New York City's most recent budget plan is credit negative, said Moody's Investors Service, which cited the effect of the proposed contract settlement with teachers on out-year budget gaps.
The $73.9 billion plan, which Mayor Bill de Blasio announced on May 8, more than doubles the city's forecast budget gaps for fiscal 2016 and 2017, and triples the gap for fiscal 2018.
"The plan is credit negative because it shows how personnel costs drive the city's budget and challenge its finances, even in a strong economy," Moody's said in its weekly credit report May 8.
Moody's rates the city's general obligation bonds Aa2. Fitch Ratings and Standard & Poor's rate them AA.
On May 1, de Blasio announced a tentative agreement on a contract for teachers that would include retroactive 4% pay increases each for 2009 and 2010 for employees who remain with the city during fiscal 2015 through 2021 and for retirees during that period, which will be paid between fiscal 2015 and fiscal 2020.
The contract also includes a 10% total base wage and salary increase through fiscal 2018.
With more than 100 city unions working without a labor contract, the teachers' deal could be a prototype.
"The city has a history of 'pattern' bargaining, in which raises for one union are what other union members agree to, and the newly released budget assumes that outstanding contracts will include the 10% wage increases," said Moody's.
