Unfair: city workers' health freebies

If you were in charge of cutting the city budget, which would you choose -- eliminating essential services, or finding ways to save money and preserve the programs New Yorkers need?

As much as possible, of course, we want to keep teachers in the classroom and police on the streets, maintain high levels of transit and health-care services and otherwise preserve government's ability to enhance the quality of life.

But those services are threatened. Gov.-elect Andrew Cuomo must close a $9 billion budget gap in the coming year; similar challenges face leaders in local governments across the state.

Fortunately, our elected leaders can take steps to reduce costs without cutting services. Here is one modest proposal: Distribute the cost of municipal and school employee health benefits more fairly.

New York City, and other localities and school districts across the state, spend more than $23 billion a year on fringe benefits, mostly for employee health care and pensions, according to the state Comptroller. That's more than 17 percent of their total budgets -- and these costs are growing fast.

The incoming governor and the Legislature have a stake in controlling these local costs, because a third of state spending goes to public schools or general municipal aid.

There's little question that next year's state budget will include sharp cuts in baseline funding for local programs. State leaders can make it possible for local officials to take those cuts without slashing services -- by acting to ease taxpayer costs for local employee benefits.

There's now a blatant inequity between the state's health-care benefits for its employees, and those that the city and other local jurisdictions provide most of their workers.

State employees are covered by the New York State Health Insurance Program and they pay an average 18 percent of premium costs for their coverage. But in most municipalities -- including the city -- and in many school districts, the employee share ranges from none to minimal.

Requiring these employees to pay the same proportion of benefit costs that state workers pay would save an estimated $1.2 billion a year or more, with $650 million of that in New York City.

The state could impose this action directly, requiring that local collective-bargaining agreements include such a provision. (The state already sets the rules for public employee bargaining.) Or it could require that all local employers join

NYSHIP and adopt the same contribution rates that now apply to state workers.

Either approach accomplishes multiple goals -- helping to mitigate budget pressures, preserving services and jobs that otherwise would be cut and addressing an inequity between employees of the state and those who work for local governments.

For both labor and management, health-benefit packages -- composition and costs -- have grown in importance over time. Making meaningful changes won't be easy. No one is going to volunteer to pay for something they now perceive as "free."

In reality, given the rapidly rising cost of this "free" benefit, municipal employees are paying plenty for it -- through lower wages or other benefits, and through the loss of colleagues working alongside them.

As state and local government policymakers confront both rising health-care costs and large budget gaps, they face choosing to cut the level and quality of our public services or to reduce the unit cost of providing them. Reducing unit costs -- for example, by reducing employee benefit costs -- means preserving services and jobs for New Yorkers.

And it's important that the proposal offered here would not diminish the quality of these employee health benefits, something very important to the families receiving them. It would simply require that they, like state employees, share a small portion of the costs.

The issue of cost-sharing for employee and retiree health premiums must move to the front of the collective-bargaining table. Given the budget challenges facing the state and its localities -- and the implications of those challenges for essential public services -- avoiding this issue is no longer an option.

Carol O'Cleireacain is a senior fellow at the Nelson A. Rockefeller Institute of Gov ernment and a former New York City bud get director. Her full report on this issue is available at rockinst.org.