New York City could save $535 million in fiscal 2015 by requiring city employees and retirees to contribute to health insurance costs, a watchdog agency said.
The city could save a further $316 million by pegging health insurance reimbursement to the lowest-cost carrier, the Independent Budget Office also said in a 98-page report issued Thursday morning.
IBO examined 92 ways for the city to reduce spending or raise revenue, and presented pros or cons for each option without taking sides.
It moved up the timetable for its 13th such report given that new Mayor Bill de Blasio will take office in January. In addition, about one-third of the 51-member City Council will be new, along with public advocate Letitia James, comptroller Scott Stringer and four of the city’s five borough presidents.
“While the Bloomberg administration’s recent budget plan presents a balanced budget for the upcoming fiscal year, Mayor-elect de Blasio and the incoming City Council face no shortage of fiscal challenges—from expired labor contracts to cutbacks in federal aid,” said IBO director Ronnie Lowenstein.
Negotiating city worker and teacher contacts will pose a major fiscal challenge for de Blasio. Some contracts expired as far back as five years ago.
“I’ve said it before, but union employees have to pay something. There’s no more free lunch. The city is drowning in pension contributions,” said Anthony Figliola, vice president of Empire Government Strategies of Uniondale, N.Y.
According to Figliola, Tuesday’s ruling by federal Judge Steven Rhodes that Detroit can cut pensions under Chapter 9 bankruptcy despite state constitutional protections could ripple throughout the United States.
“Detroit’s huge. If those municipalities weren’t paying attention to Central Falls, they should definitely pay attention to Detroit,” said Figliola. Central Falls, R.I., cut retiree benefits by up to 55% during its 13 months in bankruptcy before exiting in September 2012.
IBO budget options include service reductions, labor savings, tax increases and the elimination or reduction of tax breaks, and fee and fine changes. IBO said its role is to analyze, not endorse.
Moody’s Investors Service rates New York City’s general obligation bonds Aa2, while Fitch Ratings and Standard & Poor’s assign AA ratings.
According to IBO, budget uncertainty extends well beyond labor negotiations.
Bloomberg’s plan for fortifying the city’s resistance to future storms such as Hurricane Sandy will probably exceed $20 billion, and from where that funding will come is still up in the air.
Federal cutbacks may also put increasing fiscal pressure on the city as local officials, service providers, and advocates press to maintain services previously supported with dollars from Washington,” IBO said.
Although many of IBO’s options return from previous reports, its latest edition includes 12 new options for savings through changes in service provision and labor rules.
They include eliminating city paid union release time, which could save $23 million in fiscal 2015; making new city workers eligible for holiday pay only after 90 days ($11 million); requiring all new Education Department staff to meet the same residency requirements and tax rules as other city workers ($3 million); and sharing one parent coordinator and general secretary among co-located schools ($50 million).
New options for raising revenue include freezing the phase-in of the single sales factor as a basis for taxing businesses at 2013 allocation percentages ($57 million); and creating a new real property transfer tax bracket for high-value residential properties ($34 million).