Wall Street Journal
Feb. 3, 2011

Mayor Broadens Target for Benefit Cuts

Mayor Michael Bloomberg broadened his challenge to city workers' unions Wednesday when his administration proposed eliminating an annual $12,000 bonus for current police and fire retirees and workers as part of an overall plan to create a new tier of less generous benefits for future workers.

Union officials accused the mayor of trying to damage the workforce's hard-fought pension system and unfairly burden workers with the city's fiscal problems. "We're going to fight the mayor all the way," said Harry Nespoli, chairman of the Municipal Labor Committee, an umbrella organization of city unions.

Last month, in his State of the City address, Mr. Bloomberg broadly outlined his plans to rein in the city's pension costs, which have skyrocketed to $7 billion this year, compared with $1.5 billion in 2001. At that time, the mayor said he would safeguard current city employees' pension benefits.

On Wednesday, Bloomberg officials met with the Municipal Labor Committee to outline the specifics of the pension proposal he's submitting to Albany lawmakers. The mayor proposed eliminating the $12,000 annual bonus to current fire and police retirees, as well as those currently serving in the NYPD and FDNY. In his State of the City speech, the mayor specifically proposed eliminating this bonus benefit to "future" retirees only.

A spokesman for the mayor, Marc LaVorgna, acknowledged the policy reversal.

"The proposal reflects the dire fiscal circumstances the city is in, the devastating impact of increasing pension costs and the desperate need for reform," Mr. LaVorgna said. "We just can't afford to pay for it."

The elimination of the bonus would save the city $200 million a year. By adding current retirees and employees, the city will save hundreds of millions more.

At the heart of the mayor's pension proposal is his call to create a new pension tier with fewer benefits for future workers. Some of the specifics include:

  • No longer letting employees count overtime toward their final salary calculation, a policy that currently lets many workers pad their pension benefits.
  • Altering the amount of time it takes for an employee to become vested. For example, most civilian workers and teachers become vested after five years; the mayor proposes raising that bar to 10 years.
  • Increasing employee contributions to the pension system. For example, teachers now contribute 4.85% for the first 27 years and 1.85% thereafter; the mayor proposes teachers should contribute 5% of salary every year of employment.
  • For members of the police and fire departments, the mayor also has proposed eliminating presumptions that a disability occurred on the job.

Patrick Lynch, president of the police union, said the annual bonus is the upshot of long-standing labor agreements that have "benefited the city immensely."

Michael Mulgrew, president of the teachers union, said most of the proposals won't yield immediate savings. He accused the mayor of doing "everything to disrespect" the unions.

Mr. LaVorgna said the city wants to negotiate pensions directly with the unions — just as it negotiates salaries and benefits — but is barred from doing so by state law. "The mayor has said the state needs to eliminate that restriction," Mr. LaVorgna said.