Fringe benefits for New York public employees include health insurance, pension contributions, and other supplemental compensation provided to the workforce in addition to base salaries. This page covers CBC’s work on rising health insurance costs, pension benefit expansions, union-administered welfare funds, retiree benefit liabilities, and strategies for achieving municipal labor savings.
This page was created with AICBC Insights uses AI to group, analyze and present data and recommendations from CBC's publications. Always reference the cited sources to verify important details..
The City should implement premium sharing for employee health insurance to bring benefits in line with other public and private employers.
The City should require pre-Medicare retirees to contribute to their health insurance premiums to reduce the annual cost of these benefits.
The City should work with the Municipal Labor Committee to consolidate welfare funds to leverage economies of scale for prescription drugs and other medical benefits.
The City should seek to eliminate or reduce City contributions to union annuity funds which are negotiated in addition to generous pension plans.
The City should seek State legislation to eliminate Variable Supplement Funds (VSFs) and transfer the assets to the main pension funds.
The City should sharply reduce the guaranteed return on the tax-deferred annuity (TDA) through State legislation to lower taxpayer-provided costs.
The City should reduce annual leave accrual or implement caps on how much leave can be carried forward and cashed out at separation.
Key Data
In the October 2025 report on City parks, the CBC noted that the City allocated $209 million for employee fringe benefits as part of the total $1.4 billion commitment for parks in the Fiscal Year 2026 budget.
The April 2023 report on the Department of Buildings stated that the agency's fiscal year 2023 budget included $60.6 million for fringe benefits as part of its centrally-allocated costs.
In the April 2023 report on the Department of Education, the agency's fiscal year 2023 operating budget of $31.2 billion included $4.3 billion for fringe benefits.
As of January 2023, health insurance costs for City employees and retirees were budgeted to increase at a rate of 8.5 percent per year between fiscal years 2023 and 2026.
New York State is being urged to veto 17 bills that would expand pension, disability, and death benefits for public employees, as these measures increase public costs without providing additional services or offsetting savings. These proposed benefit enhancements, which include 12 bills with estimated costs of at least $30.0 million immediately and $18.1 million annually, bypass the standard budget process and risk encouraging further costly expansions.
Recommendations related to Fringe Benefits
The Governor should veto the 17 bills because they increase costs to New York State and local governments outside of the budget process without enhancing public services or paying for them with offsetting savings.
The Governor should reject the eight bills that would enhance pension benefits for public employees, as these measures increase public costs without providing offsetting savings.
The Governor should reject the nine bills that would expand disability or death benefits for public employees, as these measures increase public costs without providing offsetting savings.
The Governor should avoid granting targeted benefit enhancements, as this encourages further expansions that also increase costs to the public.
Key Data
$30.0 million
— Estimate of immediate costs for 12 bills with complete fiscal notes.
$18.1 million
— Estimate of annual costs for 12 bills with complete fiscal notes.
$5.9 million
— Annual cost of S6486/A6942, which reduces the length of service requirement for Tier 3 members of the Unformed Sanitation Force and Uniformed Correction Service.
$3.9 million
— Annual cost of S4727/A5861, which reduces the length of service requirement for Tier 3 members of the New York City Fire Pension Fund.
Twelve legislative bills that would expand pension, disability, and death benefits for public employees should be vetoed to prevent significant unbudgeted costs to state and local governments. These proposals bypass the standard budget process and threaten to increase fiscal burdens without providing offsetting savings or improved services.
Recommendations related to Fringe Benefits
Veto S8472-A/A8918-A, which would establish a 20-year retirement plan for regional state park police, environmental conservation officers, forest rangers, and university police officers.
Veto S6141-B/A6508-B, which would provide additional retirement benefits for Suffolk County correction officers.
Veto S8855/A9646, which would allow certain United Federation of Teachers (UFT) members to join or transfer into the New York City Teachers' Retirement System.
Veto S8408/A9084, which would extend the “death gamble” benefit to retirement-eligible members of the NYSLRS employed as correction officers and security hospital treatment assistants.
Veto S7567-A/A9143, which would provide an in-service death benefit for retirement-eligible members of the NYSLERS employed as State-paid judges or justices.
Key Data
$90.1 million
— Estimated costs of at least this amount immediately for eight of the bills, with $16.9 million in annual costs thereafter.
$70.3 million
— Estimated cost in the first year for past service costs for the bill establishing a 20-year retirement plan for certain police and conservation officers.
$10.4 million
— Estimated cost in the first year for past service costs for the bill extending the death gamble benefit to certain correction officers and security hospital treatment assistants.
$5.5 million
— Estimated cost in the first year for past service costs for the bill providing additional retirement benefits for Suffolk County correction officers.
$3.9 million
— Estimated cost in the first year for past service costs for the bill providing an in-service death benefit for State-paid judges or justices.
$4.1 million
— Annual cost for the bill extending the death gamble benefit to transit Tier 4 and Tier 6 Special Plan members of the NYCERS.
The proposed change to Tier 6 pension benefits would cost the State and local governments nearly $400 million annually and impose an unfunded mandate requiring a $320 million increase in pension contributions next year. This expansion of retirement benefits is unnecessary and should be rejected, as current plans are already more generous than most private-sector alternatives.
Recommendations related to Fringe Benefits
The proposed change to Tier 6 pension benefits is unnecessary, expensive, and should be rejected.
Key Data
$400 million
— Estimated annual cost of the proposed Tier 6 pension benefit change to the State and local governments.
$320 million
— Increase in pension contributions for public employees next year alone due to the proposed change.
The New York City Fiscal Year 2024 Executive Budget includes a significant re-estimation of Department of Education fringe benefit costs, which accounts for 28 percent of the total recurring value of the Program to Eliminate the Gap. This adjustment reduced the projected growth of these benefits, which were previously budgeted to increase by 11.6 percent between fiscal years 2023 and 2024.
Key Data
28 percent
— The portion of the total recurring value of the Program to Eliminate the Gap that comes from re-estimating the cost of DOE fringe benefits.
11.6 percent
— The rate at which DOE fringe benefits were budgeted to grow from fiscal year 2023 to fiscal year 2024 before the PEG reduction.
$4.4 billion
— The amount DOE fringe benefits were budgeted at for fiscal year 2023 before the PEG reduction.
$4.6 billion
— The amount budgeted for DOE fringe benefits in fiscal year 2024 after the PEG reduction.
5.7 percent
— The annual growth rate of the fringe benefits budget through 2027 following the PEG reduction.
The New York City Fiscal Year 2024 Executive Budget for the NYPD includes $2.9 billion for fringe benefits as part of its centrally allocated costs. Additionally, the budget faces pressure from retroactive payments and new collective bargaining agreements, which include hundreds of millions of dollars in costs for fringe benefits and pensions.
Key Data
$2.9 billion
— The amount allocated for fringe benefits within the $5.8 billion of centrally allocated costs for the NYPD in fiscal year 2024.
$900 million
— The estimated cost for fringe benefits and pension contributions related to retroactive payments covering fiscal years 2018 through 2023.
$350 million
— The portion of the PBA agreement cost in fiscal year 2024 allocated for fringe benefits and pensions.
$13 million
— Savings realized from revisions of anticipated fringe costs, other than personal service costs, and an increase in paid detail reimbursement.
$17 million
— Additions to the fiscal year 2024 budget for various adjustments related to fringe costs, leases, energy, and other miscellaneous spending.
New York City faces an 8.5 percent annual increase in health insurance costs through fiscal year 2026, necessitating structural changes to employee and retiree benefits. Proposed reforms include implementing the Medicare Advantage plan, introducing premium sharing, and consolidating union welfare fund benefits to reduce long-term liabilities and manage rising expenditures.
Recommendations related to Fringe Benefits
The City should implement the agreement between the City and Municipal Labor Committee because it is beneficial in restraining cost growth and reducing the City’s other postemployment benefit (OPEB) liability.
Introduction 874 is a workable solution that allows the City-MLC agreement to move forward and should be enacted.
The law in whole should be repealed since this level of benefit specificity should not be codified.
The City and MLC should undertake a comprehensive review of health and welfare benefits for employees and retirees to agree on a set of policy changes that preserves employee health and welfare while reducing the City’s costs.
Policy changes should include premium sharing for employees and pre-Medicare retirees, elimination of some or all of the Medicare Part B reimbursement, and consolidation of union welfare fund benefits.
Key Data
8.5 percent
— Annual rate at which health insurance costs are budgeted to increase between fiscal years 2023 and 2026.
$200
— Monthly premium for retirees who choose to remain in their current Medigap program.
$600 million
— Estimated annual reduction in the City's costs if the Medicare Advantage plan is implemented.
The state legislature has passed 20 bills that would expand pension, disability, and death benefits for public employees, resulting in immediate costs of $78.6 million and ongoing annual expenses. These benefit sweeteners, which have increased in frequency since 2018, should be vetoed because they bypass the standard budget process and lack sufficient fiscal transparency.
Recommendations related to Fringe Benefits
The Governor should veto the 20 bills that enhance benefits and increase costs to New York State and local governments outside of the budget process.
The Governor should veto the five bills that lack complete fiscal notes, as this is a sufficient basis for rejection.
The Legislature should cease granting targeted benefit enhancements that increase public costs and encourage further expansions.
Key Data
$78.6 million
— Immediate costs estimated for 15 of the 20 bills.
$21.0 million
— Annual costs estimated for 15 of the 20 bills.
20
— Total number of benefit sweetener bills passed by the Legislature in 2022.
12 to 20
— Growth in the annual count of benefit sweetener bills from 2018 to 2022.
The NYPD's fiscal year 2023 executive budget totals $10.9 billion, consisting of a $5.3 billion operating budget and $5.7 billion in centrally allocated costs. These centrally allocated expenses include $2.6 billion for fringe benefits, $2.9 billion for pensions, and $214 million for debt service.
Key Data
$2.6 billion
— The amount allocated for fringe benefits within the NYPD's centrally allocated costs for fiscal year 2023.
New York City's fiscal plan for 2023 utilizes higher-than-expected tax revenues and a program to eliminate budget gaps, yet significant fiscal challenges remain due to looming cliffs and unaddressed needs. To ensure long-term stability, the administration must collaborate with municipal unions to improve efficiency and rationalize benefit levels during collective bargaining, while also making consistent deposits into the Rainy Day Fund.
Recommendations related to Fringe Benefits
The Administration should work with its municipal unions to identify and implement efficiency savings and rationalize benefit levels and administration during collective bargaining negotiations.
The New York City Preliminary Budget for fiscal year 2023 outlines a plan to achieve $1.7 billion in annual savings through agency efficiencies, with a portion of these savings derived from central costs for fringe benefits. The budget also highlights the need to address labor costs, including potential measures like premium sharing for health insurance.
New York State is considering 21 bills that would expand pension, disability, and death benefits for public employees, which would increase costs without providing additional services. These benefit sweeteners should be vetoed because they bypass standard budget negotiations and collective bargaining processes.
Recommendations related to Fringe Benefits
The Governor should veto S4719A/A1414A, as well as 20 other bills that would enhance pension or disability benefits, or grant other benefits, without providing enhanced services to New Yorkers or offsetting savings.
The Governor should veto these bills because they enhance benefits and increase costs to New York State and local governments outside of budget negotiations and/or collective bargaining processes.
The Governor should reject the granting of targeted benefit enhancements as they not only increase costs, but also may encourage further expansions.
Key Data
$64.1 million
— estimated immediate costs of the 15 bills with fiscal notes attached
$7.8 million
— estimated annual costs thereafter for the 15 bills with fiscal notes attached
$48.2 million
— estimated first-year cost of establishing a 20-year retirement plan for certain State law enforcement positions
$1,270,000
— one-time past service cost for allowing sheriffs, undersheriffs, deputy sheriffs, and correction officers to be eligible for performance of duty disability benefits
$930,000
— one-time past service cost for increasing the in-service death benefit for Suffolk County correction officers
$778,000
— one-time past service cost for increasing the in-service death benefit for Nassau County correction officers
At this time last year, New York State estimated that tax receipts would fall short of pre-pandemic estimates by $15 billion annually on average, totaling $60 billion over four years. Receipts, however, have been much stronger than expected. By April 2021, the State reduced its four-year tax receipt shortfall estimate by 80 percent, to $11.8 billion. Over the four-year period, the State also will receive at least $21.1 billion of targeted and general federal fiscal…
Early retirement incentives are a less effective strategy for reducing municipal workforce costs than natural attrition, as they incur significant pension and fringe benefit expenses while often paying employees who would have retired anyway. Relying on attrition rather than these incentives allows the city to achieve higher net savings by avoiding the $110,000 per-participant cost associated with early retirement programs.
Recommendations related to Fringe Benefits
The City should reduce its workforce through attrition and not pursue the early retirement incentive (ERI) to balance the budget.
Key Data
25%
— Fringe savings for retirees as a percentage of salary.
50%
— Fringe costs for new hires as a percentage of compensation.
50%
— Fringe savings for other separations as a percentage of salary.
$110,000
— Estimated cost per participant for the early retirement incentive over five years.
19%
— Portion of the City’s savings from not paying separated employees' salary and benefits that is offset by the early retirement incentive cost.
32%
— Estimated portion of retirements that would have occurred even without the early retirement incentive.
New York City must address its fiscal crisis by identifying recurring savings and managing its budget sustainably, rather than relying on non-recurring debt service savings. This effort should include working with labor to identify efficiencies and aligning employee benefit contributions with those of other public agencies to help close future budget gaps.
Recommendations related to Fringe Benefits
The City should continue to work with labor to identify efficiencies and align employee benefit contributions to those of other public agencies.
New York City's municipal labor costs are high, and the city should rationalize benefits like health insurance and welfare funds to achieve necessary savings without resorting to layoffs. By aligning city benefits with those of other public and private employers, the city can secure significant recurring savings while maintaining competitive compensation packages.
Recommendations related to Fringe Benefits
The City should implement premium sharing for employee health insurance to bring benefits in line with other public and private employers.
The City should require pre-Medicare retirees to contribute to their health insurance premiums to reduce the annual cost of these benefits.
The City should work with the Municipal Labor Committee to consolidate welfare funds to leverage economies of scale for prescription drugs and other medical benefits.
The City should seek to eliminate or reduce City contributions to union annuity funds which are negotiated in addition to generous pension plans.
The City should seek State legislation to eliminate Variable Supplement Funds (VSFs) and transfer the assets to the main pension funds.
The City should sharply reduce the guaranteed return on the tax-deferred annuity (TDA) through State legislation to lower taxpayer-provided costs.
The City should reduce annual leave accrual or implement caps on how much leave can be carried forward and cashed out at separation.
Key Data
$7.3 billion
— The cost of health insurance for municipal employees in fiscal year 2021.
7.0 percent
— The annual average growth rate of health insurance premium costs from fiscal year 2009 to fiscal year 2019.
$2.2 billion
— The annual cost of pre-Medicare retiree health insurance benefits in fiscal year 2020.
$1.2 billion
— The estimated annual value of the taxpayer-provided guarantee for the tax-deferred annuity (TDA).
$124 million
— The total City contributions to union annuity funds in fiscal year 2020.
$4.9 billion
— The estimated assets of the Variable Supplement Fund (VSF) for the police.
The New York City Police Department's centrally allocated costs are driven by notably generous health insurance and pension benefits for uniformed staff compared to other city employees. These fringe benefit costs for the department rose from $1,472 million in fiscal year 2010 to $2,308 million in fiscal year 2020.
Key Data
$2.3 billion
— The amount allocated for NYPD fringe benefits in fiscal year 2020.
$1,472 million
— The amount allocated for NYPD fringe benefits in fiscal year 2010.
$837 million
— The growth in centrally allocated fringe benefit expenses for the NYPD between fiscal years 2010 and 2020.
Governments can reduce fiscal stress by lowering the fringe benefit portion of employee compensation through new health insurance contributions from workers and retirees. Aligning public sector compensation with private sector standards helps improve long-term fiscal competitiveness and keeps taxes at sustainable levels.
Recommendations related to Fringe Benefits
Governments should reduce the fringe benefit portion of compensation by requiring new contributions from workers and retirees for their health insurance.
Policymakers should bring state and local government employees’ compensation into line with that of the private sector to enhance the jurisdiction's attractiveness by keeping taxes at competitive levels.
NYCHA's operating budget is significantly impacted by high labor costs, with fringe benefits accounting for 42 percent of total payroll expenditures. These benefit costs, which include health insurance, pensions, and other payments, are a primary driver of the cost disparity between the housing authority and private landlords.
Key Data
42 percent
— Fringe benefits account for this portion of NYCHA's payroll expenditures.
38 percent
— Health insurance costs represent this share of NYCHA's fringe benefit spending.
4 percent
— The projected annual growth rate for health insurance costs through 2023.
29 percent
— Pensions account for this share of fringe benefit spending in 2019.
12 percent
— Payroll taxes and annual leave account for this share of fringe benefit spending.
10 percent
— Worker’s compensation accounts for this share of fringe benefit spending.
The new labor contract for the Metropolitan Transportation Authority's largest union increases compensation and benefits, adding $16.5 million to the agency's four-year budget gap despite some offsetting savings. While the agreement includes productivity committees, it fails to secure necessary workrule changes to achieve "net-zero" wage increases, leaving the agency vulnerable to further financial shortfalls if projected savings do not materialize.
Recommendations related to Fringe Benefits
To keep the financial plan impact neutral, the agreements should include greater savings, including workrule changes, to offset the impact of these increased costs.
The labor-management productivity committees established in the TWU contract should establish productivity targets and provide public quarterly reports on savings to ensure accountability.
Similar committees should be established with other unions if workrule changes are not directly negotiated in the other collective bargaining agreements.
The MTA should not miss the opportunity to include workrule changes in other collective bargaining agreements.
Key Data
$64 million
— The agreement’s non-wage benefits will cost at least $64 million over four years.
$1.8 million
— The employer contribution toward enhanced optical and dental benefits increased by $4 per month, which will cost approximately $1.8 million annually.
$3,224
— Express bus passes cost $62 weekly, meaning the value of such a pass for the 52 weeks in a year is $3,224.
$11 million
— The cost to replace 592 workers for ten weeks would be approximately $11 million in 2020.
$13.1 million
— The cost to replace 592 workers for ten weeks would be approximately $13.1 million starting in 2021.
$44 million
— The MTA estimates health savings of $27 million annually and availability savings of $17 million, totaling $44 million annually.
New York State is considering 18 bills that would expand pension and disability benefits for public employees, which would cost at least $71 million in the first year. These proposed benefit sweeteners threaten to undermine previous fiscal reforms and increase long-term personnel costs without providing additional services to the public.
Recommendations related to Fringe Benefits
The Governor should veto all 18 bills that would enhance pension or disability benefits without providing enhanced services or offsetting savings.
The Governor should veto A7620-A/S5903-A, which would cost $5.6 million annually to allow New York City police officers to receive retirement credit for time spent as cadets.
The Governor should maintain fiscal discipline by rejecting unwarranted expansions of employee and retiree benefits that threaten to undermine hard-fought pension and health insurance reforms.
Key Data
$71 million
— Projected first-year cost of the 18 bills passed by the Legislature.
$41 million
— First-year cost of A4431/S5207, the most expensive bill passed.
$15.7 million
— First-year cost of A7874-A/S5905-A requiring New York City paraprofessionals to join the Teachers Retirement System.
$5.6 million
— Annual cost of A7620-A/S5903-A allowing New York City police officers to receive retirement credit for time spent as cadets.
$2.76 million
— First-year cost of A5940/S3659 regarding Tier 6 uniformed court officers and peace officers.
$1.5 million
— First-year cost of A5021/S3946 regarding disability benefits for Nassau County sheriffs and correction officers.
The hiring of 500 new MTA police officers carries a significant financial burden, with the annual cost per officer reaching nearly $93,000 in the first year when accounting for overtime, health benefits, and pensions. This expansion contributes to a $1 billion operating budget gap over four years, as the costs for salaries and fringe benefits are projected to more than double by the tenth year.
Key Data
$93,000
— Annual total cost for one officer in the first year, including overtime, night differential, supplemental benefits, and the employer share of health benefits and pensions.
$17,667
— Assumed blended premium rate for employer health and welfare costs.
38%
— Employer pension contribution rate as a percentage of projected salary.
$1,000
— Annual uniform allowance provided as a supplemental benefit.
$4,810
— Annual longevity increment provided to officers after 5 years of service.
Educating an average New York City public elementary school class cost $561,246 in 2017, with teacher compensation—including salaries and fringe benefits—accounting for a significant portion of that total. While classroom instruction and support services make up the majority of these costs, other expenses include school administration, ancillary services like food and transportation, and physical plant maintenance.
Key Data
62.5%
— The portion of teacher salary expenditures that went toward fringe benefits.
The total New York City budget grew by $19 billion between fiscal year 2014 and fiscal year 2019, with 6% of that growth attributed to fringe benefits and other central expenses. This spending increase was driven by federal and state mandates, inflationary costs, collectively bargained wage increases, and the priorities of the de Blasio Administration.
Key Data
6%
— Portion of the $19 billion total New York City budget growth between fiscal year 2014 and fiscal year 2019 attributed to fringe benefits and other central expenses.
The 2019 Benefit Sweetener Scorecard tracks 189 legislative proposals that would expand public employee benefits, including death and disability coverage, health insurance, and pension enhancements. These proposed benefit expansions carry significant fiscal implications, with some individual bills projected to cost hundreds of millions of dollars in past service and annual contributions.
Key Data
$942.6 million
— The estimated cost of increasing the base retirement allowance for various New York State and City retirement systems.
$149 million
— The immediate past service cost associated with increasing Tier 6 pension benefits.
$121.7 million
— The additional annual cost of increasing the salary used to compute the special accidental death benefit.
$59.3 million
— The annual increase and immediate past service cost for calculating the final average salary for judges and justices.
$57.6 million
— The annual cost increase for establishing a temporary retirement incentive for certain public employees.
$41.1 million
— The total cost of establishing a 20-year retirement plan for law enforcement officers, including annual costs and past service costs.
The New York State Legislature introduced 189 bills in 2019 that would expand public employee fringe benefits, including death and disability coverage, health insurance, paid leave, and pension enhancements. These proposed benefit sweeteners carry significant fiscal implications, with several individual bills projected to cost taxpayers tens or hundreds of millions of dollars.
Key Data
$942.6 million
— The estimated cost of increasing the base retirement allowance for New York State teachers, police, and fire retirement systems.
$149 million
— The immediate past service cost associated with increasing Tier 6 pension benefits.
$121.7 million
— The annual cost of increasing the salary used to compute the special accidental death benefit.
$59.3 million
— The cost associated with changing the final average salary calculation for judges in the New York State Unified Court System.
$41.1 million
— The cost of establishing a 20-year retirement plan for certain law enforcement officers.
$13.1 million
— The one-time past service cost for modifying the in-service death benefit for state correction officers.
The Metropolitan Transportation Authority faces a significant financial shortfall, necessitating labor cost controls through collective bargaining. By increasing employee contributions to health insurance and implementing productivity improvements, the authority could offset potential wage increases and stabilize its long-term fiscal outlook.
Recommendations related to Fringe Benefits
Increasing employee health care contributions of represented workers to levels similar to the nonrepresented workforce would defray a significant share of the authority’s $1.4 billion health and welfare expense.
Applying retiree health contribution shares to the number of MTA retirees receiving benefits would save the MTA an estimated $136 million to $165 million in 2019.
Although not providing immediate budget relief, increases to new member contribution rates or changes to benefit calculations can reduce MTA long-term costs.
Any pay increases should be conditioned on generating offsetting savings, such as increased employee contributions to fringe benefit costs.
MTA management and labor should collaboratively develop an agenda of collective bargaining changes that would allow both sides to achieve productivity goals.
Key Data
$3.4 billion
— Amount the MTA spent on fringe benefits for workers and retirees in 2018.
$1.4 billion
— Aggregate amount the MTA contributed to its six associated pension systems.
$1,318 million
— Amount spent on health insurance premium payments and welfare benefit funds in 2018.
$1,446 million
— Amount spent on employer contributions on behalf of MTA workers enrolled in one of six defined benefit pension plans in 2018.
$614 million
— Amount spent on other postemployment benefits (OPEB), primarily premiums on retiree health insurance, in 2018.
Governor Cuomo's vetoes of various legislative proposals prevented significant fiscal burdens associated with expanding public employee and retiree benefits, such as enhanced disability and retirement plans. These vetoed measures would have collectively imposed millions of dollars in immediate and long-term costs on state and local governments.
Recommendations related to Fringe Benefits
The Governor should veto legislation that expands costly employee and retiree benefits to avoid imposing significant fiscal burdens on state and local governments.
Policymakers should reject bills that increase accidental disability benefits for public employees, as these create long-term financial liabilities.
The state should oppose legislation that lowers retirement ages or enhances pension benefits for specific classes of public employees, as these changes increase annual and retroactive costs.
Legislators should avoid creating new presumptions of work-related illness for public safety employees, as these expansions often lead to increased disability classifications and associated costs.
The state should maintain current limits on overtime pay used for calculating final average salary in pension plans to prevent escalating retirement costs.
Key Data
$13.2 Million
— One-time past service cost for enhancing in-service death benefits for State correction officers.
$2.42 Million
— Increased annual contributions and immediate past service cost for accidental disability retirement for law enforcement and forest rangers.
$4.70 Million
— Annual costs associated with removing the limit on overtime pay for calculating final average salary for Tier 6 NYC Transit Authority employees.
$1.50 Million
— Annual costs and one-time retroactive cost for allowing uniformed court officers to retire without early age reduction.
7.42% is the compounded salary and wage increases for members of DC37, the City’s largest municipal union for civilian workers, under a new contract that sets the pattern for negotiations with other labor unions. NYC Labor Commissioner Bob Linn joins the podcast to discuss this deal, the dynamics of negotiating…
The expansion of New York City's municipal workforce has significantly increased personnel expenses, with fringe benefits and long-term retirement liabilities contributing substantially to the city's financial burden. These costs include billions in unfunded pension and retiree health obligations, alongside annual expenditures for health insurance and payroll taxes for the growing number of employees.
Key Data
$15,153
— Health insurance costs per employee, calculated based on a blended rate of individual and family premiums.
7.65%
— Payroll taxes applied to all earnings as part of fringe benefit costs.
0.34%
— MTA mobility tax applied to salaries.
$180.9 million
— Accrued pension liabilities added to fiscal year 2019 by new full-time hires.
$520.5 million
— Total estimated long-term costs associated with pensions and retiree health benefits for additional hires in fiscal year 2019.
$56.2 billion
— Unfunded pension liability at the end of fiscal year 2017.
New York City's pension costs for public employees are projected to grow steadily, with nearly $10 billion allocated in the fiscal year 2019 budget. Proposed legislation to increase pension benefits for police and firefighters would add unnecessary costs, potentially forcing the city to reduce other essential services.
Recommendations related to Fringe Benefits
The Mayor is right to oppose the bills that would hike the cost of pensions for NYC police and firefighters, and they should be rejected.
The City Council and the State Legislature should not pass an unwarranted sweetener that will be bitter for taxpayers.
Key Data
$10 billion
— Amount devoted to pensions for public employees in the fiscal year 2019 budget.
$20 million
— Estimated cost of one proposed bill to increase pension benefits next year.
$74,500
— Average annual pension for a recently retired NYC police officer.
$118,000
— Average annual pension for a recently retired firefighter.
$35,000
— Average annual pension for a civilian employee.
$200,000
— Value of total compensation for a police officer at 5½ years of service.
In December 2018, a series of legislative bills aimed at expanding public employee benefits—including enhanced death benefits, disability retirement provisions, and changes to pension calculations—were vetoed. These proposed measures would have collectively imposed millions of dollars in additional costs on the state and local governments, with individual bills carrying price tags ranging from $1.5 million to over $13 million.
Key Data
$13.20 Million
— One-time past service cost for the enhanced in-service death benefit for State correction officers.
$2.42 Million
— Increased annual contributions and immediate past service cost for accidental disability retirement for law enforcement and forest rangers.
$4.70 Million
— Annual costs associated with removing the limit on overtime pay for calculating final average salary for Tier 6 New York City Transit Authority employees.
$1.50 Million
— Annual and one-time retroactive costs for allowing Tier 6 uniformed court officers to retire without early age reduction.
Several proposed legislative bills that would have expanded public employee pension and disability benefits were vetoed in 2018, preventing millions of dollars in additional taxpayer costs. These vetoed measures included enhancements to in-service death benefits, accidental disability retirement, and overtime calculations for various uniformed services.
Key Data
$13.20 Million
— One-time past service cost for the enhancement of in-service death benefits for state correction officers.
$2.42 Million
— Increased annual contributions and past service costs for accidental disability retirement for law enforcement and forest rangers.
$4.70 Million
— Past service and first-year costs associated with removing the overtime pay limit for New York City Transit Authority employees.
$1.50 Million
— Annual and one-time retroactive costs for allowing uniformed court officers to retire without early age reduction.
Numerous legislative bills aimed at enhancing retirement, disability, and death benefits for various public sector employees were vetoed in late 2018. These proposed enhancements carried significant fiscal costs, including millions of dollars in past service and annual expenses for state and local governments.
Key Data
$13.20 Million
— One-time past service cost for enhancing the in-service death benefit for state correction officers.
$2.42 Million
— Increased annual contributions and past service costs for accidental disability retirement benefits for law enforcement and forest rangers.
$4.70 Million
— Annual cost increase for removing the overtime pay limit when calculating final average salary for certain New York City Transit Authority employees.
$1.50 Million
— Annual and one-time retroactive costs for allowing certain uniformed court officers to retire without early age reduction.
New York City taxpayers contribute over $1 billion annually to union-administered benefit funds, which often suffer from excessive administrative costs, unnecessary reserves, and mismanagement. Consolidating these supplemental health and non-health benefits into centralized city programs could improve efficiency and generate over $160 million in annual savings.
Recommendations related to Fringe Benefits
The Office of the Comptroller should give higher priority to auditing union-administered benefit funds to address risk factors like excessive administrative expenses and mismanagement.
The City should establish corresponding benchmarks and indicators for Directive #12 that can trigger enforcement powers for benefit funds.
The Office of Labor Relations should negotiate with labor unions to expand the Comptroller’s oversight and enforcement authority over union-administered benefit funds, including the power to sanction funds or remove officials.
The City should consolidate the provision of supplementary health benefits like prescription drugs, dental, and optical coverage within the City’s health insurance program.
The City should provide non-health related benefits through a centralized cafeteria plan to allow for consolidated, tailored benefit offerings.
Key Data
$1.1 billion
— Projected taxpayer contribution to 108 union-administered benefit funds in fiscal year 2018.
$160 million
— Potential annual savings for the City from restructuring how supplemental benefits are provided.
$109.3 million
— Total administrative expenses spent by 91 benefit funds in fiscal year 2014.
8.9 percent
— Share of all benefit fund expenditures that went toward administrative expenses in fiscal year 2014.
200 percent
— Threshold defined as reasonable for annual revenue reserves in welfare funds.
$6.3 billion
— Projected spending by New York City on health insurance benefits in fiscal year 2018.
New York State should veto numerous legislative bills that expand government employee and retiree benefits, as these measures would erode fiscal savings achieved through Tier 6 reforms. These proposed expansions include costly enhancements to retirement, disability, and death benefits that often lack fiscal notes and impose significant past-service and annual costs on taxpayers.
Recommendations related to Fringe Benefits
The Governor should veto A711B/S1411B, an expensive enhancement to volunteer firefighter benefits.
The Governor should veto the 15 other bills passed by the legislature that provide expensive enhancements to government employee and retiree benefits.
The Governor should veto these bills to preserve the fiscal restraint that has been sought over the last six and a half years.
The Governor should veto these bills because adopting them would erode the savings that New York State and its localities experience from the implementation of Tier 6.
Key Data
$394,000
— Past service costs for A3332/S3670, which would allow Tier 6 uniformed court officers and peace officers to retire early.
$13.7 million
— Past service costs for A5133a/S4077, which would enhance death benefits for State correction officers who are retirement eligible but die before retiring.
$1.15 million
— Past-service costs for A7134/S5130, which would increase disability payments for Nassau County sheriffs, deputy sheriffs, under sheriffs, and correction officers.
$8.9 million
— Immediate past-service cost for A7185A/S5484A, which would provide a special accidental death benefit for uniformed New York City sanitation employees.
$6.8 million
— Annual cost to New York City for A7185A/S5484A, which would provide a special accidental death benefit for uniformed New York City sanitation employees.
$300,000
— Annual increase in authority expenses for A7642/S6594, which would grant an additional four months of service credit for certain Triborough Bridge and Tunnel Authority employees.
Uniformed overtime spending has grown significantly, driven by factors like fixed post staffing requirements and high fringe benefit costs that make hiring new staff less cost-effective. To address this fiscal challenge, the City should implement systemic reforms, such as labor-management committees and caps on overtime earnings, to better control expenditures.
Recommendations related to Fringe Benefits
The City should adopt a system in which routine sick leave usage is accrued and capped (as for NYC civilian employees).
The City should consider capping or eliminating overtime earnings in calculating final average salary for pensions.
The City should institute a per employee cap on overtime hours or overtime earnings, as exists for civilian employees.
The City should establish a uniformed labor-management committee as part of the next round of collective bargaining in order to reduce uniformed overtime spending.
The City should change certain work rules, such as eliminating overtime for travel to alternate work locations and guaranteed minimum overtime hours.
Key Data
65 percent
— Fringe benefits, including pensions, exceed 65 percent of base pay for uniformed workers.
42 percent
— Overtime has exceeded the adopted budget in each of the past nine years by an average 42 percent.
62 percent
— From fiscal years 2009 to 2016, overtime spending grew 62 percent, from just over $1 billion to $1.7 billion.
$19,400
— Nearly $1.2 billion in overtime compensation was paid to roughly 63,000 uniformed employees—about $19,400 per employee.
Average spending on salaries, wages, pensions, and fringe benefits is projected to rise to nearly $160,000 per position by fiscal year 2021, necessitating a focus on productivity and cost control. To manage these expenses, the city should negotiate productivity gains in exchange for raises and continue efforts to reduce health insurance costs through programmatic changes.
Recommendations related to Fringe Benefits
The city should require productivity gains in exchange for raises to offset the funding included in the Labor Reserve.
To secure productivity gains, the city should settle contracts in advance of their expiration dates, as these gains cannot be retroactive.
The City and municipal labor unions should continue the effort to find more health insurance savings during the next contract period, with an expanded focus on programmatic changes.
The city should pursue strategies that reduce overtime costs as a part of the labor negotiations.
The Retiree Health Benefit Trust assets should only be used for retiree health care costs and not considered a rainy day fund.
Key Data
$140,000
— Average spending on salaries and wages, pensions, and fringe benefits per position in fiscal year 2018.
$160,000
— Projected average spending on salaries and wages, pensions, and fringe benefits per position in fiscal year 2021.
8.1 percent
— Projected annual growth rate of health insurance costs from fiscal years 2018 through 2021.
$1.3 billion
— Expected recurring annual savings from the health care savings initiative.
$4.0 billion
— Assets currently held in the Retiree Health Benefit Trust.
Average New York City employee compensation is projected to rise to $158,000 by fiscal year 2021, a trend driven significantly by the cost of fringe benefits. These benefits push the average total compensation per employee to over $140,000.
Key Data
$140,000
— Fringe benefit costs increase average compensation to more than this amount per employee.
$140
— Average compensation in thousands of dollars for fiscal year 2017, including fringe benefits.
$158
— Average compensation in thousands of dollars projected for fiscal year 2021, including fringe benefits.
Rising costs at the MTA, driven by a 42 percent increase in employee and retiree fringe benefits, necessitate a reevaluation of the agency's revenue strategy. To ensure fiscal health, the agency should pursue strategies to reduce the burden of unfunded liabilities like retiree health care costs through future collective bargaining.
Recommendations related to Fringe Benefits
The MTA should seek to reduce the obligation of unfunded liabilities related to other postemployment benefits (OPEB) through future collective bargaining.
Key Data
42 percent
— The increase in fringe benefits for employees and retirees since the MTA implemented a fare increase in 2009.
The 2016 Benefit Sweetener Scorecard tracks over 60 active legislative bills that could increase state and local government costs by hundreds of millions of dollars annually. Because approximately half of these proposed benefit enhancements lack a specified fiscal impact, the total financial burden on taxpayers could be substantially higher than currently estimated.
Key Data
60
— bills active this session that could increase state and local government costs.
New York City's legacy costs, including debt service, pensions, and retiree health benefits, are projected to grow to over $20 billion by fiscal year 2020, outpacing other budget spending. To mitigate this growth, the city should reform retiree health benefits by requiring premium contributions, consolidating union welfare funds, and eliminating Medicare Part B reimbursements.
Recommendations related to Fringe Benefits
City-MLC negotiations should focus on reducing health care costs further and bringing retiree health costs in line with those of other state and local governments.
Retirees should share the cost of health premiums to align with practices in the private sector and other municipal governments.
The City should reform union welfare funds by consolidating supplementary health care benefits under the city’s health plan to improve efficiency.
Medicare Part B premium reimbursements for retirees should be eliminated as this benefit is uncommon among public employers.
Key Data
$20 billion
— Projected annual spending on legacy costs by fiscal year 2020.
$2.9 billion
— The annual cost of retiree health benefits by fiscal year 2020.
$700 million
— The increase in the cost of retiree health benefits between fiscal year 2016 and fiscal year 2020.
$1.6 billion
— Estimated savings from reforming retiree health benefits by fiscal year 2020.
Ten bills providing expensive benefit enhancements to public sector workers and retirees, such as increased disability payments and modified retirement plans, have passed both houses of the State Legislature. These measures, which include a $6.1 Million cost in 2017 for New York City firefighter disability increases, are recommended for veto because they do not improve services for taxpayers.
Recommendations related to Fringe Benefits
The Governor should veto the legislation that provides expensive benefit enhancements to public sector workers and retirees without improving services for taxpayers.
Key Data
$6.1 Million
— Cost in 2017 for the bill increasing disability payments for New York City firefighters.
$12.6 Million
— Annual cost by 2021 for the bill increasing disability payments for New York City firefighters.
75%
— Current disability benefit limit for state police and correction officers who are sick or injured in the performance of duties.
10
— Number of benefit sweeteners that have passed both houses and will be delivered to the Governor.
New York City's rising employee compensation costs, which are projected to reach $158,000 per full-time employee by 2020, are driven significantly by health insurance and other benefits that are currently fully funded by taxpayers. Requiring city employees and retirees to contribute to their own health insurance premiums would help address the city's $70 billion liability for retiree health benefits and rising compensation expenses.
Recommendations related to Fringe Benefits
The city government should require employees and retirees to contribute to their health insurance premiums rather than paying in full for comprehensive coverage.
Key Data
$70 billion
— The city's total liability for retiree health insurance costs and other post-employment benefits, excluding pensions.
$137,000
— The average annual compensation per full-time city employee.
$158,000
— The projected average annual compensation per full-time city employee by 2020.
$5,700
— The projected increase in health insurance premiums per employee.
$2,000
— The projected increase in other fringe benefits per employee.
$1,270
— The projected increase in pension contributions per employee.
New York City faces a $70 billion liability for retiree health benefits, which are largely unfunded and currently paid on a pay-as-you-go basis. To address this, the city should establish explicit guidelines for the Retiree Health Benefits Trust, including consistent annual deposits and strict limitations on withdrawals, to ensure long-term fiscal stability.
Recommendations related to Fringe Benefits
There should be explicit guidelines requiring annual deposits and limiting withdrawals only to special circumstances, such as when there are unexpected spikes in retiree health insurance premiums.
Building the resources necessary to tackle the OPEB liability will require consistent contributions and a commitment to protect these gains.
Deposits should be calculated based on a share of the annual cost of retiree health benefits.
Mayor de Blasio and the City Council should now adopt explicit guidelines as part of the imminent budget agreement.
Key Data
$70 billion
— liability for retiree health insurance costs and other post-employment benefits
$2.5 billion
— amount the fund started with, deposited in fiscal years 2006 and 2007
$3.2 billion
— balance of the fund after gaining interest
$2.2 billion
— amount depleted from the fund over the course of four years starting in 2010
$1 billion
— previously planned withdrawal from the fund scheduled in 2014
$1.8 billion
— amount added to the fund since the planned withdrawal was reversed
The State Legislature has introduced eight new bills to enhance public employee and retiree benefits, adding to a list of over 60 similar proposals this session. These legislative efforts include costly expansions to disability benefits for uniformed personnel that would significantly increase city pension contributions over the next several years.
Key Data
8
— New bills introduced by the State Legislature to enhance the benefits of State and local public employees and retirees.
60
— Additional bills introduced to date that are captured in the Benefit Sweeteners Scorecard.
$4.7 million
— Cost to the City in 2017 for the proposed firefighter disability benefit plan, growing to $8.3 million in 2021.
$27 million
— Increase in New York City pension contributions in 2017 for the proposed statewide police officer disability benefit, growing to $40 million in 2021.
Proposed legislation to enhance public employee benefits, including disability, pension, and early retirement plans, should be rejected because these measures impose costly mandates on taxpayers without improving services. These benefit expansions threaten to undermine previous fiscal reforms that have successfully generated significant long-term savings for state and local governments.
Recommendations related to Fringe Benefits
The Legislature should reject the bills detailed in the scorecard because they would impose expensive mandates on New York State and local governments without improving services for taxpayers.
Policymakers should maintain existing reforms regarding disability benefits for recently hired New York City police and fire employees, as rolling back these changes would negate projected savings of $21 billion over 30 years.
Legislators should refrain from passing proposals to enhance expensive employee benefits, as these undermine hard-fought reforms that yield significant savings and should remain in place.
Key Data
$21 billion
— Projected savings from reforms to disability benefits for recently hired New York City police and fire employees that would be rolled back by proposed legislation.
$46 million
— First-year cost of the most expensive pension bill (A4295) which would allow judges to use their most recent annual salary for pension calculations.
$36 million
— First-year cost of the proposed bill (S5245) to enhance in-service death benefits for retirement-eligible State correction officers.
$21 million
— Annual cost to the New York City Transit Authority of a bill (A9850/S7232) that would decrease the employee contribution rate for the 25-year/55-age early retirement plan.
$16 million
— Annual cost to New York City of providing variable supplement fund payments to those who retired between 1968 and 1987.
$13.9 million
— First-year cost of the proposed bill (A7801-A/S5936) to enhance in-service death benefits for State correction officers.
New York City's efforts to achieve health insurance savings have relied heavily on lower-than-anticipated premium rate increases rather than structural reforms, with over half of the $2.1 billion target met through market fluctuations. To ensure long-term fiscal sustainability, the City should prioritize recurring reforms like reducing overutilization and ending unnecessary deposits into the Health Insurance Stabilization Fund.
Recommendations related to Fringe Benefits
The City and the Municipal Labor Committee should gain authority to conduct audits of health insurance dependents regularly as a matter of managerial discretion.
The City and the Municipal Labor Committee should work together to end further deposits by the City into the Health Insurance Stabilization Fund.
The guiding principles of health care savings exercises should be to 'bend the curve' on rising health care costs and to account for any savings produced clearly and honestly.
The City and the Municipal Labor Committee should continue to pursue reforms that reduce overutilization and have the potential to improve health outcomes for city employees.
Key Data
$85 million
— Estimated savings in fiscal year 2017 from the transition from the existing HIP HMO plan to the HIP HMO Preferred plan.
$147 million
— Expected savings in fiscal year 2017 from converting the GHI plan to a minimum premium plan and introducing new co-pays.
$1.1 billion
— Savings claimed from lower-than-projected premium rate increases, representing 52 percent of the total savings.
$23 million
— Projected savings in fiscal year 2017 from new care management programs for chronic conditions.
$1 billion
— Balance retained in the Health Insurance Stabilization Fund despite large withdrawals.
$48 million
— Annual cost of preventative services funded by the Health Insurance Stabilization Fund.
The state budget proposal includes changes to retiree health insurance premium-sharing, aiming to reduce costs by creating a tiered system based on years of service and capping Medicare Part B reimbursements. Furthermore, arbitrators should be required to account for the full cost of contract decisions, including the impact on fringe benefits, to ensure fiscal responsibility.
Recommendations related to Fringe Benefits
The Executive Budget should implement the proposal to create a tiered system for retiree health insurance based on years of service to curtail rising retiree health care costs.
The State should cap the amount retirees are reimbursed for Medicare Part B premiums at $105 per month and discontinue IRMAA reimbursements for those most able to afford the costs of healthcare.
Arbitrators should account for the full cost of a decision, including retroactive pay and the impact on fringe benefits, without increasing taxes, making service cuts, or employing fiscal gimmicks.
The criteria for arbitrators to consider a municipality's ability to pay should be applicable to all local governments, not just those in the bottom quartile of tax rates and fund balances.
Key Data
$1.3 billion to $1.6 billion
— Retiree health care costs are forecast to grow from this amount in fiscal years 2016 to 2020.
$10 million
— Savings to the State in fiscal year 2017 from proposed retiree health insurance changes.
$40 million
— Savings to the State in fiscal year 2020 from proposed retiree health insurance changes.
$122 per month
— Current standard Medicare Part B premium paid by New York State for retirees.
$105 per month
— Proposed cap on the amount retirees are reimbursed for Medicare Part B premiums.
$170,000 per year
— Income threshold for couples subject to IRMAA.
Legislative proposals to enhance disability benefits for uniformed city employees, including police, fire, sanitation, and correction officers, would impose substantial fiscal burdens on the city. These bills, which seek to alter benefit calculations and restore injury presumptions, carry projected actuarial present value costs reaching as high as $889.3 million by fiscal year 2019.
Key Data
$39.1 Million
— FY2015 budget increase associated with the disability benefit provisions in bill S5656.
$889.3 Million
— Actuarial present value of NYC contributions by FY2019 for the provisions in bill S5656.
$37.8 Million
— FY2015 budget increase for the disability benefits and presumptions outlined in bill A6046/S4269.
$850.2 Million
— Actuarial present value of NYC contributions by FY2019 for the provisions in bill A6046/S4269.
$35.7 Million
— FY2015 budget increase for the disability benefit changes proposed for Tier 3/6 police uniformed employees in bill A5295.
$622.9 Million
— Actuarial present value of NYC contributions by FY2019 for the disability benefit changes in bill A5295.
New York State's public education spending is the highest in the nation, yet student achievement ranks 20th, largely due to the rapid, unsustainable growth of instructional staff fringe benefits. These rising costs are crowding out other essential educational investments, particularly as school districts face constraints from property tax caps and limited control over state-mandated pension benefits.
Recommendations related to Fringe Benefits
The State Legislature should include employee benefits in the conversation regarding its role in public education.
Policymakers must act to curb the high growth rates of employee benefits to prevent them from consuming an ever-greater share of school budgets.
State authorities should address the fact that pension benefits for teachers and other school staff are set by the State Legislature, limiting local control.
Key Data
$4,412
— Amount spent per student on instructional staff fringe benefits in the average New York school district in 2013.
$1,609
— National average amount spent per student on instructional staff fringe benefits in 2013.
9.4 percent
— Average annual growth rate of instructional employee benefits in New York from 2003 to 2013.
3.4 percent
— Average annual growth rate of teacher salaries and wages in New York from 2003 to 2013.
22 percent
— Portion of 2013 budgets that New York schools on average allocated to instructional staff fringe benefits.
15 percent
— National average portion of budgets allocated to instructional staff fringe benefits in 2013.
New York's public education spending is driven by employee compensation costs, with instructional staff fringe benefits averaging $4,412 per student in 2013, nearly triple the national average of $1,609. This rapid growth in benefits, which increased by 9.4 percent annually over the previous decade, has forced districts to reduce spending in other areas like classroom supplies.
Key Data
$4,412
— Average instructional staff fringe benefits per student in New York school districts in 2013.
$1,609
— National average instructional staff fringe benefits per student in 2013.
22 percent
— Portion of 2013 school budgets allocated to instructional staff fringe benefits in New York.
15 percent
— National average portion of school budgets allocated to instructional staff fringe benefits.
9.4 percent
— Average annual growth rate of instructional employee benefits from 2003 to 2013.
$5,342
— Average fringe benefit costs per pupil in New York City, the highest among state regions.
New York City's health insurance costs have doubled since 2005, prompting a $3.4 billion savings agreement with the Municipal Labor Committee that relies on projected rather than actual savings. To achieve genuine fiscal relief, the city must implement structural changes like premium-sharing and improved chronic disease management rather than relying on national health care trends.
Recommendations related to Fringe Benefits
Initiatives should "bend the cost curve" and achieve recurring savings for City taxpayers by establishing premium-sharing with employees and retirees, reducing per enrollee utilization of services, better managing chronic conditions, or lowering provider payments.
Savings should be counted clearly and honestly, ensuring that lower national and regional health care inflation, temporary premium rate "freezes," and unusually low premium increases are not credited as savings gained under the agreement.
The City should pursue initiatives such as reducing emergency room utilization and improving chronic disease management to improve health outcomes for the workforce and save money for taxpayers.
Key Data
$5.3 billion
— The cost of the City's health insurance plan in fiscal year 2015, which doubled from $2.6 billion in fiscal year 2005.
$3.4 billion
— The total savings target agreed upon by the City and the Municipal Labor Committee between fiscal year 2015 and 2018.
9 percent
— The annual rate at which the financial plan projected health insurance spending to increase.
2.89 percent
— The City's actual health insurance rate increase for fiscal year 2016.
$1.2 billion
— The amount of savings credited to the Municipal Labor Committee agreement in the November modification.
6.7 percent
— The portion of the 2015 budget comprised by the City's health insurance plan costs.
The MTA faces significant financial challenges driven by rapid growth in expenses for interest on long-term debt and fringe benefits, including health insurance and pension contributions. These rising costs, alongside recurring deficits and inadequate capital investment, necessitate a new financing strategy to ensure long-term fiscal stability.
Recommendations related to Fringe Benefits
Public officials should seek in collective bargaining to reduce funding obligations for current and future retirees by requiring more cost sharing for premiums from the retirees.
The MTA should adopt a policy of funding half the OPEB liability as a practical approach for budgeting purposes.
Key Data
$400 million
— The total gain in health insurance costs for current employees and retirees, which are increasing by an average of more than 8 percent annually.
$400 million
— The total gain in pension fund contributions, which are increasing by more than 6 percent annually.
$17.8 billion
— The cumulative unfunded liability for Other Post-Employment Benefits (OPEB) as of the end of 2011.
New York City's agreement with the Municipal Labor Committee aims to achieve $1.3 billion in health insurance savings through specific, measurable reforms rather than temporary measures or fund transfers. To ensure these savings are realized, the city must implement rigorous accounting standards, such as establishing an objective measurement system and creating mechanisms to recoup any shortfalls in projected savings.
Recommendations related to Fringe Benefits
An objective system for measuring health insurance savings should be established.
Measures to lower premiums should focus on lowering per enrollee utilization of services or lowering per-service payments to providers.
The City should implement a reliable mechanism for recouping planned health insurance savings that are not actually achieved during a fiscal year.
Savings calculations should be based on an agreed-upon baseline number of people covered, regardless of fluctuations in headcount or demographics.
The City should study the potential for savings by moving retirees from City plans to those available on the New York State Health Exchange.
Key Data
$1.3 Billion
— The total amount of health insurance savings targeted by New York City.
$1 Billion
— Additional funding taken from the Health Insurance Stabilization Fund that should not be counted as savings.
1,000,000
— The baseline assumption of enrollees used in the hypothetical program to centralize radiation services.
$100
— The fiscal year 2014 average payment per service in the hypothetical radiation services program.
Variable Supplement Fund payments, often referred to as 'Christmas bonuses,' provide annual $12,000 checks to thousands of retired uniformed city employees, costing the pension system hundreds of millions of dollars annually. Because these payments are not constitutionally protected, the State Legislature should phase out or eliminate these benefits to improve the fiscal health of the city's pension funds and reduce taxpayer burdens.
Recommendations related to Fringe Benefits
Phasing out or eliminating the VSF should be part of the Mayor and City Council’s agenda in Albany next year.
Gradually eliminating these unusual pension bonuses for retirees would enhance the fiscal condition of the pension funds and reduce the needed contributions from taxpayers.
Key Data
41,600
— Number of retired New York City police, fire, and correction officers receiving an annual VSF payment.
$12,000
— Amount of the annual VSF check, informally referred to as the 'Christmas bonus,' paid to eligible retirees.
$500 million
— Total cost of VSF payments made to eligible retirees in 2014.
$2.9 billion
— Amount transferred from the pension funds to the VSFs in fiscal year 2014 due to exceptional investment returns.
17.5 percent
— Combined investment return of the pension system on its $150.3 billion in investments in fiscal year 2014.
11.3 percent
— Portion of the fiscal year 2015 budget allocated to pension contributions.
The New York City Health and Hospitals Corporation faces significant financial pressure as expenditures are projected to rise to $9.8 billion by fiscal year 2018, driven in part by growing costs for salaries and fringe benefits. These rising labor-related expenses, including pensions and other postemployment benefits, contribute to a projected accumulated cash shortfall of $3.2 billion by 2018.
Key Data
$1.5 billion to $1.8 billion
— Projected increase in fringe benefit costs.
$220 million
— Annual growth in fringe benefit costs.
New York State legislative proposals in 2014 sought to expand public employee pension and disability benefits, resulting in a combined estimated cost of $1.815 billion for state and local governments. These benefit sweeteners included various measures such as increased disability pensions and service credit purchases that impose significant long-term financial obligations on taxpayers.
Key Data
$1,699 Million
— Total estimated state costs for the listed benefit sweetener bills.
$116 Million
— Total estimated local costs for the listed benefit sweetener bills.
$1.1 Billion
— Past service cost associated with the proposal to increase pension benefits for Tier III, IV, and V members.
$617.9 Million
— Increase in the Actuarial Present Value of benefits for the proposal to enhance Tier III police disability retirement benefits.
$374 Million
— One-time costs associated with the proposal to allow additional service credit for members of various state retirement systems.
$98.9 Million
— One-time cost associated with the proposal to allow Tier I and II employees to include unused vacation time in final average salary calculations.
The agreement regarding municipal worker and retiree health insurance relies on temporary measures like artificial rate caps rather than structural changes that would create lasting efficiency. Meaningful financial returns for taxpayers and union members require shifting toward initiatives that actually reduce health care costs instead of using projections that divorce savings from specific program results.
Recommendations related to Fringe Benefits
The city should prioritize initiatives that lower health care costs by making the system more efficient to achieve substantial, recurring savings.
The city should avoid using one-time or temporary savings, such as artificial rate caps or adjustments to the City's contribution to the Health Insurance Stabilization Fund, in health insurance agreements.
The city should ensure that savings are calculated based on the actual results of specific initiatives rather than relative to City Financial Plan projections.
The city needs to establish clear, objective guidelines for measuring health insurance savings to ensure that only specific, recurring efficiency measures are credited toward savings goals. This includes implementing reliable mechanisms for recouping shortfalls, conducting regular eligibility audits, and exploring options like moving retirees to state health exchanges to achieve sustainable cost reductions.
Recommendations related to Fringe Benefits
As a first step, as specified in the agreement with the MLC, an objective system for measuring savings should be established.
The City should have a reliable mechanism for recouping amounts of planned savings not actually achieved during a fiscal year.
Savings should be based on an agreed upon baseline number of people covered.
An agreement should be reached that assures there will be regular audits in the future as a matter of managerial discretion.
A significant source of potential savings may be possible through changing the status or eligibility of retirees, for example, by moving some or all from City plans to those available on the New York State Health Exchange with federal subsidies.
Additional funding taken from the Health Insurance Stabilization Fund beyond the $1 billion already agreed upon should not count as savings.
Key Data
$1 billion
— The amount of funding already agreed upon to be taken from the Health Insurance Stabilization Fund.
1,000,000
— The baseline assumption of enrollees used in the hypothetical program to centralize radiation services.
$100
— The fiscal year 2014 average payment per service in the hypothetical radiation services program.
20
— The average utilization of service per 1,000 enrollees in the hypothetical radiation services program.
3.0 percent
— The historical annual increase trend in payment per service for the hypothetical radiation services program.
5.0 percent
— The historical annual increase trend in utilization per 1,000 enrollees for the hypothetical radiation services program.
New York's public education spending significantly exceeds the national average, largely driven by high teacher compensation and rapidly rising fringe benefit costs. These benefit expenses grew by 6.8 percent between 2011 and 2012, creating budget pressures that forced school districts to reduce spending in other areas like instructional supplies.
Key Data
$4,233
— Average instructional employee fringe benefits per pupil in New York.
169 percent
— Amount by which New York's instructional employee fringe benefits per pupil exceeded the national average of $1,573.
$5,102
— Average fringe benefit costs per pupil in New York City.
6.8 percent
— Growth rate of fringe benefit costs for teachers from 2011 to 2012.
10.2 percent
— Increase in instructional employee fringe benefit cost per pupil in Western New York, the largest year-to-year increase.
158 percent
— Amount by which instructional employee fringe benefit costs on Long Island were higher than the national average.
The tentative agreement with the teachers union includes a commitment to generate $3.4 billion in health insurance savings over four years, though the uncertainty of these savings remains a concern. While the deal addresses immediate labor costs, the extended timeline for back pay and the resulting budget gaps raise questions about fiscal sustainability.
Key Data
$3.4 billion
— Total savings in health insurance costs committed to by the unions over the four-year period.
The tentative labor agreement between the city and the teachers union relies on achieving $3.4 billion in new health care savings to remain financially viable. These savings are expected to be realized by requiring employees and retirees to contribute to the cost of their health insurance premiums, aligning city practices with those of other public and private employers.
Recommendations related to Fringe Benefits
The city should require employees and retirees to share in the cost of their health insurance premiums, just as most public and private employees do.
Key Data
$4 billion
— The estimated cost of the teachers' contract over the next four years.
$400 million
— The additional amount employees' salaries will grow in fiscal year 2015.
$1.5 billion
— The additional amount employees' salaries will grow in fiscal year 2018.
$3.4 billion
— The estimated amount of new health care savings to be determined by city and labor officials.
New York City's health insurance costs for employees and retirees have more than doubled in the last decade, creating a significant fiscal burden that is largely unfunded. To address this, the city should implement premium-sharing requirements for employees and retirees and eliminate the reimbursement of Medicare Part B premiums to align with national standards and reduce long-term liabilities.
Recommendations related to Fringe Benefits
The City should implement premium-sharing by employees to align with the norm in the private sector and in state and local governments.
The City should require premium-sharing by retirees to bring New York City closer to the standards set by other public employers.
The City should eliminate Medicare Part B reimbursement for retirees and their spouses, as this practice is rare among other state and local governments.
Key Data
$1.8 billion
— Projected savings in fiscal year 2014 if the recommended health insurance reforms are adopted.
$2.2 billion
— Projected savings in fiscal year 2016 if the recommended health insurance reforms are adopted.
90 percent
— Portion of the municipal workforce enrolled in health insurance plans that require no employee contribution toward the premium.
$4.8 billion
— Total cost of health insurance for New York City municipal employees and retirees in fiscal year 2012.
$83 billion
— Estimated unfunded liability for retiree health insurance and other post-employment benefits.
70 percent
— Portion of the projected budget gap in 2016 that will be comprised of health insurance costs.
New York's public school spending is the highest in the nation, driven largely by instructional salaries and fringe benefits that significantly exceed the national average. Specifically, per-pupil spending on instructional fringe benefits in New York is 2 ½ times the U.S. average, with New York City spending $4,919 per student on these benefits.
Key Data
$3,962
— New York's per pupil spending on fringe benefits for instructional employees.
$1,505
— U.S. average per pupil spending on fringe benefits for instructional employees.
$4,919
— New York City per student spending on fringe benefits for instructional staff.
$3,699
— Long Island average per pupil spending on instructional employee fringe benefits.
Legacy costs, including pension contributions, retiree health benefits, and debt service, are projected to consume nearly 25 percent of New York City's operating budget by fiscal year 2015. This rapid growth, doubling from $8.5 billion in 2005 to $17.8 billion in 2015, significantly outpaces other spending and reduces available resources for current service provision.
Key Data
25 percent
— The portion of the New York City budget dedicated to legacy costs by fiscal year 2015.
$8.2 billion
— The projected annual pension contribution by fiscal year 2015.
$2.4 billion
— The annual cost of retiree health benefits by fiscal year 2015.
$17.8 billion
— The total legacy costs by fiscal year 2015.
$8.5 billion
— The total legacy costs in fiscal year 2005.
24 percent
— The share of operating expenses comprised of legacy costs by fiscal year 2015.
New York City's health insurance costs for employees and retirees are projected to rise to nearly $7 billion by 2016, consuming 80 percent of the city's projected budget deficit. To address this, the city should implement premium-sharing arrangements and eliminate Medicare Part B reimbursements to achieve significant annual savings.
Recommendations related to Fringe Benefits
The city should require contributions of up to 25 percent from employees for their health insurance premiums.
The city should require contributions of up to 50 percent from retirees for their health insurance premiums.
The city should eliminate the Medicare Part B reimbursement for retirees.
Key Data
40 percent
— Projected growth of health insurance costs between fiscal years 2013 and 2017.
30 percent
— Projected growth of debt service, the next highest expenditure after health insurance.
$7 billion
— Projected cost of health insurance in 2016.
80 percent
— Portion of the city's projected budget deficit that health insurance costs will equal in 2016.
90 percent
— Portion of the city's workforce enrolled in health plans that require no employee contribution toward the cost of the premium.
$1.7 billion
— Estimated annual savings achievable by requiring employee and retiree contributions and eliminating Medicare Part B reimbursements.
Port Authority of New York and New Jersey police officers receive compensation that is generally more generous than their counterparts in other regional law enforcement agencies, driven by both higher base salaries and more extensive supplemental pay and benefits. Future contract negotiations should aim to align these compensation levels more closely with those of other large urban police departments in the region.
Recommendations related to Fringe Benefits
The next contract for PANYNJ officers should make progress in aligning their pay to that of officers in large urban departments in the region.
Key Data
$23,532
— Annual premium cost for family health insurance coverage in 2009.
$8,832
— Annual premium cost for individual health insurance coverage in 2009.
$2,700
— Annual uniform allowance for PANYNJ officers.
50%
— Pension benefit at 20 years of service for tier 2 officers.
12.5%
— Night shift differential for PANYNJ officers.
3%
— Uniform allowance as a percentage of maximum base salary.
New York's public school districts spend significantly more on employee fringe benefits than the national average, with per-student costs nearly triple the U.S. norm. Reforming health insurance premium-sharing arrangements to align with state employee standards could generate over $500 million in annual savings that could be redirected to classrooms.
Recommendations related to Fringe Benefits
The legislature and the Governor should work together to establish a statutory cap on school district employer contributions at 85 percent for single coverage and 75 percent for family coverage.
School districts should reallocate responsibility for employee and retiree health insurance premium costs to align with state employee standards.
New York City and school districts across the state should change their health insurance premium-sharing arrangements to match those of the State of New York for its employees.
Key Data
20 percent
— Statewide, districts spend 20 percent on fringe benefits compared to a U.S. average of 13 percent.
13 percent
— The U.S. average for fringe benefit spending is 13 percent.
$3,688
— The per student amount spent on fringe benefits is $3,688 per pupil.
$1,330
— The U.S. average per student amount spent on fringe benefits is $1,330.
169 percent
— New York's growth in spending per pupil on instructional staff fringe benefits increased 169 percent over the last 10 years.
$4.7 billion
— School districts in New York State, including New York City, spend $4.7 billion on health insurance for employees and retirees.
New York State school districts spend 20 percent of their budgets on fringe benefits like pensions and health insurance, significantly higher than the 13 percent national average. This results in a per-student cost of $3,688, nearly triple the national average of $1,330, prompting calls to reexamine benefit structures and increase employee premium contributions.
Recommendations related to Fringe Benefits
Fringe benefits, especially health insurance, should be reexamined.
One way to bring down costs is to share a greater percentage of premium costs with employees.
Key Data
20 percent
— Percentage of school district budgets spent on fringe benefits in New York, compared to the 13 percent national average.
$3,688
— Per-student cost for fringe benefits in New York, which is nearly three times the $1,330 U.S. average.
24 percent
— Fringe benefit costs per pupil in New York City, where most employees make no contribution to health insurance premiums.
New York school districts spend significantly more on employee benefits than the national average, with per-pupil spending on these costs growing at a rate far outpacing national trends. Aligning local health insurance premium sharing arrangements with state-level practices could generate over $500 million in annual savings for school districts.
Recommendations related to Fringe Benefits
School districts should bargain more successfully with teachers’ unions to give employees a greater stake in cost containment through the sharing of health insurance premium costs.
New York City and school districts across the State should change their health insurance premium sharing arrangements to match those of the State of New York for its employees.
Key Data
$3,311
— Amount spent per pupil on employee benefits in New York in 2009.
$1,449
— National average spent per pupil on employee benefits in 2009.
169%
— Growth rate of New York's per-pupil spending on employee benefits for instructional staff over the last ten years.
100%
— National average growth rate for per-pupil spending on employee benefits over the last ten years.
$4.7 billion
— Total amount spent by New York school districts on health insurance for employees and retirees in 2009.
$500 million
— Potential annual savings if school districts matched the State of New York's health insurance premium sharing arrangements.
Local governments in New York are increasingly borrowing money to cover the costs of employee separation benefits like accrued sick leave and vacation time, a practice that creates long-term fiscal instability. Municipalities should instead implement policies to limit these accruals and establish dedicated reserve funds to pay for future separation costs and retiree health insurance obligations.
Recommendations related to Fringe Benefits
State officials should develop alternatives to borrowing to cope with the underlying problem of accrued liabilities for separation costs.
Localities should implement preventive policies, such as not allowing the lifetime accrual of vacation days and placing tighter limits on the amount of unused sick leave that can be converted to cash.
Towns, cities, and villages should be required to fund at least partially their accrued liabilities for separation costs.
The Legislature should allow borrowing only on the condition of future requirements to build adequate reserves.
The State should establish standards for funding more adequately future separation costs and OPEB liabilities among all localities and the State itself.
Key Data
$46.6 million
— Total annual budget for the city of Glen Cove.
$1.8 million
— Separation costs generated by the retirement of six police officers in Glen Cove.
4%
— Portion of the Glen Cove annual budget consumed by separation costs for six retiring police officers.
$3.9 billion
— New York City's accrued liability for vacation and sick leave at the end of the 2011 fiscal year.
$83.9 billion
— New York City's OPEB liability at the end of the 2011 fiscal year.
$10.6 billion
— New York State's OPEB liability at the end of the 2011 fiscal year.
Prevailing wage mandates in New York City require employers to provide supplemental payments for fringe benefits, which can add at least 30 percent to total compensation costs. These benefits, which typically include health and pension contributions, significantly increase the cost of doing business beyond simple wage comparisons.
Recommendations related to Fringe Benefits
The State Labor Commissioner and the City Comptroller should take steps to improve transparency in the determination of prevailing wage.
They should exercise their discretion to re-examine the criteria for establishment of titles and consider whether changes to prevailing wage schedules could be made within occupations to simplify the schedules and reduce the cost burden.
Collective bargaining agreements used to set prevailing wage rates should be identified on the schedules.
These and other contractual agreements relevant to the determination of the prevailing wage should also be posted online.
Efforts should be undertaken to ensure wage surveys are inclusive and widely administered, and the definition of prevailing wage should be broadened to a standard greater than 30 percent.
Key Data
30%
— Supplemental pay for fringe benefits mandated under prevailing wage schedules adds at least this percentage to compensation costs.
75 - 79%
— Supplemental rate as a percent of wage rate for boilermakers.
83 - 91%
— Supplemental rate as a percent of wage rate for carpenters.
91 - 99%
— Supplemental rate as a percent of wage rate for truck drivers.
35 - 39%
— Supplemental rate as a percent of wage rate for office building cleaners.
17 - 37%
— Supplemental rate as a percent of wage rate for security guards.
Transit workers receive compensation packages that include generous health insurance and pension benefits, which are significantly more favorable than those found in the private sector or for other public employees. To maintain financial stability without raising fares or cutting service, any wage increases should be offset by productivity improvements or increased employee contributions toward these fringe benefits.
Recommendations related to Fringe Benefits
The award should include work rules changes that will produce savings that allow for enhanced maternity benefits and the accelerated installation of clear partitions for buses.
A more ambitious award could provide for small wage increases, not to exceed inflation, funded by additional productivity concessions or added employee responsibility for health insurance costs: implementing premium-sharing, increasing the contribution toward retiree health insurance, or ending the partial Medicare Part B reimbursement.
Increasing employee responsibility for health care costs, through increased premium-sharing or salary contributions, is also appropriate given the relatively modest contributions made by TWU employees as compared to other public and private employees.
A greater priority should be placed on the safety of TWU employees and on accelerating the installation of the clear bus partitions.
The MTA’s proposals for work rule changes deserve serious consideration.
Key Data
1.5 percent
— The contribution TWU employees make toward the cost of their health insurance premiums.
21 percent
— The average share of premiums for single coverage paid by private sector employees in New York.
25 percent
— The average share of premiums for family coverage paid by private sector employees in New York.
$1,110
— The average premium paid by a private sector employee in New York City and Long Island for single coverage in 2010.
$3,473
— The average premium paid by a private sector employee in New York City and Long Island for family coverage in 2010.
20 percent
— The percentage of employees in the private sector who have access to a defined benefit pension plan.
New York's public pension systems are significantly more costly than the national average, with public employees contributing only 1% of total revenues compared to the 8.5% U.S. average. To address this disparity, the state should adopt the Governor's proposal to increase employee contributions to between 3% and 6% and implement a risk/reward mechanism to adjust contributions based on investment performance.
Recommendations related to Fringe Benefits
The State should modernize the pension system by increasing the contributions required of public employees to between 3% and 6%, rising according to salary, toward the cost of their pensions.
The State should implement a “risk/reward” provision that would reduce employee contributions if investment earnings are flush and increase the required contributions if the level of contribution required by employers exceeds a certain rate.
Key Data
11.5%
— Employee contributions as a share of combined employee and employer contributions to New York State’s pension systems.
33%
— U.S. average of employee contributions as a share of combined employee and employer contributions.
1%
— Public employee contributions as a share of total revenues (contributions plus investment earnings) in 2010 for New York State’s pension systems.
8.5%
— U.S. average of public employee contributions as a share of total revenues.
47th
— New York’s pension systems ranking among states for public employee contributions as a share of total revenues.
New York's public pension costs are among the highest in the nation, with state and city expenses projected to reach billions of dollars by 2014 if left unaddressed. Proposed reforms, including raising the retirement age to 65 and introducing 401(k)-style options, aim to save taxpayers an estimated $123 billion over 30 years.
Recommendations related to Fringe Benefits
Future employees who opt for the traditional defined benefit plan should contribute between 3% and 6% of their paychecks toward their pensions, depending on their income.
The retirement age for new employees should rise from 62 to 65 to be consistent with national trends.
Overtime should be barred from pension calculations for new employees.
New employees should be given the opportunity to enroll in a 401(k)-style plan as an alternative to traditional pensions.
Employees should be able to have up to 10% of their salary deposited in a retirement account if they opt for the full matching program.
Key Data
$574
— New Yorkers pay $574 per person per year in taxes for public employee pensions, which is more than twice the national average.
$8.6 billion
— New York City’s pension costs are expected to reach $8.6 billion by FY 2014, up from $2.4 billion in FY 2004.
$1 billion
— For the MTA, pension costs will rise from $314 million in FY 2004 to $1 billion in FY 2014.
$123 billion
— The proposed pension changes would save taxpayers throughout New York State an estimated $123 billion over the next 30 years.
30%
— Without reform, pension costs will total 30% of the MTA payroll by FY 2014.
19%
— Without reform, pension costs will total 19% of fare and toll revenue for MTA subways, buses, bridges, and tunnels by FY 2014.
New York State and City face significant fiscal pressure due to rapidly rising public employee pension costs, which have grown to represent a competitive disadvantage and a significant strain on other government services. Implementing the proposed "Tier VI" pension reform, which includes higher employee contributions and a higher retirement age, is necessary to align benefits with national norms and ensure long-term fiscal sustainability.
Recommendations related to Fringe Benefits
The Governor should include the Tier VI pension reform plan in the Executive Budget, and the Legislature should adopt it in a timely manner.
New participants in the three State pension funds and three of the City pension funds should be required to contribute 6 percent of their pay during their entire period of employment.
The state should establish a “normal” retirement age of 65 for new workers in the State ERS, most new municipal employees in the NYCERS, and new NYCTRS members.
The state should eliminate overtime from the final average salary (FAS) calculation for new employees to prevent pension padding.
The state could extend the defined contribution plan option to other groups of employees to provide more portable retirement benefits.
Key Data
$455 million to $1.5 billion
— The growth in State payments to the two major pension funds (ERS and PFRS) between fiscal year 2004 and fiscal year 2011.
$2.4 billion to nearly $7.0 billion
— The growth in New York City's pension payments between fiscal years 2004 and 2011.
$93 billion
— The estimated savings for New York State and local governments over 30 years from the proposed Tier VI pension reforms.
$30 billion
— The estimated savings for New York City pension systems over 30 years from the proposed Tier VI pension reforms.
$314 million to $803 million
— The growth in MTA pension costs for the NYCT and TBTA divisions between 2004 and 2011.
New York City spends $1 billion annually on union welfare funds that suffer from limited accountability, poor financial management, and inefficient benefit delivery. Consolidating these supplementary health benefits under the City's health insurance plan and centralizing non-health benefits could generate significant taxpayer savings and improve service efficiency.
Recommendations related to Fringe Benefits
The City should consolidate supplementary health care benefits under the City’s health insurance plan to replace the varying and inefficient packages currently provided by multiple welfare funds.
The City should provide non-health related benefits through a centralized cafeteria plan to achieve meaningful economies of scale.
The City should improve accountability for any remaining union welfare fund expenditures by setting new standards, placing limits on administrative costs, and granting the Comptroller new enforcement powers.
Key Data
$1 billion
— Annual City payments to union welfare funds.
$146 million
— Total estimated annual gain from consolidating supplementary health benefits and administrative functions.
$12.7 million
— Estimated annual administrative savings from consolidating welfare funds.
$3.7 billion
— Cost to the City for health insurance benefits in fiscal year 2010.
$285,000
— Questionable expenses found in the United Probation Officers Association welfare fund audit.
$180,000
— Questionable health and wellness program expenses found in the United Probation Officers Association audit.
Reforming fringe benefits, such as aligning health insurance premium sharing plans and eliminating Medicare Part B reimbursements, offers a viable alternative to reducing public sector headcount. These policy adjustments could generate hundreds of millions of dollars in savings for New York State and local governments.
Recommendations related to Fringe Benefits
School districts outside New York City should align their health insurance premium sharing plans with New York State government to achieve significant savings.
New York State government should eliminate the practice of reimbursing Medicare Part B premiums to reduce costs.
Public employers should increase health insurance premium sharing for retirees to 50 percent to generate budgetary savings.
Key Data
$220 million
— Potential savings for school districts outside New York City if they aligned their health insurance premium sharing plans with the New York State government.
$120 million
— Potential savings from eliminating the New York State government's practice of reimbursing Medicare Part B premiums.
$315 million
— Potential savings from increasing health insurance premium sharing for retirees to 50 percent.
New York City could generate significant savings to avoid layoffs by requiring municipal employees and retirees to contribute to their health insurance premiums, mirroring the recent agreement between the State and the Civil Service Employees Association. Implementing these premium-sharing policies would save the City $735 million in fiscal year 2012, with additional savings of $290 million achievable through the adoption of state-level retiree contribution standards.
Recommendations related to Fringe Benefits
City employees and retirees should be required to make contributions toward the cost of their health insurance premiums, mirroring the arrangement required by CSEA employees.
The City should adopt the State’s long-standing policy for retiree premium-sharing, which would require 10 percent for individuals and 25 percent for families.
Key Data
$735 million
— Potential City savings in fiscal year 2012 if employees made the same health insurance premium contributions required by CSEA employees.
$915 million
— Projected City savings from employee health insurance contributions by 2015.
$290 million
— Potential City savings in fiscal year 2012 if the City adopted the State’s long-standing policy for retiree premium-sharing.
New York City could save over $1.5 billion in fiscal year 2012 by reforming health insurance arrangements for employees and retirees, specifically through premium sharing and ending Medicare Part B reimbursements. These changes would help avoid proposed layoffs and service cuts by requiring employees and retirees to contribute to their health insurance costs.
Recommendations related to Fringe Benefits
Institute health insurance premium sharing for current employees at 10 percent for individual coverage and 25 percent for family coverage.
Require retirees to pay 50 percent of their premium cost.
End reimbursement of Medicare Part B premiums.
Key Data
$1.5 billion
— Total potential savings for the City in fiscal year 2012 from proposed health insurance reforms.
$600 million
— Savings in fiscal year 2012 from adopting premium sharing requirements for current employees.
$700 million
— Savings in fiscal year 2012 from requiring a 50 percent premium contribution by retirees.
$250 million
— Savings in fiscal year 2012 from ending the reimbursement of Medicare Part B premiums for retirees.
Public employee retirement benefits, including pensions and health insurance, have become a rapidly growing expense that threatens the state's ability to fund essential services. With unfunded health liabilities reaching $56 billion for the state and pension costs rising significantly, there is an urgent need to reform benefit structures and control rising costs.
Recommendations related to Fringe Benefits
New York should stop including overtime in final average salary calculations used to determine pension benefits, as only 6 percent of employees nationwide have this advantage.
The state Legislature should cease the annual practice of passing legislation to "sweeten" benefits, which exacerbates the financial burden on taxpayers.
State leaders must control the cost of public retirement benefits to ensure that state and local governments can continue to provide essential public services in the future.
Key Data
$9 billion
— The projected budget deficit for New York state for the upcoming year.
$1.5 billion
— The current annual cost of pension contributions for New York state.
$56 billion
— The unfunded liability for retiree health insurance benefits for the state.
$61,295
— The average pension received by police and firefighters who retired in 2009.
$25,440
— The average pension received by regular civilian employees who retired in 2009.
6 percent
— The share of full-time state and local employees across the country who can include overtime in final average salary calculations.
New York City faces ballooning costs for retiree health insurance, known as other postemployment benefits (OPEB), which reached $9.4 billion in fiscal year 2010. To manage these growing liabilities, the city should implement premium-sharing for retirees and establish a disciplined funding policy for the Retiree Health Benefits Trust.
Recommendations related to Fringe Benefits
The City should require greater retiree contributions toward health insurance premiums.
The City should establish a program for funding the future liabilities related to retiree health insurance.
The City should set an appropriate goal for retirees to pay 50 percent of their health insurance premiums.
The Mayor and the City Council should agree to a policy that determines the basis for future contributions and limits the conditions and purposes of future withdrawals from the Retiree Health Benefits Trust.
Key Data
$9.4 billion
— New York City recognized this expense for other postemployment benefits (OPEB) in fiscal year 2010.
$2.3 billion
— The amount of OPEB expense incurred in fiscal year 2009.
$1.6 billion
— Total premium payments made by the City for retiree health insurance in fiscal year 2010.
$2.4 billion
— Projected cost of retiree health insurance premium payments by 2014.
$11 billion
— The actuarially determined contribution needed for the City to fully fund its 2010 OPEB obligation.
$2.5 billion
— Total amount deposited into the Retiree Health Benefits Trust (RHBT) fund over fiscal years 2006 and 2007.
Rising municipal pension and health insurance costs are forcing significant budget cuts to youth services and agency staffing in New York City. To address this, the state should reform pension systems for future workers and implement greater cost-sharing for retiree health benefits.
Recommendations related to Fringe Benefits
The Legislature must enact a new pension system for future uniformed workers that includes a minimum age for retirement, bases pensions on salaries without overtime, and requires higher employee contributions during their working years.
Union leaders must agree to more cost-sharing for health insurance premiums, and retirees should be paying for a share of their benefits similar to arrangements in the private and nonprofit sectors.
Key Data
$69,884
— Annual city-funded pension fund contributions for each firefighter.
$51,829
— Annual city-funded pension fund contributions for each police officer.
$6.6 billion
— Total pension contributions cost New York's taxpayers last year.
$1.2 billion
— Retiree health insurance cost New York taxpayers last year.
$4.9 billion
— Annual pension fund contributions in 2007.
$8.1 billion
— Projected annual pension fund contributions in fiscal year 2012.
New York faces a budget gap projected to reach $14.6 billion in 2012, necessitating reforms in school aid, Medicaid, and public employee compensation. Public employees currently receive fringe benefits that are significantly more generous than those in the private sector or other states, requiring negotiated savings as contracts expire.
Recommendations related to Fringe Benefits
Since contracts will expire on March 31, 2011, savings should be negotiated regarding public employee compensation.
New York State's public pension systems face significant fiscal strain due to rising employer contributions, which have reached a 9:1 ratio compared to employee contributions, and escalating costs for retiree health insurance that total over $55.9 billion in unfunded liabilities. To address these challenges and ensure long-term sustainability, the state should consider reforms such as capping overtime in pension calculations and transitioning toward defined contribution plans for public employees.
Key Data
$55.9 billion
— The State liability for retiree health insurance and other benefits.
9:1
— The ratio of employer to employee pension contributions in New York.
$33,270
— The average annual pension received by employees retiring in 2010.
$61,295
— The average pension received by police and firefighters who retired in 2010.
$2.1 billion
— Projected pension contributions by fiscal year 2014.
$46.3 billion
— The future cost of retiree health insurance obligations for the State as of March 31, 2010.
A proposed legislative mandate requiring firefighters to undergo 80 hours of additional training would cost $29.5 million, largely due to overtime payments. This added expense would increase current year wages and fringe benefits by nearly $19 million while further inflating already rapidly growing pension costs.
Recommendations related to Fringe Benefits
The Governor should veto A9885/S6784 because the bill mandates an arbitrary 80 hours of training that creates unnecessary overtime costs and increases fringe benefits for firefighters.
Key Data
$29.5 million
— The estimated cost of the legislation requiring additional firefighter training.
$19 million
— The amount by which current year wages and fringe benefits would increase due to the added overtime.
20 percent
— The projected growth rate of pension costs by 2014.
$8 billion
— The projected cost of pension obligations in 2014.
80 hours
— The amount of additional training mandated by the proposed legislation.
222,114
— The total number of inspections conducted by the FDNY in fiscal year 2010.
New York City's municipal union welfare funds, which receive $1 billion in annual taxpayer contributions, suffer from poor management and inefficiency, leading to calls for consolidation and reform. By integrating supplemental health benefits into the city's main insurance plan and centralizing non-health benefits, the city could improve accountability and achieve significant cost savings.
Recommendations related to Fringe Benefits
The varying and inefficient package of drug, dental and optical benefits provided by the multiple welfare funds should be replaced by a standard set of benefits included under the City's health insurance program.
A new centralized 'cafeteria' plan should be developed for non-health-related benefits, enabling individuals to select specific benefits with a limit on the dollar value.
Setting standards for fund performance and management and expanding the Comptroller's authority to oversee and sanction funds that don't meet those standards would help to keep remaining funds accountable.
Key Data
$1 Billion
— Annual taxpayer contributions received by municipal union welfare funds.
81
— Total number of municipal union welfare funds established by 58 unions.
4% to 7%
— Average annual increase in payments to welfare funds.
69
— Number of funds that submitted late filings for fiscal year 2007.
15
— Number of funds that submitted filings including qualified or adverse auditors' statements.
2
— Number of funds that submitted no financial information for fiscal year 2007.
New York State is considering legislation that would expand pension and retirement benefits for various public employees, including teachers, corrections officers, and state police. These proposed changes would increase costs for an already unaffordable pension system, prompting calls for the Governor to veto these measures to maintain fiscal responsibility.
Recommendations related to Fringe Benefits
The Governor should veto bill A8664-A/S5748A, which would make the final average salary calculation for New York City teachers who have taken a leave of absence more generous.
The Governor should veto bill A8509A/S5633A, which enhances already generous pension packages for uniformed employees by allowing members of the State Department of Corrections to defer five vacation days per year and receive a lump sum payment upon their retirement.
The Governor should veto bill A10068/S7078, which allows certain employees in nursing titles in the State University of New York’s optional retirement program to retroactively transfer their membership to the New York State and Local Employees Retirement System.
The Governor should veto bill A10753/S7544, which would set a precedent for State police officers to receive death benefits for longer periods of service than their records reflect by counting vacation and sick time.
The Governor should continue to stand for fiscal responsibility and veto these bills and any others that come before him.
Key Data
25
— Number of bills enhancing benefits for State and local employees and retirees currently being tracked on the annual Sweetener Scorecard.
$1.1 million
— Estimated annual cost in added contributions for the bill regarding final average salary calculations for New York City teachers.
five
— Number of vacation days per year that members of the State Department of Corrections would be allowed to defer under the proposed pension enhancement bill.
City employee pension and fringe benefits account for nearly a quarter of municipal expenses and are projected to grow by nearly five percent annually. Implementing reforms such as requiring employee contributions to health care premiums and creating a new pension tier could generate significant annual savings to help balance the budget.
Recommendations related to Fringe Benefits
The City should require employee contributions to health care premiums of 10% for individuals, 25% for families and 50% for retirees to save over $1 billion annually.
The City should create a new pension tier that requires greater employee contributions and a longer vesting period to achieve $200 million in annual savings.
The City should reform health care and retirement benefits for its workers to bring them more in line with the private sector.
Key Data
10%
— Required employee contribution to health care premiums for individuals.
25%
— Required employee contribution to health care premiums for families.
50%
— Required employee contribution to health care premiums for retirees.
$1 billion
— Annual savings achieved by requiring employee contributions to health care premiums.
$200 million
— Annual savings from creating a new pension tier with greater employee contributions and a longer vesting period.
5%
— Average annual growth rate for city employee pension and fringe benefits.
City pension contributions have risen from $3.9 billion in 2006 to $6.3 billion in 2009, with projections exceeding $7.9 billion by 2014, necessitating reforms to future worker benefits. Additionally, the city should stop using the $1.2 billion Retiree Health Benefits Trust to balance operating budgets and instead require retirees to contribute to their health insurance premiums.
Recommendations related to Fringe Benefits
The only way to avoid an unaffordable burden in coming years' budgets is to make pension benefits less lavish.
The state constitution guarantees current retirees and workers their pension benefits, but those benefits can and should be reduced for future workers.
Taxpayers should join the mayor in a campaign to enact pension reform in the current legislative session, with savings from Tier 5 beginning on July 1.
The imprudent diversion of funds from the Retiree Health Benefits Trust should be eliminated from the Executive Budget.
The city should also require retirees to pay a substantial share of their health insurance premiums; unlike pensions, this benefit is not protected by the state constitution.
Key Data
$3.9 billion
— City pension contributions in fiscal year 2006.
$6.3 billion
— City pension contributions in fiscal year 2009.
$7.9 billion
— Projected city pension contributions in fiscal year 2014.
$65 billion
— Actuarial value of future retiree health insurance premiums.
$2.5 billion
— Amount deposited into the Retiree Health Benefits Trust from surplus revenue over two years.
$1.2 billion
— Amount from the Retiree Health Benefits Trust used to balance the budget in fiscal years 2011 to 2013.
New York State faces unsustainable growth in employee compensation, with pension and health insurance costs projected to consume 16 percent of general fund tax revenues by fiscal year 2013-14. To address this, the state should increase employee premium sharing for health insurance, eliminate retiree subsidies for Medicare Part B, and introduce a defined contribution pension option to better align public sector costs with private sector norms.
Recommendations related to Fringe Benefits
For single policies, the individual's share of the health insurance premium should increase from 10 to 20 percent.
For families, the premium sharing should increase from 25 to 30 percent.
For retirees, the premium sharing should be increased to 50 percent for both single and family policy holders.
The practice of allowing retirees to buy down the future costs of health care premiums by applying unused sick days should be discontinued and the highly unusual reimbursement for the cost of Medicare Part B premiums ended.
A defined contribution option should be added to the pension system for all State employees.
Key Data
$18.9 billion
— Employee compensation in fiscal year 2009-10, including wages, salaries, health insurance, pensions, and other fringe benefits.
$56.3 billion
— The estimated unfunded liability of providing retiree health care for State employees.
$581 million
— The estimated fiscal benefits associated with increasing health insurance premium sharing for current and retired employees.
$194 million
— Estimated savings for the State if 10 percent of the workforce were enrolled in a new defined contribution pension plan by fiscal year 2013-14.
$138.8 million
— Total expenses for Medicare Part B in fiscal year 2009-10.
$22.2 billion
— Projected total compensation for state employees in fiscal year 2013-14.
Between 1996-97 and 2006-07, employee benefits emerged as the fastest-growing category of education spending in New York, with costs rising at an average annual rate of 8.2%. This growth significantly outpaced the national average, as New York districts spent an additional $1,561 per pupil on benefits compared to the national increase of $600 per pupil.
Key Data
8.2%
— Average annual growth rate of employee benefits in New York from 1996-97 to 2006-07.
7.3%
— Average annual growth rate of employee benefits in the U.S. from 1996-97 to 2006-07.
12%
— The rate at which benefit costs in New York grew faster than in the rest of the nation.
$1,561
— Additional amount spent per pupil on benefits in New York from 1996-97 to 2006-07.
$600
— Additional amount spent per pupil on benefits in the U.S. from 1996-97 to 2006-07.
31%
— Portion of the $4,980 increase in instructional spending that went to fringe benefits.
New York City's budget relies on one-shot measures, including a $395 million withdrawal from a retiree health insurance trust fund, to address projected deficits. Relying on such temporary fixes to bridge budget gaps instead of implementing structural cost-cutting measures creates long-term fiscal instability.
Recommendations related to Fringe Benefits
The city should avoid using the $395 million drawdown from a retiree health insurance trust fund as a one-shot budget measure.
Key Data
$395 million
— The amount of the drawdown from a retiree health insurance trust fund used as a one-shot budget measure.
New York City taxpayers currently spend $10.4 billion annually on pension and health benefits for municipal employees, a cost that exceeds private-sector standards and requires reform. Aligning these benefits with private-market practices, such as requiring employee contributions and shifting to defined-contribution pension plans for future hires, could generate significant annual savings.
Recommendations related to Fringe Benefits
The city should require its current workers to make contributions toward health-insurance premiums equal to the amounts paid by employees of local private-sector firms.
The city should require retirees to make contributions toward health-insurance premiums to align with private-sector policies.
The city should convert to defined-contribution plans for future hires to remain competitive with the private sector regarding pension benefits.
Key Data
$10.4 billion
— Total annual cost for pension and health-insurance benefits for current and retired municipal employees.
$628 million
— Annual savings to taxpayers if current workers were required to make contributions toward health-insurance premiums equal to those in the private sector.
$741 million
— Annual savings to taxpayers if the city required retirees to make contributions toward health-insurance premiums.
$1.4 billion
— Combined annual savings for health-insurance premiums if the city aligned its policies with the private sector.
8 percent
— Percentage of surveyed private firms that do not require payments toward health insurance premiums from their workers.
90 percent
— Percentage of surveyed private firms that offer defined-contribution pension plans.
Between fiscal year 2000 and 2009, the cost of municipal employee compensation, including pensions and fringe benefits, increased by $15 billion, or 80 percent, with average compensation now exceeding $100,000. To address this fiscal burden, the city must reform generous fringe benefits, increase the retirement age for new hires, and require employee contributions toward health insurance and pensions.
Recommendations related to Fringe Benefits
Fringe benefits, which are exceedingly generous, must be reformed to be more in line with those of other public and private-sector entities.
Every employee should contribute to his or her health insurance premiums.
The retirement age should be increased for new employees.
New employees should contribute more to their pensions.
Key Data
$15 billion
— The increase in the cost of compensating City employees, including pension and fringe benefits, from fiscal year 2000 to 2009.
80 percent
— The percentage increase in the cost of compensating City employees, including pension and fringe benefits, from fiscal year 2000 to 2009.
$100,000
— The average compensation of a New York City municipal worker.
Uniformed employees in New York State currently receive significantly more generous pension benefits than civilian counterparts, with higher employer contribution requirements and earlier retirement ages. To effectively control rising state and local pension costs, new police and fire hires should be included in the proposed Tier V pension legislation rather than being granted exemptions.
Recommendations related to Fringe Benefits
The Governor should veto A3426/S1409 to prevent the extension of Tier II pension provisions to new police and firefighters.
New uniformed employees must be eligible for Tier V benefits along with civilian employees to ensure the effectiveness of the new tier in curbing rising pension costs.
Any effort to exempt uniformed employees from Tier V benefits, even on a temporary basis, should be rejected.
The Governor should resist any effort to exempt certain classes of employees from the provisions of the proposed Tier V pension legislation.
Key Data
86 percent
— of uniformed employees who retired from the New York State Police and Fire Retirement System were under the age of 60.
$48,900 to $66,586
— is the range of annual lifetime pension payments for uniformed employees who retired from the New York State Police and Fire Retirement System.
20 percent
— of salary is the amount public employers are expected to contribute to fund the pension of a uniformed employee.
11 percent
— of salary is the amount public employers are expected to contribute to fund the pension of a civilian employee.
New York City faces significant financial pressure due to the rising costs of employee retirement benefits. This analysis examines the factors contributing to the explosion in pension expenditures and their implications for the city's fiscal health.
State and local governments face significant fiscal pressure from rising salary and fringe benefit costs, necessitating reforms to pension and health insurance structures. Proposed measures include reducing annual pay increases, increasing retiree health insurance cost-sharing, and providing municipal managers with tools to control labor costs.
Recommendations related to Fringe Benefits
The state should implement eliminating one annual pay increase, typically averaging 3 percent, for state employees that was planned as part of recent collective bargaining agreements.
The state should move toward requiring retired state employees to pay a larger share of their health insurance premiums.
The state should embrace the governor's proposals, and consider enhancing cost-sharing for current workers as well.
Mayors, county executives, school boards and other municipal managers need the state to give them tools to control labor costs.
All taxpayers should support these important reforms as part of a balanced response to the hard economic times.
Key Data
$5 billion
— The amount of new tax proposals needed to address the state budget.
3 percent
— The average annual pay increase for state employees planned as part of recent collective bargaining agreements.
75 percent
— The portion of family health insurance premiums currently paid by the state.
90 percent
— The portion of retirees' individual health insurance premiums currently paid by the state.
$25 million
— The initial annual savings from the proposed pension reforms.
$500 million
— The projected annual savings from the proposed pension reforms once fully implemented.
New York City's employee compensation costs have surged by 63% over eight years, driven largely by an astonishing 704% increase in pension contributions and generous health insurance benefits. To curb these rising labor expenses, the city must pursue structural reforms to health insurance, implement a new pension tier for new hires, and return to productivity-based contract negotiations.
Recommendations related to Fringe Benefits
The mayor should aggressively pursue health-insurance reforms.
The Legislature should approve new pension tier changes for new employees.
The city should return to productivity-based negotiations in future contract talks.
Mayor Bloomberg and the city's unions must partner to identify concessions and workplace reforms that would provide immediate and recurring savings.
Key Data
704%
— Growth in the city's average contribution for pension benefits over eight years.
$37,600
— Average annual fringe-benefit costs for full-time city employees.
63%
— Growth in total New York City compensation costs over the last eight years.
$200 million
— Projected savings from health-insurance restructuring in the next fiscal year.
$20,333
— Current average annual pension contribution per full-time employee.
50%
— Rise in nonpension fringe-benefit costs over eight years.
Between fiscal years 2000 and 2008, the average compensation cost for New York City full-time employees grew by 63 percent, reaching $106,743. This increase was driven primarily by fringe benefits, which nearly tripled in cost and rose from 20 percent to 35 percent of total employee compensation.
Key Data
$106,743
— Average compensation cost per full-time New York City employee in fiscal year 2008.
$37,619
— Average fringe benefit costs per full-time employee in fiscal year 2008.
700%
— Growth in the City's average contribution for pension benefits between fiscal years 2000 and 2008.
$20,333
— Average contribution for pension benefits per full-time employee in fiscal year 2008.
20%
— Portion of total compensation represented by fringe benefits in fiscal year 2000.
35%
— Portion of total compensation represented by fringe benefits in fiscal year 2008.
New York can address significant budget gaps by restructuring state employee fringe benefits, specifically by aligning health insurance with other public-sector employers and creating a new pension tier for future hires. These adjustments, including requiring higher premium contributions and eliminating Medicare Part B premium repayments, offer a path to fiscal sustainability without raising taxes.
Recommendations related to Fringe Benefits
The state should restructure its health insurance to bring it in line with other public-sector employers.
An additional 4 percent contribution toward family plan premiums from current workers should be required.
For retirees, New York should insist on a larger contribution toward premiums and eliminate repayment for Medicare Part B premiums.
The state should also restructure pensions.
The most practical approach would be to change the pension benefits for future employees by creating a new tier for them.
Key Data
$1.1 billion
— Annual cost of state-required pension contributions for employees and retirees.
4 percent
— Additional contribution toward family plan premiums that should be required from current workers.
New York State's government pension and fringe benefit plans are unnecessarily generous, as public sector workers often receive higher hourly wages than their private sector counterparts. Reforming these mandates, including raising retirement ages and increasing employee contributions, is essential to reducing the state's high local tax burden.
Recommendations related to Fringe Benefits
Redesign the State-mandated pension benefits for future state and local government workers through changes such as raising the minimum retirement ages, increasing the required employee contributions, eliminating inclusion of overtime in benefit calculations, and eliminating variable supplements for uniformed workers.
Key Data
74%
— Percentage of state and local government employees in other systems required to contribute more than 3% of their earnings.
6%
— Percentage of full-time state and local government employees nationally who can count overtime in their pension formula.
$12,000
— Amount of annual 'variable supplement' payments or 'Christmas bonuses' per retiree in 2007.
1.5 million
— Number of people employed by local governments and school districts in New York.
Payroll costs, which include direct wages and fringe benefits, represent the largest expense for the Metropolitan Transportation Authority, accounting for 56% of total expenditures in 2005. These fringe benefit costs have grown at an average annual rate of 4.2%, a figure that increases to 8.4% when adjusted for the transfer of the transit police force.
Key Data
56%
— The portion of the MTA's total 2005 expenses accounted for by payroll, including direct wages and fringe benefits.
4.2%
— The average annual growth rate of fringe benefits from 1992 to 2005.
8.4%
— The adjusted average annual growth rate of fringe benefits from 1992 to 2005, accounting for the police transfer.
New York City's pension and retiree health insurance costs are significantly higher than private sector standards, with taxpayers contributing $4 billion to pensions and $900 million for retiree health insurance in the current fiscal year. Reforming these benefits to align with private sector practices and adjusting retirement ages could help manage the projected increase in costs, which are expected to exceed $5.7 billion by 2010.
Recommendations related to Fringe Benefits
New York should trim the pensions of city workers to align with private sector standards.
New York should adjust the retirement age for city employees to match the age for full Social Security benefits.
New York should exclude overtime earnings from the pension benefit formula.
New York should convert from defined benefit plans to defined contribution plans to align with the private sector.
Key Data
$4 billion
— taxpayer contribution to the pension funds of municipal workers in the current fiscal year
$900 million
— taxpayer contribution for retiree health insurance in the current fiscal year
$5.7 billion
— projected pension contributions in 2010 if no changes are made
15%
— amount by which average hourly wages for public employees exceed those of private firms
30%
— wage advantage for public sector blue collar workers compared to private sector counterparts
New York City's 'non-discretionary' spending, which includes pension contributions and health insurance, is projected to grow to $25 billion by 2009, consuming a large portion of city revenue. By implementing reforms to these benefit structures and other costs, the city could save nearly $2.5 billion annually to address budget gaps or fund other priorities.
Recommendations related to Fringe Benefits
A new and more affordable pension plan could be established for new workers through State legislation.
The City should share the cost of health insurance premiums with workers by requiring 10 percent for individual policies and 20 percent for family policies.
Retirees should be required to pay 50 percent of their health insurance premiums.
The City should stop paying for their Medicare Part B premiums.
The Mayor could make these changes via collective bargaining, and a local law could end the Medicare subsidy.
Key Data
$4,624 million
— The cost of fringe benefits in 2005.
$5,877 million
— The projected cost of fringe benefits in 2009.
$1,197 million
— The potential annual savings from health insurance reforms in fiscal year 2009.
$12,000
— The December holiday bonus paid to retired New York City police officers.
18.0%
— The typical individual premium contribution for current employees in the private sector.
31.0%
— The typical family premium contribution for current employees in the private sector.
New York City and State retirement benefits, including pensions and health insurance, are significantly more generous than those provided by other large public and private employers, creating a growing fiscal burden. To address this, the state and city should transition to defined contribution plans and reform existing defined benefit systems by increasing employee contributions, raising retirement ages, and tightening disability definitions.
Recommendations related to Fringe Benefits
Require retirees to pay 50 percent of the premium for health insurance for themselves and their dependents.
Stop reimbursing retirees for Medicare Part B premiums.
The long-run goal of pension reform should be to convert from defined benefit to defined contribution plans.
Increase required employee contributions to pension plans.
Raise the minimum age requirement for retirement.
Base pension benefits on the more standard definition of final average salary.
Define work-related disabilities more rigorously.
Eliminate the variable supplements available to some retired New York City uniformed workers.
Key Data
$615 million
— Required contributions to City pension funds in fiscal year 2000.
$2.3 billion
— Required contributions to City pension funds in fiscal year 2004.
$4.7 billion
— Projected required contributions to City pension funds in fiscal year 2008.
$1.5 billion
— Combined cost to the City and State of health insurance for retirees in 2004.
$12,000
— The amount of variable supplement payments for certain retired New York City uniformed workers in 2007.
43%
— Percentage of retired firefighters receiving additional benefits due to a disability deemed to be job related.
City worker fringe benefits have grown rapidly, with costs rising 54 percent to nearly $4.2 billion between fiscal years 1994-95 and 2001-02, largely driven by a 72 percent increase in health insurance costs. Consequently, addressing the city's budget gap should involve seeking concessions from employees regarding these benefits.
Recommendations related to Fringe Benefits
Citizens should reasonably expect some concessions from employees, particularly in their fringe benefits, to address the large looming budget gaps.
The Mayor can negotiate with the unions on fringe benefits and work with the State legislature on pensions to help control costs.
Key Data
54%
— The total cost to the City of fringe benefits rose by this amount from fiscal year 1994-95 to fiscal year 2001-02.
$2.7 billion
— The total cost to the City of fringe benefits in fiscal year 1994-95.
$4.2 billion
— The total cost to the City of fringe benefits in fiscal year 2001-02.
72%
— The increase in health insurance benefits, which contributed significantly to the rise in total fringe benefit costs.
$2.0 billion
— The cost of health insurance benefits in fiscal year 2001-02.
$3.8 billion
— The amount outside the Mayor's 'controllable base' allocated for pension fund contributions and other fringe benefits.
Moving non-managerial municipal employees from a 35-hour to a 40-hour workweek could save the city approximately $498 million annually by reducing the need for staff and associated costs. These savings include significant reductions in expenditures for salary, fringe benefits, and office space, as the average savings per worker is estimated at $58,001.
Recommendations related to Fringe Benefits
The City should require non-managerial civilian employees currently working a 35-hour week to move to a 40-hour workweek to increase productivity and reduce personnel costs.
To address occupational specialization, the City should implement "broad-banding," which involves combining similar job titles into broader common job titles to facilitate work sharing.
To overcome geographic dispersion, the City should pursue relocation of workers to more concentrated offices or implement rotating schedules where employees divide their time among multiple locations.
Key Data
$58,001
— Estimated total annual savings per worker, including salary, fringe benefits, and space costs.
$498 million
— Estimated total annual savings to the City from moving all non-managerial civilians to a 40-hour workweek.
$5,043
— Average annual premium cost to the City for health insurance per municipal worker.
$1,475
— Annual City contribution to union welfare funds per member for District Council 37.
$2,911
— Estimated annual pension contribution per worker.
$3,300
— Annual savings per job from reduced office space needs.
The municipal health insurance program should be modernized through premium cost-sharing and price competition, which could yield over $500 million in annual savings. Additionally, streamlining the administration of union welfare funds and transitioning new employees to a defined contribution pension plan would improve fiscal stability and benefit management.
Recommendations related to Fringe Benefits
The City should require cost-sharing of 10 percent toward individual coverage and 20 percent for family coverage to modernize the health insurance program.
The City should ask multiple plans seeking to insure municipal workers to compete by offering lower prices to generate price competition among insurance plans.
The City should contract on behalf of multiple funds with a private benefit program administrator to achieve economies of scale for smaller welfare funds.
The next round of contracts should contain stronger accountability measures, including annual audits by independent firms, to ensure effective oversight of welfare funds.
The City should use the current round of collective bargaining to establish a new defined contribution pension plan for newly hired workers.
Key Data
$500 million
— Annual direct savings from implementing premium cost-sharing for municipal health insurance.
$129 million
— Projected savings in fiscal year 2002 from introducing price competition among health insurance plans.
$247 million
— Projected savings in fiscal year 2004 from introducing price competition among health insurance plans.
$3.7 million
— Annual savings from reducing administrative costs for smaller union welfare funds.
$798 million
— Recurring annual cost of pension enhancements added in 2000 outside of collective bargaining.
$781 million
— Savings from restructuring the employee health insurance program in fiscal year 2004.
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