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New York Daily News


Solidarity? Not For Long

September 30, 2013

By Daniel DiSalvo

De Blasio and the city’s public sector unions will have a very short honeymoon

How tough will de Blasio get on organized labor?

New York City’s liberals have been aflutter ever since Bill de Blasio won the Democratic Party’s mayoral nomination. For them, de Blasio’s candidacy holds out the tantalizing prospect of reviving the old-time religion of taxing the rich and liberating the masses. His populist “tale of two cities” campaign has played up class divisions, promised tax hikes on the wealthy and pre-k for the poor, and attacked the police’s stop-and-frisk tactics.

Yet if de Blasio is elected mayor, get ready for a progressive civil war. The cause of the conflict will be strife between the next mayor and the city’s public employee unions.

Of course, there are many signs that might make one expect de Blasio to give away the store to the unions.

Liberals on the Upper West Side and Park Slope fashion themselves champions of working stiffs. They’ve booed efforts in New Jersey, Wisconsin and elsewhere to push back against the demands of public sector unions.

Although some of the city’s big unions, such as the United Federation of Teachers, backed de Blasio’s rivals during the primary, they are all now endorsing him. Hector Figueroa of 32BJ SEIU says that his union “would like him to be the person at the other side of the table.”

De Blasio himself has a long history with SEIU 1199, which represents health and hospital workers, and the union-backed Working Families Party. And unlike most of the other mayoral candidates, he has demurred talking about union-related issues on the stump.

Sounds like sweetness and light in the house of urban liberalism.

Not so fast.

All of the city’s unions are working under contracts that have expired. They have been waiting out Bloomberg in hopes that a Democrat will end up at City Hall. The next mayor will therefore have to collectively bargain some 152 new contracts. The unions are demanding salary increases and what would amount to $8 billion in back pay. They also want to avoid forcing workers to contribute more to their healthcare plans. These demands are budget busters.

And the rapidly rising pension and healthcare costs of the city’s public employees add up to billions more. Pension costs next year will be $8.8 billion; up from $3.1 billion in 2002. Healthcare will cost $8.2 billion; up from $2 billion — and 90% of the city’s workforce pays nothing towards its health coverage.

Those two big-ticket items now comprise 34% of the budget; up from 15% when Bloomberg took office. And with an $88 billion unfunded health care liability, the city’s cost curve points in one direction: Up.

In fact, over the course of the Bloomberg administration, the city’s budget increased nearly 50%, from $33.9 billion to $50.7 billion. Yet the new spending did not fund basic city services but instead went to pensions, health and fringe benefits for city workers and retirees.

In this year’s budget, these fixed costs constitute more than 50% of the budget for the first time in Gotham’s history.

The city’s capital spending — on things like roads, bridges and tunnels — has only kept pace due to the accumulation of more debt. Under Bloomberg, the city’s capital debt increased from $55.1 billion to $77.3 billion. And the costs of servicing that debt have also gone up. Any interest-rate increase will throw a wrench into the city’s financial plans.

Given the budget context, it will be very difficult for de Blasio to satisfy the unions’ demands. If he does, it will be very bad for the rest of New Yorkers. Therefore, neither de Blasio nor the unions are likely to be as happy with one another as they are right now.

It is not surprising, then, that while the city’s unions are currently lining up behind him, they are simultaneously preparing for a fight.

“We make no assumptions that he’s going to be easy,” says Arthur Cheliotes, president of CWA Local 1180.

His support for the Sandanistas aside, other union leaders are already questioning de Blasio’s leftist bona fides. They say he’s just another “Clinton Democrat,” which is something of an insult in liberal circles.

There are only three ways de Blasio might satisfy the unions.

One is deep cuts in basic services to make room for their demands. But that would be politically very unpopular.

Another would be to use fiscal gimmickry to push costs into the future, such as long-term contracts reserving the biggest raises for fiscal 2016 or 2017. But that would only postpone the inevitable day of reckoning.

The third way out of the budget squeeze would be a big tax increase. De Blasio has already endorsed a hike that would collect an estimated $500 million a year, but that’s all earmarked to fund universal pre-kindergarten and expanded afterschool programs.

Moreover, it is unlikely that Albany will approve another tax hike-and certainly not one large enough to cover all the unions’ demands. Gov. Cuomo has already reneged on his no-tax-hike pledge and has twice extended a supposedly temporary state income tax hike of nearly 30% on incomes starting at $1 million. With his own re-election campaign looming in 2014, Cuomo has little reason to spend more political capital on yet another tax hike, even one that would only impact “wealthy” city residents.

Beyond the politics, another tax increase on the city’s high earners would also be bad policy. New York City is already too dependent on taxing high-earners. Over 50% of the city’s tax revenues come from people making more than $500,000. Such people’s incomes tend to fluctuate with market conditions. So when markets take a tumble, the city is unable to raise revenue when it needs it most. In fact, some 5,000 people are responsible for about 30% of the city’s income tax revenue. Such a volatile tax base is shaky ground on which to build progressive dreams.

Another problem is that Wall Street, while still the golden goose, is laying smaller eggs. Putting a greater squeeze on it now is unlikely to help it recover. Like it or not, Wall Street’s growth is essential to New York City’s budgetary stability because the city is so dependent on revenue from the financial services industry.

Finally, such a tax hike threatens small businesses who file individual tax returns, thus making it harder for new small businesses to flourish.

So de Blasio will face a tough choice once in office. Either he can take some very risky political and fiscal decisions to try to placate the unions or he can take a tougher line against them than his campaign has so far suggested he would. It is a choice between favoring the small slice of New Yorkers who happen to work for government over the vast majority who don’t.

If de Blasio sides with the majority and fights the unions, he will split the progressive coalition in two.

Some liberals and union leaders will applaud his righteous intentions and argue that he is doing the best he can in light of the bad situation Bloomberg handed him. But others will attack him as a class traitor for reneging on his campaign’s theme, if not its explicit promises, and argue that he has been corrupted by big business and real estate interests.

At bottom this intramural battle will be over whether liberals can have both a city government that provides the middle class with effective basic services at an affordable price and collective bargaining and unionization of that government.

In sum, de Blasio’s election will test the proposition whether liberal urban governance and fiscal prudence can ever, for very long, be combined.

Original Source:



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