SHARED sacrifice by all, for the good of the country. That has been the theme of President Obama’s approach to the economic crisis. Everyone must do their part.
In the private sector, that same message has led labor and management to work together to find cost savings that can save jobs – and keep companies open for business. As part of the auto industry’s restructuring, for example, many auto workers – those who still have their jobs – have accepted reductions in health-care benefits and a shorter work week. Such changes are happening across the country in nearly every industry. Companies are taking these painful steps because they have no choice: They must cut their expenses. The same is true for city and state governments.
When times are good, members of labor unions share in the benefits. In New York City, we’ve raised salaries substantially and made them competitive with suburban counties.
But when times are tough – when even spending on police, fire and education must be cut – the public has a right to expect labor unions to be part of the solution.
Our administration is asking labor leaders to agree to modest pension and health-care reforms that will save taxpayers money and allow us to limit layoffs, service reductions and tax hikes – while still leaving current and future city employees with among the most generous benefits in the nation.
The city offers its employees pension benefits that very few other Americans enjoy. For police officers and firefighters, this means they can retire at half-pay – free from city and state taxes – after only 20 years of service, regardless of age.
But, at a time when people are living longer and longer, we can no longer afford to hire uniformed workers who will start collecting full retirement benefits in their early 40s. Nor can we continue allowing new hires to avoid making contributions to their pensions, as happens now.
In the private sector, employees contribute to their 401(k) plans and pension funds (if they’re offered retirement benefits at all) throughout their careers. But employees of New York City stop paying after 10 years – and even during the first 10, many uniformed workers have their contributions covered largely by the city.
Our proposed pension reforms, which Gov. Paterson has included in his executive budget, would create a minimum retirement age of 50 for uniformed workers hired in the future. We also propose requiring all uniformed and civilian employees hired in the future to contribute to their pensions throughout their careers. These two critical steps are the core of the reforms that would save the city $7 billion over the next 20 years – beginning with $200 million in the next fiscal year. That’s $200 million in taxes we don’t have to raise and services we don’t have to cut.
We’ve also proposed modest health-care reforms that ask city workers – who now contribute nothing to basic coverage – to pay 10 percent of their premiums, a level far below many private-sector workers.
These pension and health-care reforms would save the city more than $750 million a year. To put that in perspective, that’s the equivalent of hiring 8,600 police officers.
We are hopeful that the state Legislature will take action on pension reform, and that labor leaders will work with us to achieve health-care savings, so that we can avoid the kind of debilitating layoffs the city faced in the ’70s. Back then, the Legislature stepped up and passed pension reforms that helped save the city from fiscal ruin. Now, it’s our turn to show that kind of courage.
Our administration has already cut $2.5 billion from city spending since 2008, and we’ve cut from every area except one: employee benefits, which are growing far beyond the rate of inflation. For instance, in 2000, the city paid $700 million for pension costs. In the coming year, we’ll have to spend $6.5 billion.
Without reducing our pension and health-care bills, we could be forced to make cuts that could jeopardize the incredible progress we have made in driving down crime 28 percent over the last seven years, raising graduation rates by more than 20 percent and improving the quality of life in all five boroughs.
Our administration looks forward to working with the Legislature and labor leaders in the weeks ahead to deliver the kind of change that reflects the president’s call for shared sacrifice. In this new era of responsibility, every group must be part of the solution to the severe economic problems we face. By working together and sharing the load, I believe we can pull our city out of the recession – and wind up stronger than ever.
Michael Bloomberg is mayor of New York City.