Thomas MacMillan Photo
(Updated) Without directly saying the words, Mayor John DeStefano set the stage for a showdown with city unions in a Thanksgiving Week talking-turkey presentation to city aldermen about New Haven’s long-range budget morass.
The mayor’s two-hour early-season budget talk came Tuesday evening in City Hall, where he led members of the Board of Aldermen’s Finance Committee through 63 PowerPoint slides detailing the city’s four-year budget outlook. Click here to see the slides.
New Haven doesn’t adopt a new budget until next summer. But after having his staff crunch numbers going out four years, DeStefano decided it was time to launch a discussion about hard choices that will have long-term ramifications.
The mayor (pictured) painted a grim picture. The city could face a significant decrease in state funding, as state budget deficits soar to unseen heights. Meanwhile, the city is facing ballooning pension and health care costs for city workers. That all adds up to a projected $57 million budget shortfall in the next fiscal year, and more than $300 million by 2014, the mayor predicted. With city property taxes that can’t go up any more and no one-time revenue streams on the horizon, the city needs to find concessions from unions on employment costs, the mayor argued.
“I’ll say it another way: City taxpayers have already stepped up to the plate,” the mayor said before his presentation. To the unions, the message is, “We need you to do a little something,” he said. Changes in union contracts could bring in up to $27 million in one year, the mayor’s PowerPoint indicated.
Larry Dorman, spokesman for AFSCME Council 4, which covers five city unions, responded on Wednesday. “I think the mayor has put out a gloom and doom budget that cynically pits city employees against taxpayers, creating a fictitious struggle for the survival of New Haven,” he said.
The administration is locked in a battle with unions on several fronts. The mayor would like to privatize the custodians union, and he’s seeking cutbacks on health care and pensions in other labor contracts. Both of those efforts have met with resistance from labor. (Click on the play arrow to watch scenes from a recent confrontation.)
Mayor DeStefano also spoke Tuesday about the possibility of increased revenue through local option taxes, like a local motel/hotel tax of 2 percent. Changes like that could bring in over $30 million, but they would require action from the state legislature.
The mayor said he has asked all city departments to prepare department budgets that are 5 percent smaller than last year. That could mean up to $15 million saved. It would also mean cuts in services.
The mayor’s presentation to aldermen means the annual budget conversation is starting months earlier than usual. Mayor DeStefano said the city needs extra time to work on this one because tough choices loom. “I need to start the process off better than I have in the past,” he said.
This year’s budget process was marked by heated public meetings and angry crowds of taxpayers in City Hall.
The mayor urged alderman to be prepared for budget blowback from constituents, including unions. He also acknowledged making mistakes in the last budget season. That includes the inclusion of the nebulous Innovation-Based Budgeting (IBB), which was “not straightforward” and “enables poor decisions,” the mayor said.
Notably, the mayor’s predictions do not include parking meter monetization, which could help the city with five years of quick cash but plunge it into a long-rante $120 million hole while losing some control over parking policy. He said he hasn’t taken the idea off the table, as some alderman are urging, but didn’t want to count on it.
The mayor presented his plans in part as a response to a recently released four-year budget outlook from a consultant company working with the Financial Review and Audit Commission. The mayor said he found several of that report’s predictions, like an increase in state funding, unrealistic.
The Problem
Aldermen listen to the mayor’s presentation.
Mayor DeStefano started and ended his presentation Tuesday with a statement of priorities: continued school reform, economic development for jobs and taxes, and safe and stable neighborhoods. Potential state funding cuts threaten those goals; the state’s looming budget deficit is well over $3 billion.
The biggest blow from the state this year could be a cut of over $20 million in Educational Cost Sharing (ECS), the mayor predicted. New Haven and other cities get a larger percentage of that state education grant than suburbs do. For the last couple of years, 20.3 million of the New Haven’s ECS money has come from federal stimulus, which will lapse in 2011. It’s possible that newly-elected Democratic Gov. Dan Malloy could propose in his budget that the state make up that drop, but the mayor predicted that wouldn’t get through the state legislature without at least some modification, if not removal.
Other sources of state funding, like Payment In Lieu Of Taxes (PILOT) and the city’s share of gambling revenue, have been decreasing steadily, and can only get worse in years to come, the mayor predicted.
As state aid has declined, city property taxes have risen — along with city expenditures. The city has controlled some costs where it can, the mayor said. It has increased recycling, which is cheaper than straight garbage. Debt service has leveled off. Meanwhile, the major drivers of city costs — pensions and health care — have gone up and up.
“This is where we’re really going to get whacked,” DeStefano said.
Despite efforts to contain them, health care costs have gone up 44 percent in the last five years, the mayor said. At current funding, the City Employee Retirement Fund (CERF) will run out in 15 years, he said. On top of that, workers’ compensation costs are also shooting up. The mayor singled out custodial services — which the city is trying to privatize — as a major player in this increase. He also hit that union for allegedly missing one day in five.
Add it all up, and the city’s looking at a $57 million budget gap next year, DeStefano said. Over the next four years, the budget gap would be $309 million, he said.
The Solution
Although the mayor presented a variety of strategies to address the gap, he spent the most time on union concessions. Several slides were devoted to a proposed money-saving new health care plan for city workers.
The city currently offers a health plan that is above average nationwide and in the northeast, the mayor said. He presented “Consumer Driven Health Care,” in which employees would have a choice of four plans. The first one is paid for by the city. The other three, which offer more coverage, require buy-in by the worker. For lower-income employees, the mayor said he would like to see Health Savings Accounts. The mayor did not offer the city’s current health care plan as a comparison, but promised to proved aldermen with a case study of what the changes could mean.
In terms of CERF, the pension plan that covers most city workers, the mayor proposed a plan that would raise employee contributions from 6 to 9 percent, cap the “benefit multiplier” at 2 percent, determine pensions by budgeted pay and not total earnings, raise the eligibility age for benefits, and raise the penalty for early retirement. That plan would still be “better than most,” the mayor said.
Those changes to pension and health care would affect most city workers, but not police and firefighters. That battle will be fought further down the road, as those departments contracts don’t expire until July 2011. The custodial contract, on the other hand, expired in July 2009, and seven more union contracts expired July 2010.
Getting concessions from other unions now would set the city up for successful negotiations with police and fire, the mayor said.
The problem of employment costs does not stem from having too many employees, but from too-high benefits, the mayor stressed. “The generosity of the plan is the problem.” He wondered aloud if, when it comes to union negotiations, “will 90 percent throw 10 percent under the bus?” That is, will unions choose layoffs for some? Or cuts for all?
In the end, the mayor added up predicted savings from changes to pensions, health care, and union work rules, plus possible state funding and city department budget reductions, and came up with nearly $77 million in potential savings and revenue. That’s on the top end of what’s possible, but even less than that would cover the $57 million gap, he said.
“This requires resolve on the part of elected officials in the city of New Haven,” he said before the meeting.
He offered a warning to aldermen. They are elected by a smaller group of voters than mayors, and are “more vulnerable to a heavy action in a ward from labor,” he said
“We are going to feel pressure,” he said. “We are going to feel severe political pressure.”
Union Response
Dorman, the AFSCME spokesman, said on Wednesday that the mayor is “making New Haven public workers the scapegoat for all the city’s financial ills.” Unions have been trying to work “cooperatively and collaboratively” with the city, he said.
Dorman said he disagrees that unions have not stepped up to the plate. He said Local 3144 put together a package of more than $600,000 in concessions a year and a half ago. The mayor rejected that proposal, which led to layoffs, Dorman said.
As for the charge that unions will throw their members under the bus by choosing layoffs over concessions, Dorman called that “unfair, premature, and cynical.”
“We’ve made concessionary offers in the past that have been rejected,” he said. “We’re in discussions now about providing significant savings to the city. Our goal is to provide the best quality services that are going to make New Haven a vital place to live and work.”
The mayor is, “simply pointing a finger at one group of people and saying, ‘they’re the reason for our woes,’” Dorman said. “He needs to stop blaming and start listening.”
Pressure
After the meeting, aldermen discussed applying some political pressure of their own, on the state legislature. Board of Aldermen President Carl Goldfield lingered in the meeting room with mayoral Chief of Staff Sean Matteson and Aldermen Greg Dildine, Justin Elicker, and Matt Smith. They talked about organizing lobbying trips up to the Capitol to work legislators on local option taxes and PILOT funding.
Several aldermen acknowledged that they may face a battle with unions. City money isn’t “going to other things, it’s going to salaries,” Goldfield said. He added that it’s not an “us v.s them” situation necessarily. “We sink or swim together. Something’s got to give.”
Didine said collaboration will be key. The challenge will be to get everyone on the same page, said Alderman Smith. He laughed as he was reminded that he narrowly won his seat this month over a challenge from a union-backed candidate.
as much as it pains me to say thank you to the the mayor for standin up for taxpaying peoples but "thank you". i like the no tax increase.