Another View on Mayor de Blasio’s FY 2015 New York City Executive Budget

May 9, 2014. Understandably, much of the commentary on Mayor de Blasio’s FY 2015 Executive Budget has dealt with the financial impact of the recent UFT contract if applied across the entire 350,000-person unionized city workforce.  It is, afterall, by far the most significant labor deal in City history, potentially affecting the entire workforce for 7 years, and 150,000 of those workers for an additional two years going back to 2009 and 2010.

Some observers can’t quite grasp that Bill de Blasio pulled that off, restoring a constructive labor-management dialogue based on mutual respect, and doing that without destabilizing City finances.  They point to the $17.8 billion total price tag, concerned fingers wagging.  They voice their skepticism about under-specified health care savings and their own preference that city workers should pay out of pocket.

It is truly puzzling why such observers feel it’s somehow better to have workers pay part of their premiums rather than take on a powerful incentive to create substantial cost savings.  Dollars and cents don’t support the skeptics view. The unions are now obligated, over the next four years, to provide $1.3 billion annually in recurring health care cost savings.

While $17.8 billion viewed alone is a substantial sum, relative to the total $172 billion that will be spent on labor compensation in the 2015-2018, four-year financial plan, it is a fraction over 10 percent. That includes lump sum back pay for 3-5 years that his predecessor should have dealt with, and that don’t recur.  Plus, there’s the fact that a chunk ($3.5 billion) is already in the budget in the form of the labor reserve, and that labor is on the hook to identify $3.4 billion in health care costs savings and will provide $1 billion from a jointly-managed health stabilization fund.  The new money needed is less than six percent of the four-year labor compensation total.

Not to be lost sight of is the fact that a host of educational policy issues were resolved at the bargaining table between the UFT and the City that should positively affect city schools.

There is also a risk of losing sight of the many ways Mayor de Blasio’s budget represents a sharp and progressive departure from how the budget has been done for the past 20 years.  The mayor starts by acknowledging that not all New Yorkers are sharing in the city’s economic growth, and that “our economy will be strengthened by addressing income inequality.” Then he stakes out two big things the city must do: expand educational opportunities from pre-K to middle school to college; and dramatically expand affordable housing.  A big agenda for a big challenge.

Foremost on this list, of course, is the Mayor’s signature UPK and after school expansion initiatives where he succeeded in getting the state to kick in $500 million a year for services that will overwhelmingly benefit children from low-income families.  No small feat and one of the most significant budget commitments Albany has made to New York City in a long time. The mayor also is putting $20 million in FY 2015, rising to $50 million in coming years, into an expansion of STEM program to prepare more CUNY community college students for careers in the city’s tech sector.

On the housing front, not only has the Mayor launched a 10-year, $41 billion plan to build or preserve 200,000 affordable housing units, his budget is funding long-overdue repairs at Housing Authority units, and supporting several initiatives to prevent and reduce homelessness.

Moreover, the Mayor’s budget finally ends what has come to be known as the cynical and harmful annual “budget dance” that for years marginalized public libraries, child care services, and important community-based public health, senior and youth services.

Those who claim the Mayor’s budget is fiscally irresponsible need to take a closer look at recent tax collections and the City’s very conservative projections.  Compared to the FY 2014 tax forecast at the time the budget was adopted last June, tax collections are now expected to be $2.6 billion higher. Similarly, the latest tax forecast for FY 2015 calls for growth of only 1.2 percent.

In its March review of the City’s forecast from the preliminary budget, the Independent Budget Office projected upside revenue potential of $1.1-$2.4 billion a year over the next four years. Those projections could rise further considering that the City did not make significant upward adjustments in its own forecast for those years in the new budget.  That upside revenue potential alone will pretty much offset projected out-year budget gaps.  And that’s without having to turn to various non-labor reserves elsewhere in the budget.

New York City voters who gave him a mandate six months ago expected great things from Bill de Blasio, including leveraging the city budget to advance a progressive agenda. As things are turning after just over four months in office, he is mainly disappointing those who expected him to bust the budget. He not only faced up to one of the biggest challenges any new mayor has faced in inheriting wall-to-wall unsettled labor contracts, but he has managed that within a budget that also begins to take meaningful strides in addressing income inequality.

James Parrott

 

Understandably, much of the commentary on Mayor de Blasio’s FY 2015 Executive Budget has dealt with the financial impact of the recent UFT contract if applied across the entire 350,000-person unionized city workforce.  It is, afterall, by far the most significant labor deal in City history, potentially affecting the entire workforce for 7 years, and 150,000 of those workers for an additional two years going back to 2009 and 2010.

Some observers can’t quite grasp that Bill de Blasio pulled that off, restoring a constructive labor-management dialogue based on mutual respect, and doing that without destabilizing City finances.  They point to the $17.8 billion total price tag, concerned fingers wagging.  They voice their skepticism about under-specified health care savings and their own preference that city workers should pay out of pocket.

It is truly puzzling why such observers feel it’s somehow better to have workers pay part of their premiums rather than take on a powerful incentive to create substantial cost savings.  Dollars and cents don’t support the skeptics view. The unions are now obligated, over the next four years, to provide $1.3 billion annually in recurring health care cost savings.

While $17.8 billion viewed alone is a substantial sum, relative to the total $172 billion that will be spent on labor compensation in the 2015-2018, four-year financial plan, it is a fraction over 10 percent. That includes lump sum back pay for 3-5 years that his predecessor should have dealt with, and that don’t recur.  Plus, there’s the fact that a chunk ($3.5 billion) is already in the budget in the form of the labor reserve, and that labor is on the hook to identify $3.4 billion in health care costs savings and will provide $1 billion from a jointly-managed health stabilization fund.  The new money needed is less than six percent of the four-year labor compensation total.

Not to be lost sight of is the fact that a host of educational policy issues were resolved at the bargaining table between the UFT and the City that should positively affect city schools.

There is also a risk of losing sight of the many ways Mayor de Blasio’s budget represents a sharp and progressive departure from how the budget has been done for the past 20 years.  The mayor starts by acknowledging that not all New Yorkers are sharing in the city’s economic growth, and that “our economy will be strengthened by addressing income inequality.” Then he stakes out two big things the city must do: expand educational opportunities from pre-K to middle school to college; and dramatically expand affordable housing.  A big agenda for a big challenge.

Foremost on this list, of course, is the Mayor’s signature UPK and afterschool expansion initiatives where he succeeded in getting the state to kick in $500 million a year for services that will overwhelmingly benefit children from low-income families.  No small feat and one of the most significant budget commitments Albany has made to New York City in a long time. The mayor also is putting $20 million in FY 2015, rising to $50 million in coming years, into an expansion of STEM program to prepare more CUNY community college students for careers in the city’s tech sector.

On the housing front, not only has the Mayor launched a 10-year, $41 billion plan to build or preserve 200,000 affordable housing units, his budget is funding long-overdue repairs at Housing Authority units, and supporting several initiatives to prevent and reduce homelessness.

Moreover, the Mayor’s budget finally ends what has come to be known as the cynical and harmful annual “budget dance” that for years marginalized public libraries, child care services, and important community-based public health, senior and youth services.

Those who claim the Mayor’s budget is fiscally irresponsible need to take a closer look at recent tax collections and the City’s very conservative projections.  Compared to the FY 2014 tax forecast at the time the budget was adopted last June, tax collections are now expected to be $2.6 billion higher. Similarly, the latest tax forecast for FY 2015 calls for growth of only 1.2 percent.

In its March review of the City’s forecast from the preliminary budget, the Independent Budget Office projected upside revenue potential of $1.1-$2.4 billion a year over the next four years. Those projections could rise further considering that the City did not make significant upward adjustments in its own forecast for those years in the new budget.  That upside revenue potential alone will pretty much offset projected out-year budget gaps.  And that’s without having to turn to various non-labor reserves elsewhere in the budget.

New York City voters who gave him a mandate six months ago expected great things from Bill de Blasio, including leveraging the city budget to advance a progressive agenda. As things are turning after just over four months in office, he is mainly disappointing those who expected him to bust the budget. He not only faced up to one of the biggest challenges any new mayor has faced in inheriting wall-to-wall unsettled labor contracts, but he has managed that within a budget that also begins to take meaningful strides in addressing income inequality.

Understandably, much of the commentary on Mayor de Blasio’s FY 2015 Executive Budget has dealt with the financial impact of the recent UFT contract if applied across the entire 350,000-person unionized city workforce.  It is, afterall, by far the most significant labor deal in City history, potentially affecting the entire workforce for 7 years, and 150,000 of those workers for an additional two years going back to 2009 and 2010.

 

Some observers can’t quite grasp that Bill de Blasio pulled that off, restoring a constructive labor-management dialogue based on mutual respect, and doing that without destabilizing City finances.  They point to the $17.8 billion total price tag, concerned fingers wagging.  They voice their skepticism about under-specified health care savings and their own preference that city workers should pay out of pocket.

 

It is truly puzzling why such observers feel it’s somehow better to have workers pay part of their premiums rather than take on a powerful incentive to create substantial cost savings.  Dollars and cents don’t support the skeptics view. The unions are now obligated, over the next four years, to provide $1.3 billion annually in recurring health care cost savings.

 

While $17.8 billion viewed alone is a substantial sum, relative to the total $172 billion that will be spent on labor compensation in the 2015-2018, four-year financial plan, it is a fraction over 10 percent. That includes lump sum back pay for 3-5 years that his predecessor should have dealt with, and that don’t recur.  Plus, there’s the fact that a chunk ($3.5 billion) is already in the budget in the form of the labor reserve, and that labor is on the hook to identify $3.4 billion in health care costs savings and will provide $1 billion from a jointly-managed health stabilization fund.  The new money needed is less than six percent of the four-year labor compensation total.

 

Not to be lost sight of is the fact that a host of educational policy issues were resolved at the bargaining table between the UFT and the City that should positively affect city schools.

 

There is also a risk of losing sight of the many ways Mayor de Blasio’s budget represents a sharp and progressive departure from how the budget has been done for the past 20 years.  The mayor starts by acknowledging that not all New Yorkers are sharing in the city’s economic growth, and that “our economy will be strengthened by addressing income inequality.” Then he stakes out two big things the city must do: expand educational opportunities from pre-K to middle school to college; and dramatically expand affordable housing.  A big agenda for a big challenge.

 

Foremost on this list, of course, is the Mayor’s signature UPK and afterschool expansion initiatives where he succeeded in getting the state to kick in $500 million a year for services that will overwhelmingly benefit children from low-income families.  No small feat and one of the most significant budget commitments Albany has made to New York City in a long time. The mayor also is putting $20 million in FY 2015, rising to $50 million in coming years, into an expansion of STEM program to prepare more CUNY community college students for careers in the city’s tech sector.

 

On the housing front, not only has the Mayor launched a 10-year, $41 billion plan to build or preserve 200,000 affordable housing units, his budget is funding long-overdue repairs at Housing Authority units, and supporting several initiatives to prevent and reduce homelessness.

 

Moreover, the Mayor’s budget finally ends what has come to be known as the cynical and harmful annual “budget dance” that for years marginalized public libraries, child care services, and important community-based public health, senior and youth services.

 

Those who claim the Mayor’s budget is fiscally irresponsible need to take a closer look at recent tax collections and the City’s very conservative projections.  Compared to the FY 2014 tax forecast at the time the budget was adopted last June, tax collections are now expected to be $2.6 billion higher. Similarly, the latest tax forecast for FY 2015 calls for growth of only 1.2 percent.

 

In its March review of the City’s forecast from the preliminary budget, the Independent Budget Office projected upside revenue potential of $1.1-$2.4 billion a year over the next four years. Those projections could rise further considering that the City did not make significant upward adjustments in its own forecast for those years in the new budget.  That upside revenue potential alone will pretty much offset projected out-year budget gaps.  And that’s without having to turn to various non-labor reserves elsewhere in the budget.

New York City voters who gave him a mandate six months ago expected great things from Bill de Blasio, including leveraging the city budget to advance a progressive agenda. As things are turning after just over four months in office, he is mainly disappointing those who expected him to bust the budget. He not only faced up to one of the biggest challenges any new mayor has faced in inheriting wall-to-wall unsettled labor contracts, but he has managed that within a budget that also begins to take meaningful strides in addressing income inequality.