New York Mayor Michael Bloomberg on September 21 instituted a hiring freeze of city workers and instructed city agencies to further trim their budgets. But the measures are unlikely to be enough to close a projected $3.3 billion budget gap for the next fiscal year.
Stephen Goldsmith, New York’s deputy mayor for operations, says layoffs would help the city face next fiscal year's $3.3 billion budget gap and exploding retiree costs.
Goldsmith said the city will likely have to lay off some of the approximately 305,000 people employed by the city to address the current budget deficit and defray the long-term fiscal impact of the city's growing retiree costs.
“I think [layoffs] are inevitable,” Goldsmith said.
Five years ago, the city's employee headcount was about 320,000, and the most recent staff reductions were accomplished largely through attrition. This time, the mayor instructed the education department and uniformed forces to cut spending by 2.7 percent this fiscal year and 4 percent next fiscal year.
All other agencies are told to trim by 5.4 percent now and 8 percent next fiscal year. The mayor wants the spending cuts to shave $800 million from city expenses this fiscal year, which ends June 30, and $1.2 billion in 2012.
Positions immediately affecting public safety or ones that generate revenue for the city were not part of the hiring freeze.
But Goldsmith, who spoke with Howard Wolfson, deputy mayor for government affairs and communications, at a midtown breakfast sponsored by the Citizens Budget Commission, said that even with the cuts, the city's growing retirement costs are threatening the ability of the administration to pay for municipal services. In a couple of years, Wolfson said, one out of every eight dollars the city spends will go to providing health care benefits to retirees.
“Unless some corrective action is taken soon, New York City runs the risk of becoming General Motors in the sense that we will be assuming a debt to retirees that is not sustainable,” he said.
The Bloomberg administration cannot reduce pension benefits earned by retirees through collective bargaining. Those benefits are guaranteed under the state constitution.
Still, it has put together a working group to address rising pension costs and will submit what it is calling an aggressive plan to Albany legislators, who would have to change laws to give the city more control over pension costs, which will total about $7 billion this year.
He said retiree health care costs eat up another $7 billion of the city's budget. Last year's budget totaled about $63 billion. Both Goldsmith and Wolfson attempted to put the situation in terms they believe the public will respond to.
“Unchecked, the quality of city services will go down because every year a higher percentage of the operating budget goes to pay the people who are retired,” he said. “The only way to pay the folks who are retired, since they are constitutionally protected, is to lay off the people who are working today.”
Wolfson, who managed the Senate campaigns of New York Democrats Charles Schumer and Hillary Rodham Clinton, as well as the mayor's 2009 re-election bid, said that because the political risks are high, Bloomberg waited until his third and final term to tackle pension costs.
“He doesn't have to worry about courting the support of labor,” Wolfson said.
District Council 37, a labor union representing city workers, criticized the proposed hiring freeze, but the administration says it will not back down from its plan or its warning about layoffs until it brings long-term costs under control.
“Putting the city's fiscal state on sounder footing will be very, very important for the mayor's legacy,” Wolfson said.
Filed by Jeremy Smerd of Crain’s New York Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.
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