New York City’s Fiscal Crisis Can’t Be Solved on the Backs of Its Working Class

If New York City is going to avoid catastrophic austerity measures in response to the COVID-19–induced fiscal crisis, the city’s municipal unions will have to summon a fighting spirit that has been missing for a very long time.

With New York’s contact-intensive economy suspended, hundreds of thousands of workers were unemployed or thrown into the uncertainty of indefinite furlough. (Marc A. Hermann / MTA New York City Transit)

The COVID-19 pandemic has killed nearly twenty-five thousand New York City residents. The worst of the public health crisis may have passed, but its dire toll has triggered a second crisis. Shutting down huge swaths of the economy was necessary to save lives, but the deep freeze on economic activity has plunged the city into its worst fiscal crisis since the troubled 1970s.

Then as now, municipal workers and their unions are in the crosshairs. If the city’s economic and political elites have their way, labor will pay for the crisis againjust like it did in the 1970s.

A Fragile Giant

New York City’s economy was particularly vulnerable to a deadly pandemic. COVID-19 thrives on close interaction, and so do many of the city’s leading industries: personal services, tourism, leisure and hospitality, food and drink, education, health care, entertainment. In normal times, millions of workers travel to and from the city daily to work in densely packed offices, ride crowded elevators, crush against each other in subways and buses, and pack bars and restaurants.

With New York’s contact-intensive economy suspended, hundreds of thousands of workers were unemployed or thrown into the uncertainty of indefinite furlough. While employment has begun to rebound, about 16 percent of the city’s workforce was still unemployed in late September, twice the national average.

Medicaid enrollment has increased nearly 10 percent since February and SNAP (food stamps) recipients increased by more than 12 percent. And of course the city is paying for a sharp increase in staffing in the public hospitals, personal protective equipment (PPE), ventilators, testing, and other coronavirus needs.

Unemployment is up, tax revenues are down, and emergency expenses are still necessary. In June, Mayor Bill de Blasio and the City Council passed a fiscal year 2021 budget that cut overall spending by $5 billion from the previous fiscal year. The city made immediate cuts to trash collection, composting, and the Staten Island Ferry, and it kept most public swimming pools closed for the summer. But this is only a small taste of what could come under a post-pandemic austerity program.

The FY 2021 budget’s $5 billion cut doesn’t even include the truly crucial number for New York’s 325,000 municipal workers — the additional $1 billion in labor savings the city says it must find in order to avert 22,000 municipal layoffs.

“Hard Choices” for Whom?

The city needs to balance its budget if huge service cuts and layoffs are to be avoided. The question is which choices will be made, and who will pay for them?

For New York’s business elite and their mouthpieces, the answer is easy: unionized municipal workers and working people in general. The Citizens Budget Commission (CBC), an influential business-backed “fiscal watchdog” group whose “nonpartisan” budget analysis shapes public debate, called for “Hard Choices” to shore up the city’s finances. To anyone familiar with the CBC, its recommendations are hardly surprising: cuts to services, cuts to the unionized workforce, and shifting health care costs from the city to employees, among other measures.

While the CBC does not call for layoffs, it proposes a sharp pace of attrition, filling just one of every three vacancies over the next two years. It wants to eliminate the Absent Teacher Reserve, popularly known as the “rubber room” or “teacher jail,” which would permanently lay off hundreds of “excessed” union teachers. Since many teachers end up there without explanation or justification, this would amount to an unfair denial of their due process rights under the contract.

“Premium-sharing” for health insurance would save the city $700 million each year. Nearly all New York City employees and retirees currently do not pay premiums for health insurance, which also includes their dependents — a benefit that most American workers can only dream of.

The CBC wants retirees to pay 16 percent of their pre-Medicare insurance premiums and 25 percent of Medicare Part B and Supplemental Medicare coverage. This would cost pre-Medicare retirees $2,500 annually and Medicare recipients $800.

Current city employees with salaries below $65,000 would contribute 6 percent of premiums for single coverage ($575 per year) and 8 percent for family coverage ($2,000). Those with salaries above $65,000 would contribute 14 percent for single coverage ($1,350) and 16 percent for family coverage ($4,000). For years the unions have traded higher wage increases for maintaining the zero-premium health benefit, so any cost-shifting to employees has a real impact, particularly on the lowest-paid workers.

In 2014, Mayor de Blasio and the municipal unions struck the first “health savings agreement,” aimed at reducing insurance costs without implementing premiums. They struck a second such agreement in 2018, and these deals have allowed them to wring out billions in savings through measures like raising co-pays for emergency room visits and terminating coverage for ineligible dependents.

Since the low-hanging fruit was picked in 2014 and 2018, it’s possible that concessions on zero-premium insurance could actually be on the table this time around. That would be a major victory for the budget hawks at the CBC and in the business community, who have been pushing to shift the cost of health insurance on to labor for decades. They consider the zero-premium benefit an unjustifiable expense precisely because it’s so rare. In their view, since most other workers in the United States pay premiums, New York’s municipal workers should too.

What’s the Alternative?

Mayor de Blasio, city council members, and the municipal unions have called for the governor to give the city long-term borrowing authority to plug budget gaps, something it hasn’t had since the imposition of financial controls by the state during the 1970s fiscal crisis. But business interests and budget hawks in both parties are strenuously opposed to taking on debt. For them, this would signal a return to the bad old days of the 1970s, when New York was supposedly led to ruin by runaway welfare spending and overpaid municipal workers.

In addition to borrowing authority, the union-backed Strong Economy for All Coalition is also calling for tax increases on billionaires and millionaires at the state level. Those increases would prevent the state from cutting billions of dollars in aid to schools and local governments, including New York City. The unions are also proposing an old standby for hard times, an early retirement incentive for state and local government workers, to reduce the workforce without layoffs. Along with Governor Andrew Cuomo and Mayor de Blasio, they are also calling for federal aid to close budget gaps.

It’s clear, however, that Washington won’t be coming to New York’s rescue as long as Donald Trump is in the White House and Republicans control the Senate. Even if Joe Biden becomes president and the Democrats make gains in Congress, it’s not guaranteed that the city would receive enough federal aid to avert a deep austerity program. Biden’s closest advisors have already signaled that they think the federal “pantry is bare” because of the Trump tax cuts, and that a massive increase in federal spending is not forthcoming.

The force of events may change their perspective, but Biden’s long record as a fiscal moderate does not inspire confidence that he will spend what’s needed to keep state and local governments out of budget hell.

Unfortunately, the city is not the master of its own fate. That power lies, to a significant extent, in the hands of Governor Cuomo and the state legislature’s Democratic Party majority. If the city is to take on debt, raise taxes on the wealthy, and otherwise avoid an austerity program, it must get authorization and support from the state.

One might think this would be easily forthcoming, considering the fact that all the most important political figures here are Democrats. But Governor Cuomo and Mayor de Blasio can’t agree on the time of day, much less the right fiscal policy, and the state is facing its own serious budget crunch. The governor and many of his closest allies have already announced their opposition to soaking the rich, on the false grounds that they will leave for greener pastures in other states.

For its part, the state legislature’s Democratic majority includes an exciting new crop of democratic socialists and other progressives, but also many suburban moderates who have ridden the wave of anti-Trump sentiment into office. They may not be willing to send enough help to a city that many of their constituents believe, against all evidence, is falling into violent chaos.

Where’s Labor?

As the 2020 school year approached, it briefly looked like a previously unthinkable event might come to pass: a public schools strike. This was because of the dogged organizing of activists in the Movement of Rank-and-File Educators (MORE), the reform caucus in the giant city teachers union.

The union’s Delegate Assembly scheduled but ultimately did not carry out a strike authorization vote because the leadership hammered out a reopening agreement with the mayor before the meeting. But rank-and-file members have continued to organize, and their organizing for a sickout and other actions showed their ability to mobilize members for worker and student safety.

Aside from these actions, and some public health worker demonstrations for increased funding and PPE, the municipal labor movement has been rather quiet. AFSCME (American Federation of State, County, and Municipal Employees) District Council 37 and other unions held a rally against layoffs in September, but like most of the city unions’ labor rallies, it went largely unnoticed. Despite the scale of the crisis, it appears as if New York’s labor establishment is turning once again to its well-worn playbook of behind-the-scenes lobbying, politicking, and dealing.

The uncomfortable fact is that New York’s municipal labor movement is, with some notable exceptions, hidebound and risk-averse. Union membership in the public sector remains very high, and the collective bargaining system has not been dismantled.

The city’s system of labor relations has largely been preserved: a labor-management partnership in which deals are hammered out at the top with little in the way of membership participation or collective action. This has insulated the municipal unions from the worst effects of the national anti-union offensive, but has tended to make leaders inward-looking and resistant to change.

This situation stems, to a significant extent, from the resolution of the 1970s fiscal crisis. New York’s municipal union leaders still talk about how labor “saved the city” by buying municipal bonds with pension funds and accepting massive contract concessions: layoffs, wage freezes, benefit cuts, and, in future contracts, the linkage of wage increases to productivity gains.

The unions eventually regained their membership numbers, supported by the passage of New York State’s 1976 agency shop law. But these measures and those that followed tended to draw union leaders closer to public officials and away from their own members and the people they serve.

New York Is Not Over

New York City is not “over,” as so many commentators have recently claimed. But it will probably be different, now that we know that many workers, particularly white-collar office workers, can work remotely and don’t need to fill Manhattan’s mammoth office buildings every day. If they don’t come back in big numbers, workers in retail, restaurants and bars, and other service industries will continue to suffer even after the public health crisis is resolved.

With the future of New York’s economy in doubt, the labor movement has an opportunity to articulate a different vision for the city as a whole — one that is less reliant on the consumption spending of office workers, tourists, and the wealthy. But doing so will require many of the city’s unions to adopt a different approach, one that is proactive instead of defensive, activates the dormant power of member action, and embraces the common good in addition to their own needs and interests.