Labor savings in New York refer to the strategies and structural reforms used by the City and State to manage the costs of their municipal and public workforces. This page covers CBC’s work on workforce attrition, overtime reduction, health insurance premium sharing, pension benefit reforms, and the consolidation of agency functions.
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 and retiree health insurance to generate significant savings.
The City should work with the MLC to consolidate welfare funds to leverage economies of scale for prescription drugs and other medical benefits.
The City should seek State legislation to eliminate the VSFs and have the assets transferred to the main pension funds.
The City could make four firefighters the standard staffing for engine companies.
The City should be given the flexibility to shift at least half of the ALS ambulances to a one paramedic, one EMT staffing model.
The City could reduce overtime for skilled trades and uniformed employees through the implementation of overtime caps.
Key Data
In March 2022, the CBC reported that the City had nearly 26,000 vacant full-time positions as of December 31, 2021, and that eliminating over 7,000 of these was a beneficial step toward fiscal stability.
As of February 2022, the City projected that Program to Eliminate the Gap (PEG) savings from agency spending would total $1.7 billion annually, with $1.0 billion coming from operating budgets.
In January 2021, the CBC estimated that an Early Retirement Incentive (ERI) would cost the City approximately $110,000 per participant over five years, making it a more costly workforce reduction strategy than attrition.
In September 2020, the CBC reported that the City's Adopted Budget for Fiscal Year 2021 included a placeholder for $1 billion in recurring labor savings, which would increase to $1.8 billion by fiscal year 2024.
In July 2020, the CBC highlighted that the City's fiscal year 2021 budget relied on a $350 million reduction in overtime at the New York City Police Department to help keep spending flat.
The Preliminary Budget for Fiscal Year 2023 took initial steps toward fiscal prudence by eliminating over 7,000 vacant positions and removing $500 million in illusory labor savings. To achieve long-term stability, the administration must implement a 3 percent Program to Eliminate the Gap (PEG) annually, focusing on operational efficiencies and structural reforms rather than relying on vacancy reductions.
Recommendations related to Labor Savings
The Executive Budget should include a PEG targeting 3 percent in fiscal year 2023 and each year thereafter, focused on strategies that increase efficiency and reduce unit costs.
The Executive Budget should include efficiency savings from centrally managed services like space and fleet.
The City should pursue savings from potential actions, such as modernizing contractual differentials, work rule changes, and consolidation of welfare benefits.
Key Data
$500 million
— The amount of annual illusory labor savings removed in the Preliminary Budget for Fiscal Year 2023.
7,000
— The number of vacant full-time positions eliminated in the Preliminary Budget for Fiscal Year 2023.
26,000
— The number of vacant full-time positions the City had on December 31, 2021.
18,500
— The number of vacant full-time positions remaining for the City to hire necessary personnel.
24 percent
— The portion of five-year PEG savings attributed to vacancy reductions that did not increase efficiency.
9 percent
— The portion of PEG savings attributed to efficiency initiatives, totaling $500 million over five years.
The November 2021 Financial Plan includes $700 million in unspecified labor and attrition savings that lack a concrete plan for achievement, necessitating either their removal or the identification of specific actions to realize these savings. Additionally, future collective bargaining increases, such as a two percent annual raise, would cost $1 billion in fiscal year 2023 and rise to $2.5 billion by fiscal year 2025, requiring new resources or offsetting efficiencies.
Recommendations related to Labor Savings
Agencies should leverage technology to improve service delivery.
Agencies should reduce spending on low impact programs.
Agencies should work with labor to change work rules to increase efficiency.
Agencies should streamline work processes.
Agencies should consolidate like functions across agencies.
The City should either remove the unspecified labor savings from the financial plan or identify specific actions to achieve them.
Key Data
$500 million
— Unspecified labor savings included in the November 2021 Financial Plan annually beginning in fiscal year 2023.
$200 million
— Unspecified attrition savings included in the November 2021 Financial Plan annually beginning in fiscal year 2023.
$1 billion
— Cost of annual raises of two percent over three years in fiscal year 2023.
$2.5 billion
— Cost of annual raises of two percent over three years in fiscal year 2025.
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Reducing the municipal workforce through attrition rather than early retirement incentives offers significantly higher fiscal benefits, with net savings over five years estimated at $4.3 billion compared to $3.3 billion. Early retirement incentives are a more costly strategy that would offset 19 percent of potential savings and include hundreds of millions of dollars in unneeded expenses for employees who would have retired regardless.
Recommendations related to Labor Savings
The City should reduce its workforce through attrition and not pursue the early retirement incentive (ERI) to balance the budget.
Key Data
$110,000
— Estimated cost to the City per participant over five years for the proposed early retirement incentive.
19 percent
— Portion of the City's savings from not having to pay the separated employee’s salary and benefits that would be offset by the early retirement incentive cost.
$1.1 billion
— Estimated cost of the early retirement incentive if 10,000 employees participate and the City fills one new employee for every three vacancies.
$3.3 billion
— Estimated net savings over five years if 10,000 employees take the early retirement incentive and the City fills one new employee for every three vacancies.
$4.3 billion
— Estimated net savings over five years if 10,000 employees leave through normal attrition and one-third of the vacancies are filled.
32 percent
— Amount by which per-person savings through attrition would be greater than savings through an early retirement incentive.
New York City faces a $1 billion budget gap that requires recurring labor savings to avoid widespread layoffs. The city should implement reforms such as health insurance premium sharing, consolidation of union welfare funds, and modifications to work rules and productivity differentials to achieve these savings while maintaining essential services.
Recommendations related to Labor Savings
The City should implement premium-sharing for employee and retiree health insurance to generate significant savings.
The City should work with the MLC to consolidate welfare funds to leverage economies of scale for prescription drugs and other medical benefits.
The City should seek State legislation to eliminate the VSFs and have the assets transferred to the main pension funds.
The City could make four firefighters the standard staffing for engine companies.
The City should be given the flexibility to shift at least half of the ALS ambulances to a one paramedic, one EMT staffing model.
The City could reduce overtime for skilled trades and uniformed employees through the implementation of overtime caps.
Key Data
$1 billion
— The recurring savings target from negotiations with labor unions in the Adopted Budget for Fiscal Year 2021.
$1.1 billion
— Total savings in fiscal year 2021 from the gap-closing plan.
$1.8 billion
— Total savings in fiscal year 2024 from the gap-closing plan.
$1.2 billion
— The estimated annual value of the taxpayer-provided guarantee for the tax-deferred annuity (TDA) fund.
$1.3 billion
— Projected City payments to welfare funds in fiscal year 2020.
$1.1 billion
— Total uniformed overtime spending in fiscal year 2019.
New York City faces a $1 billion recurring labor savings target to address its fiscal crisis, which can be achieved through benefit rationalization and productivity reforms. These measures include implementing health insurance premium sharing, consolidating welfare funds, and adjusting work rules to improve efficiency and reduce overtime costs.
Recommendations related to Labor Savings
The City should implement health insurance premium sharing for active employees to bring benefits in line with other public and private employers.
City leaders should seek State legislation to eliminate Variable Supplement Funds and transfer the assets to the main pension funds.
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 extend overtime caps to skilled trades and uniformed employees to reduce the substantial growth in overtime pay.
The City should standardize fire engine staffing to four firefighters per engine company, rather than allowing staffing of five firefighters.
The City should eliminate the Absent Teacher Reserve as a permanent, paid assignment for teachers whose positions are eliminated.
The City should reform productivity differentials for sanitation workers to ensure they are only given for measurable improvements in cost-effectiveness.
The City should standardize work hours to a forty-hour work week for all employees to facilitate workforce shrinking and associated savings.
The City should eliminate the City contribution to Union Annuity Funds which are negotiated with each union.
The City should reform the Tax-Deferred Annuity (TDA) by sharply reducing the guaranteed return on the fixed return fund through State legislation.
Key Data
$1 billion
— The recurring savings target from negotiations with labor unions in the Adopted Budget for Fiscal Year 2021.
$1.2 billion
— The estimated annual value of the taxpayer-provided guarantee for the Tax-Deferred Annuity (TDA) fund.
$1.1 billion
— The amount spent on uniformed-agency overtime in fiscal year 2019.
$136 million
— The amount the City spent on the Absent Teacher Reserve (ATR) in fiscal year 2018.
$43 million
— The estimated annual cost of the sanitation worker differential for two-person garbage trucks in fiscal year 2018.
$53 million
— The savings generated in fiscal year 2021 by eliminating funding for two future 1 percent raises.
New York City's fiscal year 2021 budget relies on achieving $1 billion in recurring labor savings and $350 million in agency overtime reductions to maintain spending levels. Failure to secure these labor-related savings could result in the layoff of 22,000 municipal employees.
Recommendations related to Labor Savings
The City must successfully negotiate $1 billion in recurring savings with municipal labor unions to maintain current spending levels.
The City must successfully implement reductions approved as part of agency savings programs, specifically the $350 million reduction in overtime at the New York City Police Department.
The City should utilize strategies such as attrition, increased productivity, and negotiated fringe benefit changes to achieve necessary budget savings without resorting to layoffs.
The City must prioritize negotiating and managing the changes necessary to achieve the assumed savings rather than just adopting the budget.
Key Data
$1 billion
— Recurring savings with municipal labor unions required to maintain current spending levels.
22,000
— Number of municipal employees facing potential layoffs if labor savings targets are not met.
$350 million
— Reduction in overtime at the New York City Police Department approved as part of agency savings programs.
$88.2 billion
— Total budget adopted by New York City leaders for fiscal year 2021.
$98.5 billion
— Size of the total budget in fiscal year 2020.
$92.8 billion
— Size of the total budget in fiscal year 2021.
New York State faces a significant fiscal imbalance with a projected four-year budget gap of $28.8 billion, driven by accelerating spending in Medicaid and education aid. To address this, the state should implement recurring savings by reforming retiree health benefits, restructuring Medicaid supplemental payments, and reducing unproductive economic development spending.
Recommendations related to Labor Savings
Consider reforms to retiree health benefits that were proposed repeatedly in recent Executive Budgets.
Reconstitute the Medicaid Redesign Team to identify savings, including policies to address high and rapidly rising long-term care costs.
Key Data
$28.8 billion
— The total four-year State budget gap.
$3.6 billion
— The amount in Medicaid supplemental payments that should be reformed.
$4.4 billion
— The amount New York spends annually on economic development programs.
CBC Vice President Maria Doulis says MTA managers, riders, and drivers will all be making sacrifices through job cuts, fare hikes, and congestion pricing, so it’s only fair labor contributes as well: “The MTA’s demands reflect the fact that more needs to be done with the workforce in order to…
The Metropolitan Transportation Authority faces a severe fiscal crisis, with labor costs comprising nearly 60 percent of its operating budget. To achieve financial stability, the authority must negotiate collective bargaining agreements that freeze total labor costs, increase employee health insurance contributions, and implement productivity improvements.
Recommendations related to Labor Savings
The MTA should revise its financial plan assumption of 2 percent annual wage increases and instead condition any pay increases on generating offsetting savings.
The authority should increase employee health care contributions of represented workers to levels similar to the non-represented workforce.
State legislation should be passed to modify pension benefits for future employees to reduce long-term costs.
Management and labor should set productivity goals and collaboratively develop an agenda of collective bargaining changes to improve efficiency.
New collective bargaining agreements should reduce penalty payments made to bus operators and eliminate allowances for time not worked.
Key Data
$950 million
— Potential savings over the life of the financial plan from forgoing raises.
$496 million
— Potential annual savings from increasing subway maintenance productivity to the median for selected U.S. systems.
$444 million
— Potential annual savings if total bus productivity matched the median.
$86 million
— Potential savings if the Long Island Rail Road could match the total productivity of Metro-North.
$1.4 billion
— MTA health and welfare expense in 2017.
$80 million
— Savings from 2 percent gross wage contributions to health care in 2017.
New York City's capital construction costs are significantly inflated by restrictive contracting rules, including prevailing wage mandates that increase housing construction costs by 25 percent and Wicks Law requirements that add an average of 14 percent to project costs. Renewing Project Labor Agreements and reforming these outdated procurement regulations are essential steps to reduce labor expenses and improve the efficiency of city infrastructure projects.
Recommendations related to Labor Savings
The City should renew its Project Labor Agreements to reduce labor costs and improve managerial flexibility.
City leaders should advocate for a repeal of Wicks Law to reduce construction costs.
City leaders should advocate for the expansion of the city’s toolbox for effective contracting, including the latitude to award construction contracts on a 'best value' basis.
The City should increase funding in the operating budget for project scoping to improve the design process and reduce the need later for change orders.
Key Data
3 to 15 percent
— Savings achieved on 213 project contracts worth a total of $3 billion through Project Labor Agreements.
$300 million
— Estimated capital budget savings over four years from Project Labor Agreements.
25 percent
— Increase in the cost of housing construction caused by prevailing wage mandates.
14 percent
— Average increase in construction costs caused by Wicks Law requirements.
New York City's uniformed overtime spending has grown significantly, reaching $1.7 billion in fiscal year 2016, with uniformed employees receiving two-thirds of all overtime pay. To address this fiscal challenge, the City should establish a labor-management committee to negotiate work policy reforms, such as capping sick leave and overtime earnings, to achieve necessary cost reductions.
Recommendations related to Labor Savings
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 adopt a system in which routine sick leave usage is accrued and capped, similar to the system for civilian employees.
The City should change certain work rules, such as eliminating overtime for travel to alternate work locations and guaranteed minimum overtime hours.
The City should institute a per employee cap on overtime hours or overtime earnings, as exists for civilian employees.
The City should cap or eliminate overtime earnings in calculating final average salary for pensions, which would require State legislative approval.
Key Data
$1.7 billion
— Total overtime spending in fiscal year 2016.
$19,400
— Average overtime compensation paid per uniformed employee in fiscal year 2016.
42 percent
— Average amount by which overtime exceeded the adopted budget in each of the past nine years.
62 percent
— Growth in overtime spending from fiscal year 2009 to fiscal year 2016.
$1.2 billion
— Annual uniformed overtime costs for fiscal years 2015 and 2016.
$500 million
— Increase in uniformed overtime spending from fiscal year 2009 to fiscal year 2016.
New York City's labor-management agreement aimed to achieve $3.4 billion in health care savings between 2015 and 2018, yet over half of the claimed savings resulted from lower-than-projected premium increases rather than structural reforms. While recurring changes like the transition to the HIP HMO Preferred plan and GHI plan modifications are projected to save hundreds of millions, the city continues to contribute to the Health Insurance Stabilization Fund despite it no longer serving its original purpose.
Recommendations related to Labor Savings
The City and the Municipal Labor Committee should gain authority to conduct audits of ineligible 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.
Key Data
$3.4 billion
— Total savings target committed to by the labor-management agreement for fiscal years 2015 to 2018.
$477 million
— Anticipated savings from recurring healthcare cost reductions, representing 23 percent of the three-year target.
$1.1 billion
— Estimated savings claimed from lower-than-projected premium rate increases, accounting for 52 percent of the total.
$147 million
— Expected savings in fiscal year 2017 from converting the GHI plan to a minimum premium plan with new co-pays.
$85 million
— Estimated savings in fiscal year 2017 from the transition to the HIP HMO Preferred plan.
$1 billion
— Balance retained in the Health Insurance Stabilization Fund despite large withdrawals.
The fiscal year 2017 Citywide Savings Program relies heavily on one-time re-estimates and funding shifts rather than sustainable operational efficiencies, with initiatives to improve agency efficiency accounting for only $270 million over the five-year period. To better prepare for potential economic downturns, the city must prioritize recurring savings through operational improvements rather than relying on temporary budget adjustments.
Recommendations related to Labor Savings
The Mayor should ask agencies to identify operational efficiencies that provide recurring savings to increase the budget cushion and guard against economic uncertainty.
The expanded Citywide Savings Program in the Executive Budget should include much more in the way of agency savings from initiatives that improve operations and provide recurring savings.
Key Data
$7.9 million
— Initiatives to make agencies more efficient total this amount in fiscal year 2016.
$1.9 billion
— The fiscal year 2017 Citywide Savings Program proposes new savings initiatives worth this amount over fiscal years 2016 to 2020.
$1.2 billion
— Agency initiatives account for this amount, or 62 percent, of the fiscal year 2017 Citywide Savings Program.
$398 million
— Re-estimates and funding shifts comprise this amount of the $405 million in agency savings identified in fiscal year 2016.
The 2010 Early Retirement Incentive saved New York State and local governments a net total of $681 million over two years, though this came at the cost of losing 9,311 experienced workers and incurring $755 million in pension benefit costs. Future labor savings could be more effectively achieved through reforms like aligning health insurance premium sharing plans and eliminating Medicare Part B premium reimbursements rather than relying solely on early retirement programs.
Recommendations related to Labor Savings
The next time an early retirement incentive is proposed, more options should be explored to achieve labor savings.
School districts outside New York City should align their health insurance premium sharing plan with the New York State government to generate significant savings.
The state should eliminate the practice of reimbursing Medicare Part B premiums to reduce government expenditures.
Government employers should increase health insurance premium sharing for retirees to 50 percent to achieve greater labor savings.
Key Data
$681 million
— Net savings of the Early Retirement Incentive over two years.
$1.4 billion
— Gross savings from two-year payroll reductions.
$755 million
— Pension benefit costs associated with the Early Retirement Incentive.
$817 million
— Potential savings if the same headcount reduction had been achieved through layoffs.
$220 million
— Potential savings from aligning school district health insurance premium sharing with the state.
$315 million
— Potential savings from increasing health insurance premium sharing for retirees to 50 percent.
New York State must secure $377 million in labor savings through union concessions, agency restructuring, or layoffs to meet its current fiscal targets. Rather than spending potential temporary surpluses on new initiatives, the state should prioritize closing this labor savings gap and eliminating nearly $2 billion in fiscal gimmicks to address looming future budget deficits.
Recommendations related to Labor Savings
The state must finalize the remaining $377 million in savings from labor through a combination of union concessions, agency consolidations, and layoffs.
To meet year-end targets, state agencies must ensure that spending for the remainder of the fiscal year is 12 percent below the prior year.
Key Data
$377 million
— The amount of savings from labor that the Governor and unions still need to finalize.
$450 million
— The total target for savings from labor in the current budget.
16 percent
— The portion of the labor savings target achieved with the approval of the Civil Service Employees Association contract.
84 percent
— The remaining portion of the labor savings target that must be achieved through concessions, restructuring, or layoffs.
12 percent
— The required reduction in state agency spending below the prior year for the remainder of the fiscal year to meet the year-end target.
The Metropolitan Transportation Authority's services are benchmarked against other large U.S. transit agencies to identify potential efficiency improvements, particularly in bus and commuter rail operations. The analysis highlights that while subway service is relatively efficient, significant opportunities for cost control exist through improved labor productivity and management practices.
Recommendations related to Labor Savings
The MTA should continue its "net-zero" wage policy, which requires any wage increases to be offset by productivity gains.
The MTA should conform to practices for direct state government employees with respect to a new pension tier and cost sharing for health insurance premiums.
The MTA should pursue efficiency improvements in non-vehicle operations by continuing efforts to terminate redundant staff, such as former token booth clerks.
The MTA should explore best practices from other transit agencies, such as those in Chicago, to identify new efficiency initiatives.
Key Data
$32 million
— Projected savings from the "net-zero" wage policy in 2011.
$220 million
— Projected savings from the "net-zero" wage policy in 2014.
$935 million
— Total projected savings from all identified initiatives in 2014.
$525 million
— Recurring savings expected from efficiency measures and service cuts.
New York State faces a projected $12.4 billion budget gap, driven by rising employee compensation costs that are expected to reach $22.2 billion by fiscal year 2013-14. To address this, the state should implement structural reforms to pension and health insurance benefits, including increased premium sharing and a defined contribution option, alongside a reduction in workforce size.
Recommendations related to Labor Savings
For single policies, the individual's share of the health insurance premium should increase from 10 to 20 percent.
For families, the health insurance premium sharing should increase from 25 to 30 percent.
For retirees, the health insurance 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.
The highly unusual reimbursement for the cost of Medicare Part B premiums should be ended.
A defined contribution option should be added to the pension system for all State employees.
The need to fill any position in State government in the coming year should be reexamined to capture savings from not filling 16,000 vacancies.
Part of the negotiations with the public employee unions should include adding hours to the workweek in order to reduce needed staffing levels and overtime.
Key Data
$18.9 billion
— Employee compensation in fiscal year 2009-10, including wages, salaries, and benefits.
$22.2 billion
— Projected total compensation for state employees in fiscal year 2013-14.
$56.3 billion
— Estimated unfunded liability of providing retiree health care for State employees.
$581 million
— Estimated fiscal benefits associated with proposed changes to health insurance premium sharing.
$194 million
— Estimated savings for the State if 10 percent of the workforce enrolled in a new defined contribution pension plan.
$800 million
— Estimated savings from not filling 16,000 vacant positions in State government.
The state budget should prioritize workforce reductions and benefit reforms to address fiscal gaps, including scaling back public employee health insurance contributions and reducing agency staffing levels. These measures, alongside institutional consolidations, offer significant opportunities to lower expenditures without compromising core services.
Recommendations related to Labor Savings
The Legislature should take all possible actions to reduce the size of the State’s workforce.
The Legislature should require a greater share of health insurance premiums to be paid by current and retired employees, bringing healthcare contributions in line with those of other public sector employees.
If the Department of Correction’s staff and facilities were reduced to a level commensurate with the 15 percent decline in inmate population, the State would save $280 million annually.
For current employees, the Legislature should increase contributions to family healthcare plans from 18 percent to 22 percent, for a savings of $75 million annually.
The Legislature should thoroughly review all the large institutions that the State continues to run to determine which facilities can be closed or consolidated.
Key Data
$280 million
— Annual savings from reducing Department of Correction staff and facilities to match the 15 percent decline in inmate population.
$430 million
— Annual savings from requiring retirees to pay a 50 percent contribution to their health insurance premium costs.
$200 million
— Annual savings from eliminating reimbursement for Medicare Part B premiums for retirees.
$75 million
— Annual savings from increasing current employee contributions to family healthcare plans from 18 percent to 22 percent.
$283 million
— Annual savings achieved if agency workforces were brought down to fiscal year 2006-07 levels.
3,000
— Number of positions the Governor proposes to eliminate through agency consolidations and shared services.
Between fiscal years 2000 and 2008, the average compensation cost for a full-time New York City employee grew by 63 percent to reach $106,743. This rapid increase was driven primarily by a 700 percent surge in pension contributions and rising health insurance costs, which significantly outpaced growth in private and national government sectors.
Key Data
$106,743
— Average compensation cost per full-time New York City employee in fiscal year 2008.
63 percent
— Growth in the City's average employee compensation cost since fiscal year 2000.
700 percent
— Growth in the City's average contribution for pension benefits per full-time employee between fiscal years 2000 and 2008.
$37,619
— Fringe benefit costs per full-time employee in fiscal year 2008.
$69,124
— Average pay per employee in fiscal year 2008.
