Government revenues of all types — sales and income taxes, tolls, transit fares, casino levies, lotteries, you name it — are dropping further and faster than at any time in history, thanks to unprecedented emergency restrictions imposed to minimize the spread of the coronavirus.
But while the federal government can effectively print money to finance deficit spending on huge stimulus and bailout packages, our state and local budgets must be balanced.
It’s painfully obvious that all those budgets will have to be cut, and by a lot.
There’s an obvious place to start in New York: Freeze state and local government employee pay. The combined estimated savings for every level of government could at least be a down payment on the massive reductions that will be necessary in the year ahead — and probably for years to come.
Consider the backdrop:
Compared to pre-pandemic forecasts, tax receipts in the year ahead are expected to drop at least $7 billion for the state government, $3.2 billion for New York City and up to $1 billion for county governments.
Hundreds of thousands of New Yorkers are losing their jobs. Thousands of Main Street businesses face bankruptcy. And those private-sector workers who remain employed will consider themselves lucky not to experience outright cuts in their pay and hours.
But in the public sector, the outlook is very different.
Under current union contracts and civil-service rules, the vast majority of state and local government workers across New York can expect to receive pay increases this year — and next, and in many cases the year after that, too. For many of these employees — including a sizable share of the nation’s best-paid teachers — an annual increase in base pay will be further increased by automatic seniority “step” increments.
As a provision of the state budget for the fiscal year that starts April 1, Gov. Cuomo and the Legislature can and should freeze all base pay and scheduled incremental raises for all state and local government employees.
The temporary freeze period initially should extend at least through mid-2022, to cover counties and municipalities with different fiscal calendars and allow for a further one-year freeze if the Legislature finds that fiscal emergencies continue to exist. It also should include an important escape clause: a provision allowing unions to avoid the freeze to the extent they agree to other contract changes that demonstrably yield the same savings on a recurring basis.
This would be a broader exercise of powers the state has authorized in the past on a more targeted basis — starting with the New York City fiscal crisis, and most recently for control boards overseeing Buffalo and Nassau County.
Previous pay freezes were designed to help close budget gaps that brought municipalities to the brink of bankruptcy after years of spending beyond their means in slumping economies. The coronavirus is very different but more acute — as serious an emergency as New Yorkers have ever faced, outside wartime. It unfolded in the space of a few weeks, and its economic and fiscal consequences could linger for years.
It all adds up. Based on current collective-bargaining agreements and patterns, and assuming average annual pay hikes of 2 percent to current salary bases at all levels, scheduled public-sector pay increases over the coming year would total about $1.9 billion. The prospective pay raises include:
• $359 million for employees of state government, including SUNY and CUNY campuses.
• $753 million for employees of New York City.
• $137 million for MTA workers.
• $53 million for NYC Health + Hospitals employees.
• $415 million for employees of school districts outside New York City.
• $200 million for employees of counties, cities, towns and villages.
Basic fairness, as well as economic common sense, dictates that this spending should be put off. A savings of $1.9 billion over the next year won’t be nearly enough by itself to close the gaping holes in government budgets. Other cuts will surely be necessary as well.
But a pay freeze is a good way to preserve government jobs and public services that would otherwise be jeopardized as a result of spending cuts that will now be absolutely essential to balance state and local budgets.
Cuomo has said the coronavirus requires a “wartime dynamic.” In wartime, business as usual needs to end — in both the public and private sectors.
This piece first appeared at the New York Post
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E.J. McMahon is an adjunct fellow at the Manhattan Institute and research director at the Empire Center for Public Policy. Follow him on Twitter here.
This piece originally appeared in New York Post