in services, pay more in taxes, or face an even worse future due to rising debts, it is because you have decided to make your crowd even better off relative to the rest.  Not just the one percent.  Not just the better off.  The worse off too.  The unexpected contracts are not an excuse.  And the next recession will not be an excuse.  A recession means lower tax revenues because the people who are being taxed are becoming less well off.  Any city financial problems are a result of a failure of city insiders to share in the sacrifice.