Mayor’s $3.5B Surplus Set Aside A Wise Move
During the recent labor negotiations between the Metropolitan Transportation Authority and the Transport Workers Union, the issue standing in the way of a settlement was a proposal by the MTAto give future transit workers less health care coverage than that of their present brethren.
Likewise, at the start of new contract talks with the city’s largest municipal union, 1 million member DC 37, the Bloomberg administration said a reduction in pension costs might be necessary because the costs of entitlements which the city gives its employees are becoming unaffordable.
In both cases, the unions involved strongly resisted giving up benefits they had fought hard to win during years and years of bargaining sessions.
For many years in the recent past, a strong trend has steadily developed in private industry to take away the pensions of hundreds of thousands of workers and retirees, leaving most of them without the funds that had been expected to provide them and their loved ones with many happy retirement years.
Mayor Michael Bloomberg, in his budget presentation several weeks ago, indicated awareness of both this upsetting trend and future budget deficits. He wisely proposed a revised four-year financial plan for the city calling for using an unexpected surplus of $3.5 billion to address long-term health care costs, paygo capital and debt reduction.
Almost half the surplus—$2 billion— would be placed in a trust fund as a down payment on future health care costs for city retirees.
“We must seize this opportunity, marshal our current resources and work with our partners in government to make the structural changes necessary to the city budget to put our city on track for long term growth and fiscal stability,” the mayor added in the budget message.
Previous mayors confronted with similar surpluses have had almost knee jerk reactions, allotting the funds to areas that could have been covered in the normal course of budget-making.
Indeed, there were some suggestions that the mayor follow that same course. This might have served a legitimate purpose, but would not have exhibited the same foresight.
Most officials in and out of government who opt for other uses for surplus do not come from the same business background as the mayor. The Mayor’s budget surplus proposal reflects his business acumen and the same instincts that guided him in starting a business venture from scratch and developing it into a successful, ongoing, very profitable enterprise.
City Council leaders, reacting to the mayor’s proposal, stated they would study it before making a decision on it. The Gazette believes they should approve it for the same reasons which motivated the mayor to make it in the first place.
As he pointed out in his budget message, “Despite the city’s strong economy and fiscal stability, significant risks exist in the out years.”
Among these are the anticipated growth in government spending in near future years and the reality that pensions and fringe benefits now consume more than 62 percent of the total salaries for municipal employees and there are projected gaps of $3.5 billion in Fiscal Years 2008 and 2009.
The mayor concludes: “Without long-term solutions to these recurring problems and structural shortfalls, the city will be plagued by a continuous boom–bust cycle that invariably causes painful budget cuts and tax increases.
The City Council will be looking at the same data as was the mayor when he proposed setting aside the $3.5 billion surplus. The lawmakers must come to the same conclusion and approve his plan.