Eye on the News

Nicole Gelinas
The Benefits Storm
Why New York can’t afford enough sanitation workers to clean up the snow
4 January 2011

On Sunday, Bloomberg’s Blizzard saved a suicidal Hell’s Kitchen man who jumped nine stories, not to his death but into a cushion of trash bags, which hadn’t been picked up because the previous week’s snowstorm had postponed trash collection. Coming a few weeks before budget season starts, could the storm also save New York from its suicidal spending? Only if state and local politicians identify the true culprit behind the botched post-storm cleanup: the misguided idea that management expertise can overcome the benefits costs that are consuming the city budget.

If money could melt snow, Mayor Bloomberg would be basking in victory over the storm. When he took office in 2002, Gotham spent $1.3 billion annually on the Department of Sanitation. Today, the city spends more than $2.2 billion on “New York’s Strongest.” That increase during Bloomberg’s tenure was almost three and a half times the inflation rate. It follows that we should have a sanitation army well equipped to clean the white stuff up fast. Not quite. Today’s budgeted sanitation force—from supervisors to garbage collectors—is 392 people smaller than it was nine years ago, a 4 percent decline even as population is up. And the department is shrinking further, as Deputy Mayor Stephen Goldsmith knocks 200 people off the rolls to save $21 million by moving supervisors into front-line jobs.

So where has the city’s swelling sanitation budget gone? Not into better services but into workers’ health care and pensions, as well as borrowing to fund infrastructure, which would otherwise be unaffordable because of those sky-high benefits. Taxpayers now spend $144,000 on salary and benefits for each sanitation worker, up from $79,000 nearly a decade ago. Nine years ago, taxpayers contributed about $10.5 million annually to support sanitation pensions; this year, they’ll cost $240 million—a more than twentyfold increase (the final number may be lower, though, as some changes to the pension funds, which push up contribution rates, may not go into effect until next year).

As for sanitation debt, it has grown from $119.6 million in 2002 to $265 million today. Borrowing is fine if you use the money to improve productivity or to serve a growing population. In recent years, for example, New York has borrowed $355 million to invest in two garbage-transfer stations, and it will soon borrow $230 million for similar investments, according to the city’s Independent Budget Office. New York is also borrowing $370 million to build a new garage for sanitation trucks on the West Side of Manhattan. But borrowing without benefits reform just helps the city avoid the reality of its enormous personnel costs.

Bloomberg knows full well that public workers’ benefits are creating a permanent crisis for Gotham, as pension and health-care bills consume resources that should be paying for city services. As the mayor has said, “The time has come to bring our municipal pension system in line with reality. . . . It’s costing taxpayers a fortune, and they’re not getting any services or benefits from it.” The problem is that Bloomberg made that observation two years ago. Sanitation and other uniformed workers continue to retire after just 20 years, with overtime money to pad their pensions. To be fair, the mayor has stopped giving out big raises without asking workers for anything in return—and he does need Albany’s help to curb the pension madness (though not to rein in the health benefits).

But to Gotham’s detriment, the mayor’s chief plan has been to try to manage the impossible. That is, he’s chopping spending on actual services and investment, bringing in people like Goldsmith—who achieved a reputation as an urban innovator as mayor of Indianapolis—to figure out how to do it wisely. New York should certainly ferret out waste, fraud, and abuse, and better manage costs and staffing, too. But that strategy won’t be enough to solve the city’s budget woes. Plus, the snowstorm has made it obvious that New York hasn’t perfected public-sector management to such an extent that it can cut spending to feed the benefits monster without harming the public.

Nor are other management panaceas, such as privatization, going to save us from reality. The mayor could try to privatize residential sanitation, for example—but that would require more public-sector competence, not less, than doing it the old-fashioned way. City hall would have to make sure, for example, that bidders were competing and not colluding. During Bloomberg’s administration, the city’s contract with a private vendor to build a new payroll system has resulted in massive cost overruns and $80 million worth of alleged kickbacks. Privatization may work in certain circumstances, but it isn’t an easy answer to New York’s fiscal problems.

In fact, Bloomberg has things backward. Because public-sector management perfection won’t be arriving soon, counting on it to save the budget is a recipe for disaster. Instead, we need to fix the retirement benefits so that we can afford the inevitable public-sector inefficiencies. And it isn’t just the inefficiencies that we need to spend money on; it’s projects that are crucial to the city’s future health. A month ago, the mayor asked city agencies to plan for 20 percent cuts in investment projects—everything from fixing bridges to, well, buying garbage trucks. These cutbacks won’t be as obvious as dirty snow, but they will certainly harm New York’s growth.

Bloomberg should direct his innovators to focus on where the money is, reducing taxpayers’ commitments to pay future retiree benefits before they consume even more of the budget. He could run a media campaign, for example, to help the public understand that Governor Andrew Cuomo must do wholesale pension change so that new workers, not taxpayers, take more responsibility for their retirements. Further, as union workers would chafe under a serious effort to pare back health benefits in future contracts, the mayor needs an old-fashioned labor-wars veteran to make sure that employees aren’t executing stealthy work slowdowns, as some sanitation workers may have done last week.

There’s no time to waste. Over the next three years, benefits costs will grow by another 8.1 percent annually; debt will grow by 9 percent. Meanwhile, the services that people need will deteriorate. We don’t need another blizzard to figure out that this isn’t working.

Nicole Gelinas is a contributing editor to the Manhattan Institute’s City Journal.

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