How New York City might avoid 22,000 layoffs

New York City Mayor Bill de Blasio surprised many when he announced he would delay his plan to lay off 22,000 city employees to balance the city’s budget that has been decimated by the coronavirus crisis. But that still leaves the city on the hook for $1 billion in unspecified savings that were meant to come about through negotiations with labor unions – and layoffs are still on the table.

While de Blasio has previously said layoffs will be necessary without federal aid or increased borrowing authority from the state, fiscal experts and labor advocates argue there are still other ways to close the budget gap.

Back in June, as details emerged about the city’s pared-down budget and the cuts that came with it, de Blasio announced that an additional $1 billion in savings would be found by working with labor unions, after the budget passed. He repeated on numerous occasions that layoffs would be a last resort if that number could not be met through other means. Some of the employees on the chopping block would include essential and frontline workers, such as EMTs and sanitation workers, who risked their personal safety to keep the city running at the height of COVID-19 pandemic.

De Blasio has been pushing hard for Albany to increase the city’s borrowing capacity to help fill a projected multibillion dollar budget deficits in coming years. He has asked for the ability to borrow $7 billion. Other city officials, including Council Speaker Corey Johnson and Comptroller Scott Stringer (as a potential part of a comprehensive cost-saving plan), as well as union leaders, have signed on to support additional borrowing capacity, although they have been met with resistance from Gov. Andrew Cuomo. The state Legislature has not passed a bill to authorize the borrowing, which would be necessary. De Blasio reiterated on Monday when he delayed the layoffs that without borrowing layoffs would be inevitable. 

But Maria Doulis, vice president of strategy, operations and communications at the Citizens Budget Commission, said the mayor created a false dichotomy and that other options exist besides layoffs and borrowing, both of which she believes should be avoided. She argued that borrowing would simply push the problem down the road and saddle future generations with debt. Doulis said that now that the unions have been called back to the negotiating table, there is still more they can offer that would avoid major layoffs. “In every fiscal crisis since the 1970s, the labor unions have come to the table to negotiate,” Doulis said. “The labor unions have understood they are key stakeholders and they come to the table with some concessions.” 

Doulis said that health care costs is the major area to find savings, and that the city could ask union members and perhaps retirees as well to pay a portion of their health care premiums. She pointed out that the city has already been working for years with the unions through their umbrella group, the Municipal Labor Council, to find health care savings. That council is also handling the current negotiations to find additional savings. “Spreading the cost out throughout the entire workforce is obviously preferable to laying off 22,000 workers and their families,” Doulis said.

Jonathan Rosenberg, director of budget review at the city’s Independent Budget Office, agreed that asking public employees to pay part of their health care premiums is one of two major options available to find enough savings to avoid layoffs. He said that while a lot of the “low-hanging fruit” in health care savings have been found through previous negotiations, he suggested that the city could potentially look for more, like increasing co-pays or decreasing certain services. Rosenberg said the other big savings option is some form of payroll reduction or delays in scheduled raises. “The precedent has been set in the past,” Rosenberg said. 

According to Politico, the city had originally asked unions to figure out cost-saving methods including furloughs and deferred raises. Teamster Local 831 President Harry Nespoli told the outlet it was “like extortion.” During the 1975 financial crisis, which the current one is often compared to, public union leaders agreed to a wage freeze, and even a 20% reduction in the workforce, though that too was met with resistance from labor leaders. 

New York City Council Member I. Daneek Miller, chair of the Committee on Civil Service and Labor, agreed that alternatives to layoffs are still possible, although he said that the budget should not be balanced on the back of city workers by asking them to accept pay reductions or to contribute to their health care premiums. “What gives this city its inherent value is its public servants, the often-maligned public servants,” Miller said.

Miller added that the city still has other avenues available, such as finding additional agency savings that don’t require workforce reduction and other negotiations around health care for cutting costs that could be explored before resorting to asking for workers to contribute more. Miller said city agencies must get “creative” after many have seen significant budget increases over the past several years to figure out “how to do more with less” and to assess which services should take priority. Stringer has also called for “a serious, agency-by-agency savings program” to find inefficiencies and waste before the city considers long-term borrowing or layoffs. Doulis agreed that the de Blasio administration could be doing more to find additional agency savings, in addition to ongoing negotiations with labor unions. Rosenberg, however, counters that some money-saving measures could lead to worse social outcomes and end up increasing government costs through unintended consequences. 

Miller is a strong proponent of authorizing long-term borrowing by the city. “It would only be fair to allow that the city be allowed long-term borrowing opportunities, just as the state has,” Miller said. “We are in a much better position than we were the last time we did (it) after 9/11,” Miller added, referring to the strength of the city’s economy in recent years prior to the pandemic and the fact it has proven its financial responsibility in part by paying back that past loan. Public sector unions, through the Municipal Labor Council and including the Teamsters and District Council 37, have been pushing hard for that borrowing ability, and are planning to lobby Albany even harder now in the wake of the layoff delays. However, the Legislature currently has no plans to reconvene in the coming weeks or months, and meeting again is no guarantee they would authorize borrowing.

Unions are also pushing for an early retirement package to help decrease the workforce and increase the numbers lost through attrition. That, like borrowing, would require state legislative approval. The mayor said that early retirement would be a “helpful piece,” but said it alone would not be enough to fill the city’s deficit. 

Like borrowing, early retirement incentives may generate higher costs down the road. “One of the problems that typically befalls these things is you're paying people who already can retire, to retire, you're just paying them more to do it,” Doulis said of early retirement incentives. She said it may lead to some short-term savings as some workers retire a bit earlier, but more generous pension benefits lead to more spending in the long run. 

But Miller said an early retirement package would be a great option for the city and unions to consider, disagreeing that it would incur significant long-term costs. District Council 37 President Henry Garrido previously predicted the incentives could save $900 million a year. Miller said that they could reduce the costs associated with the top earners with the most benefits, and open up more opportunities for younger workers to enter civil service, who would make lower wages initially and hopefully better represent the city’s diversity. “In order for us to attain the level of service and diversity in the delivery of the service that (we want to see), we're going to have to have entry into some of these agencies,” Miller said. “And you only open up opportunities when other people, who've been around for 25 years, 30 years decide that they're going to leave.” The de Blasio administration and the Municipal Labor Council were set to meet on Tuesday to begin negotiations anew, but that meeting was canceled, so little is known now about how they might find savings.