The Chief
January 5, 2001


Is Cheapest Deal Really Best?

Mayor Giuliani's ability to persuade District Council 37 to accept a two-year wage freeze in its 1995 wage contract, and then to lock other municipal unions into that pattern after the DC 37 deal was fraudulently ratified, became a major factor in the city's prosperity in recent years.

The unions had hoped to take advantage of that prosperity in the current round of bargaining to make up ground their members lost to the tight budgets caused by a faltering economy in the first half of the 1990s. While calls for "makeup raises" rarely have much resonance outside union halls, two powerful unions, the United Federation of Teachers and the Patrolmen's Benevolent Association, seemed to have compelling arguments for raises well above the inflation rate, given the problems the city has experienced in attracting and retaining qualified employees in those areas.

The Mayor last week continued to deny that such problems existed, claiming that it was merely union "spin" meant to make a case for a windfall. That may be Mr. Giuliani's own spin as he strives for the cheapest contracts possible; he noted during his year-end sitdown with the news media that the city is facing "big deficits" beyond the current fiscal year in no small measure because of the raises it granted unions in the final three years of their recently expired contracts.

Some Mayors might be willing to risk relatively generous wage deals that could ultimately force them to raise taxes if the economic picture did not improve. Mr. Giuliani is not one of them, however, and the city already has lost one significant source of revenue with the state's elimination of the commuter tax two years ago. The Mayor last week said he hoped President-elect Bush would succeed in cutting both income taxes and the levy on capital gains; the short-term impact of such cuts would be to further limit the city's ability to pay its work force better.

And while there has long been a consensus among the unions that the UFT and PBA were best positioned to set a favorable wage pattern, it has become increasingly likely that neither of those unions will get the chance to do so.

The UFT is in a bargaining stalemate that is partly a consequence of its differences with the Mayor on the issue of merit pay. The freeze in the talks also stems from the sour relationship between Mr. Giuliani and UFT President Randi Weingarten touched off by her enthusiastic endorsement of Hillary Clinton for Senator at a time when the Mayor also planned to seek that office.

PBA President Pat Lynch was given a six-month head start by other uniformed union leaders to make a deal they all would try to replicate. But by putting him on the clock in that fashion, the other unions sent a signal to City Hall that they were ready to leap-frog the PBA if its bargaining failed to ignite. This was not the best way to play contract poker, since it gave city officials an indication that they might not have to beat the best hand to win the round.

Surely the other unions know that. But there are also understandable reasons, beyond impatience, for their reluctance to simply sit back and let their destiny be determined by the PBA talks.

A large one was Mr. Lynch's retainer of Bob Linn, Ed Koch's former chief negotiator, to argue the PBA's case. When he worked for the city, Mr. Linn was a skilled, creative negotiator, and his deal that led the police and fire unions to trade in their Variable Supplements Funds has saved the city $4 billion and counting.

But union leaders remember only too well that this very deal with the PBA in 1988 put the rest of the uniformed unions at a bargaining disadvantage because it was structured in a way that punished unions whose members stayed in their jobs longer than the average Police Officer. Whatever hard feelings may still linger toward Mr. Linn--a misplaced anger, since his mission then was to make the best possible deal from Mr. Koch's standpoint, not theirs--are compounded by the concern that he could very well use the PBA's stronger bargaining case to once again get a contract that rewards that union's members at the expense of other uniformed employees.

That is a large reason the uniformed forces coalition is moving ever closer to a deal with the Giuliani administration. It might not be the maximum possible wage hike, but settling first would offer those unions the security of not being boxed in once again by the PBA.

Their suspicions could ultimately work to the Mayor's advantage. A question remains, however, about whether getting the cheapest possible deal this time and thwarting the grander goals of the UFT and the PBA will ultimately benefit the city.

During the same round that he agreed to those constricting uniformed union deals, Mr. Koch authorized Mr. Linn to give city nurses contract terms that exceeded those won by other unions, including the PBA. There was no political advantage to doing so; in fact the uniformed unions were his staunchest labor allies. Rather, that was one of those cases where Mr. Koch became persuaded that the shortage of qualified nurses was so severe that only by stepping outside the basic bargaining pattern could the city hope to compete with neighboring jurisdictions in recruiting and retaining qualified personnel.

Mr. Giuliani prides himself on being an unconventional politician. It remains to be seen whether in the area of collective bargaining that unorthodox streak will be confined to squeezing all the available dollars from the unions during his first administration to balance his budget, rather than using it to solve longterm compensation problems.