That was fast. Last Thursday, Mayor de Blasio informed the United Federation of Teachers that the city couldn’t afford a $900 million bonus for union members. It took 24 hours for the union to knock this threat down — and wring a better deal from out-of-work taxpayers.
The state must step in.
How did New York City end up on the hook for a near-billion-dollar payment during the worst fiscal crisis ever?
You can thank de Blasio. In Mayor Mike Bloomberg’s final term, the global economy melted down — and Bloomberg told teachers that if they wanted raises, they would have to pay for them through work-rule or benefits changes.
The teachers waited Bloomberg out, and de Blasio delivered in his first six months. He offered a contract that included $3.6 billion in back pay.
Only problem: The city didn’t have $3.6 billion. The “thinking”: The city would surely have the money by, oh, say, October 2020. The city stretched out the payments over the six years, with payments getting bigger the further into the future they got.
Only other problem: State law forbids New York City from borrowing for day-to-day operating expenses, let alone borrowing for past operating expenses. And this is what this was. Consider: If you ask your neighbor to paint your house but tell him you can’t pay him for 12 years, don’t you owe him money? That’s debt.
The city got around this with a strange insistence that the bonuses weren’t back pay; they were, um, “lump-sum payments stemming from the 2009-2011 [bargaining] round.”
The state’s Financial Control Board, the body the state Legislature created after the 1975 fiscal crisis to ensure the city balanced its budgets, incorrectly signed off on this fiction.
Now, the city is broke, bleeding at least $10 billion in revenue — and, as Hizzoner’s deputy wrote in a letter to the union last Thursday, making this last payment would be “fiscally irresponsible.”
The teachers weren’t in the mood to compromise. “We’re in for another fight,” UFT chief Michael Mulgrew vowed.
Mulgrew, in a fit of temper, destroyed the illusion. He said what the city and the union have refused to acknowledge for six years. He reminded his members that “those payments are overdue wages that go back to 2009 and 2010.”
That’s exactly right — and why the deal incurring this “overdue” debt, back in 2014, was illegal under the state’s balanced-budget law.
The UFT didn’t have to wait long for a victory. Friday, the city and the union sent this disagreement to a neutral third party, as agreed to under the unlawful contract. The third party, of course, said that the agreement says what it says: The city owes this money.
The arbitrator “gave” the city a little something, though: He said Gotham can delay $450 million of the $900 million payment to next July.
In return, the city must pledge no teacher layoffs until next June — and, if the city gets more than $5 billion in state or federal rescue money, it can’t lay off teachers until mid-2022.
Hard to believe, but this agreement is worse than the original unlawful agreement.
De Blasio has no idea what the budget situation will look like by next June. If layoffs are necessary, it’s not the teachers’ union that should decide that teachers should be immune, while sanitation workers and EMTs shoulder an even bigger burden.
Yet this agreement binds not only de Blasio, but the first six months of his successor.
So this fresh deal is just as prohibited, under state law, as the 2014 one was. New York City has now taken its six-year-old debt incurred for past operating expenses — and extended it nine months, into the next fiscal year.
The 1975-era law prohibits “an operating deficit of more than $100 million.” Contrary to de Blasio’s characterization of this fresh deferral as “savings,” a deficit — and a debt — is exactly what it is.
The city’s new no-layoffs prohibition, too, violates another tenet of state law: It “substantially impairs the [city’s] ability to . . . adopt or adhere to a balanced budget.”
It’s obvious that New York City can’t address its budget crisis. The state’s Financial Control Board, controlled by Gov. Cuomo, must step in.
The FCB should ask for state legislation to undo these unlawful concessions to the union — and to impose a blanket wage freeze, including for, as Mulgrew finally called them last week, these “overdue wages.”
Nicole Gelinas is a contributing editor of City Journal.