New York City should freeze teacher salaries

With New York City facing a huge revenue shortfall (over $9 billion over the next 14 months according to current estimates) due to the economic shutdown, Gotham’s public schools stand to suffer significant funding cuts. After all, the Department of Education accounts for about a third of the city’s budget. In response to this reality, fiscal policy experts and editorial boards have begun floating ideas about how the city might maintain essential public services such as schools while dealing with this financial challenge—and some have suggested freezing public employee salaries, notwithstanding any labor agreements currently in place.

A look at the New York City school system’s spending trends demonstrates the critical need for such a freeze and illuminates the choice elected officials face: fiscal prudence or the denial of much-needed services to our city’s schoolchildren. Just last night, it was reported that Governor Cuomo was using his emergency powers to defer upcoming raises in state employee contracts. While an unnecessarily long delay or outright deferral of the raises would surely lead to legal challenge, a legal analysis by the Empire Center documents legal precedents giving state legislatures the power to freeze raises in a time of fiscal crisis. 

In a perfect world, teachers would certainly get the raises that have already been agreed to, but current conditions require sacrifice across the board. New York City Mayor Bill de Blasio has over-extended city spending and employee salaries to the extent that adjustments to existing agreements are necessary to avoid huge cuts to basic and essential school services, such as reducing the availability of courses, after school and summer programs or access to extra-curriculars. Students have already lost learning time during the school closures required by the COVID-19 pandemic that will need to be made up in the coming years. Rather than cutting services, the city is going to need to augment them and that will come at a cost.

When the last financial crisis hit in 2008, New York City itself was in much stronger shape. In the wake of near-bankruptcy in the mid-1970s, the city had made key structural reforms to its accounting and financial planning which ultimately helped foster decades of economic growth and resilience. Still, the city faced a great challenge. Federal stimulus funds helped a bit, but Mayor Mike Bloomberg tightened spending, allowing the city some time for the private sector to bounce back and re-fill the city’s coffers. He took a particularly tough line with the city’s employee unions, arguing that the city simply could not afford raises. 

In response to Bloomberg’s approach, the United Federation of Teachers took a political gamble, refusing to sign a new contract with Bloomberg in the hopes that the next mayor would be more generous. They won that bet. Just a few months after de Blasio took office in 2014, he agreed to a contract that not only provided teachers with 10 percent salary increases in the four years going forward, but also included two retroactive increases of 4 percent each for 2009 and 2010, the years when teachers were working under an expired contract. This lump sum payment was to be paid out between 2015 and 2020. The contract also included annual increases totaling 18 percent over the years 2013-2018.The cost was huge, and de Blasio craftily structured the deal so that a large part of it would come due outside the city’s four-year financial plan.

As fate would have it, the final payment on that agreement was scheduled to be made this year. According to the city’s January 2020 Preliminary Budget, the city has transferred $650 million from its miscellaneous budget account to the education department to fund the final retroactive payments to teachers and others for work conducted in 2009 and 2010—before students currently in grades K–5 were even born, let alone enrolled in school. And the financial hits will keep coming: the contract that required that payment expired in 2018, and the new contract that took its place made promises for a 2 percent raise last year, 2.5 percent this May, and 3 percent next year.

As of 2019, salaries for the 75,000 teachers across city schools ranged from $57,845 to $121,862, depending on seniority and educational attainment. The May 2020 increase will range from $1,446 to $3,047 per teacher, plus an additional $3,748 to $4,779 that will kick in come May 2021. Thus, on top of this huge payout, city schools would increase payroll in the range of $250 to $501 million for teachers alone by the end of the next fiscal year, only 15 months away.

To get a sense of the growth spending on school employee salary and benefits, I updated the figures from a report that the city’s Independent Budget Office published when I was directing its education research team. Looking at the school system’s current budget, including the infusion of $650 million described above, the cost of salaries and benefits (not including $3.6 billion in annual pension costs) has increased by an average of 4.5 percent in the years since de Blasio took office, compared to 2.6 percent annual growth in Bloomberg’s last seven budgets. Two percentage points a year might not seem like a lot, but these costs have grown by $4.6 billion in the de Blasio years and now total $17.3 billion dollars, before the pending salary adjustments. In the de Blasio years, the annual cost per employee in the school system has increased by over $23,400, or 22 percent.

Some of the money that de Blasio has directed to additional staff costs could have been used to pay down some of the city’s debts. Currently, $2.8 billion is spent annually to pay the debt service on bonds associated with the school system.

The city’s teachers are essential to student achievement, but the city is facing its greatest fiscal challenge in 45 years. The cuts to school funding made during the mid-1970s included layoffs of more than 14,000 teachers, the closure of about 100 schools, and a reduction of the school day equivalent to two days a week. The impact of these cuts, as well as the loss of routine maintenance of school buildings, harmed academic wellbeing, health, and safety in schools for 10 years or more. These grim conditions could repeat themselves if the city fails to make some hard sacrifices in the short run.

Charter schools will need to be part of this discussion as well. While there should be, according to the formula that determines allotment, parity between the amount of funding that charter schools and traditional public schools receive, the Independent Budget Office has consistently shown that public schools receive more per pupil than do charters. With that said, if public schools undergo extensive funding cuts, putting them below the level of charter school funding, charters should do so as well, to a degree that creates parity between the two sectors.

None of this will be easy, but it will be necessary. Schoolchildren have already been burdened by school closures. If they are to catch up in the coming years, services need to be maintained and perhaps even augmented with longer school days or years. That will require real sacrifice, but it will be well worth it.