Mayor Marvin's Column: Mayoral Committee Recommendations Regarding State Mandates

The following is a weekly column from Bronxville Mayor Mary C. Marvin: 

In late 2010, the New York State Conference of Mayors (NYCOM) appointed a bi-partisan committee of Mayors representing communities throughout the State to develop a set of mandate relief proposals for the State Legislature to adopt prior to approving any property tax cap legislation.

The rationale being that the out of control costs of employee pensions and healthcare are now threatening the ability of communities to provide even the essential services at an affordable cost to taxpayers.

The following are a sampling of the Committee’s recommendations:

Recommendation:  Have the State Legislature impose a public sector wage freeze by declaring a state of fiscal emergency and suspend all salary increases for one year for State, municipal and school district employees. Under the proposal, a municipality would have the ability to opt out if it could demonstrate that it had negotiated an offset such as increased healthcare contributions of an equal or greater value.

Rationale:  This concept would allow State and local governments greater ability to address the current fiscal challenges without having to reduce the work force or curtail services until the other cost saving reforms recommended are enacted.  (Both President Obama and Governor Cuomo have endorsed such a plan for Federal and State employees.)  Even communities like ours which are currently not locked into multi-year labor contracts with unaffordable salary increases, will still be obligated for expensive step increases guaranteed by the so named Triborough Amendment.

Recommendation:  The State should require a minimum contribution by employees to their active and retirement healthcare costs.  The suggested contribution is 10 percent for individual coverage, 25 percent for family coverage and a 25 percent contribution from retirees phased in over a three year period.

Rationale:  Health insurance costs are one of the largest and fastest growing components of municipal budgets.  (Some New York State communities are currently spending more to cover retiree costs than they are in providing current services in their municipal budgets.)  The total unfunded liability for healthcare for local governments and school districts in New York State is $130.4 billion and climbing.  For many years, municipal employees had their health insurance covered entirely by the local entity in contrast to the private sector where 100 percent coverage is exceedingly rare and retiree health coverage of any kind virtually non-existent.

Recommendation:  Restructure the formula for pension cost sharing and benefits.  The State should immediately reinstate the 3 percent employee pension contribution that was eliminated in 2000 and simultaneously undertake a thorough analysis of the funding methodology and the oversight structure of the entire system.  In addition, new hires should be offered a defined contribution plan.

Rationale:  Municipalities and school districts experienced a ten-fold increase in pension costs between 2003 and 2005 due to a dramatic increase in payouts with a concurrent decline in returns on investment for the fund’s principle.  It is projected that municipal pension contribution amounts will increase in the range of 25 percent to 40 percent for both 2011 and 2012.

Currently, municipal and school employee pension funds operate under a defined benefit system whereby employees are guaranteed a certain level of benefits which are financed by State and local employers and the retirement fund’s return on investment.  This type of system is virtually non-existent in the private sector and the average retirement benefit for government retirees in New York State in 2009 was more than twice the average company or union pension benefit.

The Mayors’ Task Force also believes that a property tax cap without specific exclusions such as the above for the upcoming year will result in destructive local budget deficits, decimated work forces and a major reduction in essential services provided by local governments.  (Bronxville received a pension bill increase amounting to a 3 1/2 percent local property tax increase and this does not include the expected health insurance increase as well as the proposed decline in State aid.)   To meet the Governor’s 2 percent tax cap, if approved, we would have to curtail services and reduce staff.  

There has been a perennial unwillingness for elected officials to address these issues.  In some cases, it is a fear of not being re-elected and not staying in office long enough to avail themselves of the personal pension benefits.

However, the cumulative result of their inaction has resulted not only in excessive property tax levels but a reduction in municipal services and the work force necessary to deliver them.  The State must intervene at this juncture and give local communities the relief from mandates that are crippling the ability to deliver services efficiently and economically to the property tax payers. 

Note:  Material from the Recommendations of the NYCOM Mayoral Task Force on Mandate and Property Tax Relief (December 2010).

Editor's Note: This piece, in its entirety, was written by Bronxville Mayor Mary C. Marvin.