May 12, 2014. Today’s joint announcement by Mayor de Blasio and Comptroller Stringer clarifies a City budget accounting question regarding an obligation the City incurred in connection with the recent labor settlement with the United Federation of Teachers.  The payments in question pertain to UFT members retiring after June 30, 2014 and cover wage increases for the first two years (2009 and 2010) of the recently settled contract.

Officials of both the Mayor’s and the Comptroller’s offices have confirmed that the announcement is strictly an accounting issue, and that it has no effect on the UFT settlement, the costs of that settlement, or any individual UFT member.

Similarly, the change has no net budget or financial impact. The change is strictly an accounting one pertaining to the payments due post-6/30/14 retirees. The change simply advances recognition of that obligation into FY 2014 from FYs 2015, 16, 17 and 18.

The result will be to increase the FY 2014 labor reserve amount, and to offset it by a like reduction in the FY 2014 Budget Stabilization payment. The FY 2014 Budget Stabilization is the expenditure item wherein the City would pre-pay FY 2015 debt service or other obligations coming due in FY 2015 as a long-established budgeting mechanism to “roll” surplus monies from one year to the next.

My understanding is that the monies will remain in a “FY 2014 labor reserve” budget line until paid out. In the FY 2015 Executive Budget released last Thursday, those monies were incorporated into the labor reserve for the future fiscal year in which the retirements were projected to occur. Thus, the combined labor reserves for FY’s 2015-18 will be reduced by the amount by which the FY 2014 labor reserve is increased.

These changes will be incorporated in budget documents when the Adopted FY 2015 Budget, reached with the Council prior to the end of the current fiscal year, is published. In a conference call Monday afternoon, Budget Director Dean Fuleihan indicated that the exact dollar amount of the labor reserve change had not yet been finalized but that it was expected to be in the several hundred million dollar range.

While this is not a routine or inconsequential budget development, it is understandable given the fact that a historically unprecedented long-term labor agreement was finalized within a few days of the presentation of the Executive Budget. As the City’s chief financial officer and final arbiter on accounting matters, the Comptroller’s Office requested the change in the accounting treatment that was mutually agreed-to today.

James Parrott