How the federal tax law could hurt New York's unions

In his State of the State address on Jan. 3, Gov. Andrew Cuomo affirmed his commitment to New York’s union workers, saying that the state “must do all in our power to protect collective bargaining, the right to organize and preserve workers’ rights.”

Cuomo was referring to the U.S. Supreme Court case Janus v. American Federation of State, County and Municipal Employees Council 31, which could prohibit mandatory fees to unions from government workers who decline to join them. However, public sector unions in New York may also be facing another threat in the long term, in contract negotiations with the very state government that promised to protect them.

New York is facing considerable fiscal challenges, including a projected $4.4 billion budget deficit and impacts from the new federal tax law, which limits the state and local property and income tax deduction to $10,000. This could affect the state’s revenue stream, as many wealthy New Yorkers who form the base of the state economy would no longer be able to deduct their high property and income taxes. The federal government may also pay for the $1.5 trillion tax reform law by cutting funding to programs used by the state.

E.J. McMahon, the research director of the conservative think tank Empire Center for Public Policy, said the impact on contract negotiations for most government employees would not be immediate, due to the delayed effects of the tax law and the fact that no major negotiations are currently underway.

New York recently reached five-year agreements with the Civil Service Employees Association and District Council 37, providing annual salary increases from fiscal year 2017 through fiscal year 2021. The Public Employees Federation has a three-year collective bargaining agreement through 2019.

McMahon said there could be a lag effect, where the current economic situation does not influence negotiations until contracts are next renewed. This is comparable to union negotiations during Cuomo’s first term. Most state union contracts had been locked in with pay increases before the recession hit in late 2008. By the time Cuomo was negotiating contracts in 2011, the recession had taken its toll on the state’s finances.

“His state contracts in the first term for the unions was the hangover of the unions coasting through the recession with pay increases,” McMahon said, referring to the wage freezes implemented in 2011. Something similar may happen in 2021. If the effects on the federal tax law are as bad as Cuomo fears, then he may be more aggressive in negotiating union contracts and urge for a pay freeze.

McMahon noted that even the contracts negotiated this year may not be impacted by the tax overhaul because New Yorkers will not see changes to their federal taxes this April. The New York State Troopers Police Benevolent Association and the New York State Police Investigators Association are among the public employee unions with contract negotiations this year. The state is also still negotiating with the New York State Correctional Officers and Police Benevolent Association, which rejected a tentative agreement on a five-year contract last year, and the Police Benevolent Association of New York State.

Election year politics could also interfere with contract negotiations. Cuomo, who is seeking his third term, will want the support of labor and may be hesitant to restrict wages. However, a deal reached before the election that does not factor in future fiscal issues and gives unrealistic pay increases could lead to greater problems for the state down the line.

Carol Kellermann, the president of the Citizens Budget Commission, a nonpartisan fiscal watchdog organization, said the state does not have a reserve specifically for union contracts. The long-term effects of the federal tax law and the state budget deficit could constrict the funds the state has available for negotiations.

“On the one hand, everybody should have an incentive to resolve the contracts now, and not have them be lurking around during the election,” Kellermann said. “On the other hand, there are a lot of unknowns about finances, and if the unions aren’t willing to be realistic and participate in cost saving (now) so that the contracts are affordable down the road, then they might drag on until after the election.”

But the longer the delay in reaching an agreement, the greater the fiscal stress on the state may be.

Local school districts are also contending with contract negotiations. McMahon noted that some public school teachers will have contracts up for renewal, and the greatest immediate impact of the new federal tax law may be on teacher contract negotiations in Long Island and lower Hudson Valley suburbs, where property taxes are the highest. Property taxes largely go to school taxes and teacher salaries.

“There’s this broad awareness that the state and local tax deduction has gone away, and the governor on down has done much to hype the impact of the loss of the state and local tax deduction,” McMahon said. Because school districts are aware of impending tax issues, this could factor into contract negotiations, even if the tax overhaul doesn’t have an immediate effect.

LABOR ISSUES

Farmworker rights

In a blow to labor but a win for the agriculture industry, a New York court decided not to give farmworkers collective bargaining rights. The New York Civil Liberties Union brought a lawsuit last year that argued the lack of collective bargaining rights leads to discriminatory practices against largely immigrant farmworkers. Gov. Andrew Cuomo decided to not contest the suit, so the New York Farm Bureau stepped in. The judge in the case ultimately sided with the Farm Bureau, although the defendants are expected to appeal. State legislation has been introduced to extend collective bargaining rights to farmworkers, but it has died several times since 2009. It was reintroduced in the current legislative session by state Sen. Marisol Alcantara and Assemblywoman Catherine Nolan.

Preparing for the Janus ruling

At stake in the Janus v. American Federation of State, County and Municipal Employees Council 31 case is the right of public unions to collect fees from nonmembers who still benefit from collective bargaining. Labor unions believe an unfavorable ruling in this case would cripple their ability to represent workers by eliminating a large chunk of their revenue. The U.S. Supreme Court was expected to rule against labor unions in a similar case, until Antonin Scalia’s death two years ago ended in a split vote. Now, New York unions are once again bracing for an adverse ruling with Scalia’s replacement, Justice Neil Gorsuch, filling out the court. The decision could have a severe effect on organized labor.

Combating workplace harassment

A former staffer’s allegation against state Sen. Jeff Klein of sexual misconduct has brought the #MeToo movement to Albany, and the state Senate has reworked its decade-old workplace sexual harassment policy to expand its protections. The updated policy included a new line stating that false accusations could lead to firing or disciplinary actions, which was seen by state Senate Democratic Leader Andrea Stewart-Cousins as tone-deaf. For his part, Cuomo included legislation in his budget that would prevent taxpayer money to be used for settlements in sexual harassment lawsuits against public officials and create a dedicated unit within the Joint Commission on Public Ethics to investigate claims.