New Research Outlines Huge Costs of Ballooning City Municipal Workforce

New York City is now in its 109th month of economic recovery since the 2008 recession – the longest period of growth since the Second World War. That growth has powered tremendous gains in our city that are currently benefitting all New Yorkers. However, policymakers must be careful to avoid handicapping the city during the inevitable future periods of economic slowdown. An important new report by the Citizens’ Budget Commission (CBC) outlines why we should prepare for a downturn in good economic times.

That report found that the city’s municipal workforce has grown by more than 34,000 employees since fiscal year 2014, which not only puts immense pressure on the city budget in the short term but also commits New York to potential long-term liabilities.

New positions have been added primarily at the Department of Education (DOE) and the uniformed agencies. The growth has been universal across mayoral agencies and substantial in certain smaller agencies.

The figures in the report are staggering. The CBC estimates compensation costs for new hires at the DOE will average $104,882 per employee, $91,546 per uniformed employee and $90,197 per civilian employee. Separately, the city must spend an additional $180.9 million for accrued pension liabilities – and that’s just for fiscal year 2019. Long-term liabilities, such as retiree health benefits (OPEB), in conjunction with pensions is set to cost over $520 million in the long term. That is on top of a system where the unfunded pension and OPEB liabilities already totaled $56.2 billion and $88.4 billion, respectively, in fiscal year 2017.

For now, the costs of the headcount increase are supported by a strong local economy, but whether the City will be able to sufficiently decrease its staff in the event of an economic downturn is a serious concern.

Meanwhile, the report does not mention three agencies that are sure to have an impact on the city budget in the years ahead. The well-publicized budget woes of the New York City Housing Authority, New York City Health and Hospitals Corporation, and Metropolitan Transportation Authority are each looming large over the city’s fiscal future.

The CBC recommends three steps to address the growth of the municipal workforce:

1. Change the assumption that all vacant positions will eventually be filled – remove those vacant positions from an agency’s budget instead.

2. Put the burden on agencies to explain why new responsibilities cannot be executed with its existing workforce.

3. Begin a review of positions to find inefficiencies and obsolete responsibilities. 

We think New Yorkers deserve to see these common-sense steps implemented, and the good news is that the Office of Management and Budget has already begun several of them by instituting a hiring freeze and removing vacant positions from the FY19 budget.

This is a smart step forward – because if we prepare for the bad times ahead, we will only know good times.