June 18, 2023 | 7:05 p.m.
Retired city workers are understandably upset that the city is changing their health insurance, forcing them to adopt a plan with less flexibility starting in September.
But they shouldn’t be surprised: something had to give.
Our retirees are doing well — so far.
Mayor Eric Adams registered the new contract last week with health care provider Aetna to begin administering the less generous Medicare contract in the fall, overriding Comptroller Brad Lander’s objections.
Thanks to a higher federal subsidy for the new Advantage plan, as well as stricter rules for specialty and other tours, the city expects to save $600 million a year.
Pensioners don’t like it.
But they can’t blame Adams.
They can blame their union leadership: two years ago the municipal labor committee, a group of union leaders, agreed with then-mayor Bill de Blasio to make the change, as part of a long-standing commitment to reducing health care costs.
The teachers’ union dominated the leadership vote.
For what? Realism: Even this union understands that the money is not infinite and that it must help find savings somewhere to fundraise for current workers.
Days before Adams registered the new retiree health care plan, the city and the United Federation of Teachers announced “substantial increases.”
Teachers will get increases of 17% over five years and a one-time bonus of $3,000, with annual bonuses reaching $1,000 in 2026.
The minimum salary for a first-year teacher will increase by more than $10,000 to $73,349; after eight years, instead of 15, all teachers will earn six figures.
The increases are not the problem.
This is the best the city can do in a high inflation environment.
But the teachers’ contract marks the biggest deal Adams has made with nearly every union in the city, including the police.
Most include substantial increases in starting salary, as well as bonuses, with no return in terms of additional work required or additional responsibility for performance in return.
Agreements are expensive.
The city added $16 billion to the budget over five years to pay for them. This year, the additional cost is $1.7 billion; by 2027, it will be $4.8 billion.
At the same time, the city plans to spend an additional $4.3 billion on migrants by the end of next year – a challenge the mayor himself created by trying to do the impossible: be the only city on Earth that provides on-demand shelter to the entire world.
Thanks to new labor agreements and “asylum” costs, Adams isn’t even close to signing a fiscal year 2024 budget deal with the city council by the end-June deadline of the next week.
The council and mayor fail to agree on offsetting cuts from the $108.3 billion plan.
And the projected deficit for following summer went from $3.2 billion to $4.2 billion. Add another billion to that, if migrant costs continue to soar.
Such deficits were manageable when the city’s commercial property tax base was steadily growing and Wall Street was booming.
But financial firms from Citigroup to Goldman Sachs are laying off thousands of people and offices remain mostly half-empty, meaning big losses in value.
There’s no room to raise taxes: Governor Kathy Hochul just raised New York City’s corporate taxes by $1.1 billion a year, for the Metropolitan Transportation Authority.
Next year it is set to implement the billion-per-year congestion pricing scheme.
Both are massive upsides for doing business.
Current city government employees may not worry about the fate of their retired predecessors – they prefer their own raises and don’t seem to have much sympathy for a generation that has had a much easier time hoarding the equity in his home and to pay for the children’s education.
And the new Medicare plan isn’t so bad, given that private-sector retirees don’t have a former employer to fund their health care.
They pay for health insurance themselves, and people who retire before age 65 find their own health insurance.
But current workers should also consider how easily the city downgraded the retiree health care plan.
Unlike pensions, the state constitution does not guarantee any retiree health care.
Because the benefits are not subject to a constitutional guarantee, the city hasn’t bothered to put a lot of money behind its health care promises – it has racked up a $90 billion gap between what she promised and what she saved to pay for those future costs.
The only thing that stands between the retirees of the city and No taxpayer-funded health care is city law, easily changeable in times of fiscal crisis — and union leadership.
Union members would be cautious to watch who their leaders – and implicitly the city workers themselves – have chosen this time around.
Nicole Gelinas is editor-in-chief of the City Journal at the Manhattan Institute.