De Blasio Administration Reveals Full Cost of Settling Labor Contracts

Mayor Bill de Blasio giving his Executive Budget address. (Photo: Rob Bennett/NYC Mayor's Office)

Mayor Bill de Blasio giving his Executive Budget address. (Photo: Rob Bennett/NYC Mayor’s Office)

Mayor Bill de Blasio provided an estimate for the first time today of the total cost of settling all of the city’s more than 150 expired labor contracts, which many had warned would blow a hole in the city’s finances.

In all, settling contracts with the city’s workers will cost an estimated $17.75 billion before significant healthcare savings, for a total net cost of $8 billion, city budget officials revealed today.

That includes $13.4 billion to cover retroactive pay raises for the city’s teachers through fiscal year 2018, as well as an assumed 10 percent raise for all of the city’s 350,000 workers, many of whom have been working under expired contracts for years. The sum also includes another $4.35 billion to cover additional retroactive payments for members of the teachers’ union, the United Federation of Teachers, as well as retroactive raises for another 40,000 city workers, including principals and some healthcare workers, who did not receive across-the-board raises in 2008.

To offset the costs, City Hall projects more than $3.4 billion in healthcare savings, through a combination of cost-cutting measures that were approved this week by the Municipal Labor Council. The rest of the cost, officials say, will be covered using $1 billion from a health stabilization fund controlled by the MLC as well as $3.5 billion from a labor reserve pool left to Mr. de Blasio by the previous administration.

The sums are based on the precedent set by Mr. de Blasio’s first major union settlement–a $5.5 billion deal with UFT–which includes four percent retroactive pay raises for 2009 and 2010, as well as a 10 percent raise going forward over the next seven years.

During a briefing at City Hall, Mr. de Blasio said that deal set a pattern he expected to be replicated in future deals.

“There’s going to be constructive conversations with each and every union among the 151 remaining. And again, the UFT still has to go through its full ratification process. But the fact that the [Municipal Labor Committee] almost unanimously agreed with the concept of these healthcare savings–and the fact that one of our very largest unions is well on its way to agreeing to this particular settlement–clearly indicates–if I’ve ever seen a pattern, this is a pattern,” said the mayor. “So there will be individual conversations with each union. There’s a number of items that are on the table–some economic, some non-economic–in each labor negotiation. But we feel very confident that this pattern will hold throughout the process.”

Still, officials stressed the health savings included in the deal would effectively “bend the curve” of rising healthcare costs for years to come.

“You take the full 350,000 workers and you assume a nine-year settlement for those that didn’t participate in the ‘08-’09 round, and you assume everybody–all 350,000–get the same 10 percent over seven years going forward,” said the mayor’s director of labor relations Bob Linn. “The total cost of that is the $13.4 billion total, which is offset by $3.4 billion in health savings, $1 billion from the stabilization fund, $3.5 billion from the labor reserve, and that is the net of … $5.5 billion net that covers all workers for the entire pattern.”

But the whole plan makes several assumptions, including the fact that the city will be able to hit the promised healthcare savings targets. While goals have been established, the specific menus of options each union will choose have yet to be determined. An ever bigger question will be whether the city’s remaining unions will agree to raises similar to the UFT’s deal–which hover between zero and three percent a year.

Several unions representing uniformed workers have already made clear that they are expecting far larger sums, including the Patrolmen’s Benevolent Association. Last week, the State’s Public Employment Relations Board declared negotiations between the police union and city has reached an impasse and announced the appointment of a mediator to help forge a deal.

“I would imagine some would be chaffing,” said Doug Turetsky, of the Independent Budget Office, of the other 151 unions.

“It certainly gives some degree more certainly than what we had before,” he added of the budget, but noted, “It’s not a done deal yet.”