Marc V. Shaw at Citizens Budget Commission
"How Can The City Balance Its Budget?" conference, 12/7/02

The mayor has out there a fiscal plan, he talked about it a lot this morning. Most of you folks follow this stuff more than the general public, you have some sense what's going on in the city in terms of the fiscal plan and the size of what is going on in the city in terms of the fiscal plan and the size of the problem the city is facing right now.

The bottom line is the city, at least on its side, has proposed that in order to deal with the $6.4 billion problem, yeah, there are a lot of taxes that Steve [Berger, an investment banker who was the moderator of the panel] may not like, that business people may not like but putting those issues aside, there are a lot of cuts that other people don't like and there's still a sizeable hole.

And when you do the math on the way we put together the city budget, there is a $600 million hole after we tax people to death and after we cut services as far as the mayor and council thinks the public is going to do, in terms of cuts to services while keeping, as the mayor points out, the quality of life services that New Yorkers demand.

Now what that all means is, to cut any further you have to find productivity in city government some ways, some how, and that means working with the unions. And so when we do the math, we came out with we need 600 mill in productivity savings from unions and by the way there are no wage increases in out years of this budget, so in order to do that, the first 600 mill the city is going to take in productivity, and anything above and beyond that when we get to it, we are going to share with the labor unions.

A wonderful idea. It sounds like it's pretty simple to do.

You know, the easiest way would be if people started to pay in effect a 3 percent contribution on their pensions, that would raise the $600 million, and then the real productivity [garbled]. But the unions recognize that, rightfully, it's a cut in wages, which is what it is. It may be what we end up asking them to do as part of how to get through this crisis, but that's the way the math works and there's nothing you can do about it.

I view it as something where you have to focus on what you're doing working with labor to do this. I don't want to spend too much time on it, but the point being, if you don't do it working with labor, don't have the choice but to do two things -- which is start to decimate services by laying off tens of thousands of workers. It's an end that we don't want to do because we don't want to lay off the workers, it's an end we don't want to do because we don't want to decimate the services, but that's out there and that is what will happen if all else fails. Even if we didn't want to deal with labor unions we're going to because we don't want those ends to take place.

Having said that, you get to where the money is that the city spends on labor. And there are a couple things that are sort of labor-wide in labor force. They are playing with and doing reforms of pension system, the health cost system, or taking away vacation days, call it what you want, you know, changing the work week. Those are sort of broad-banded things you can work out with labor unions to save money. If and when we can do any of those things, of course we are going to do them. They still translate into for average worker a wage cut, in their current salary, so it's a heavy lift, But recognize that is one of the things we are going to do.

Once you get beyond that, you get to be agency-specific about where the money is. Since there's not a lot of time, I'm again going to disagree with Steve (Berger) and not talk about the social service part of it, for at least this part of the discussion because it is 25 cents on the dollar and it counts but it doesn't count as much as 100 percent on the dollar, so from a budget perspective I look at where the money is. The money is in the four uniformed services and education.

In education there's the special ed initiative that the Citizens Budget Commission is talking about that a lot of people would love to turn that money into savings.

From a budget perspective, I sort of take whatever savings we can get out of education and don't even count them towards city budget relief because in the real world I think the mayor has a policy and council has a policy and city has a policy -- wants to take that money and pump it back into education to improve the education system. So wonderful, go get all that money because we need it for the education system and we still haven't spent a penny in budget relief.

So now we are down to four uniform services, it's police, it's fire, it's sanitation, it's corrections. And each of them are different in terms of what kind of productivity is available. We just went through this kind of excruciating process that the mayor talked about a little bit this morning, over the summer with the PBA [Patrolmen's Benevolent Association], an arbitration process where we were asking the unions to reschedule 20 minutes a day, adding 10 appearances, not even necessarily 10 additional appearances, but tack 10 appearances onto existing appearances, so they'd still only have to show up 253 times a year to save money. And every penny of that money is going to go not for budget balance but for wage increases back into pockets of those workers.

The arbitrator turned it down at the end of the arbitration process, not because of anybody but the PBA. Whether it was because he was afraid of PBA or got talked into it by the PBA on merits, the truth is the PBA made a decision to say we don't want to be productive in NYC now even if you give us 100 percent of the money back.

I hope, a lot of people hope we are going to be able to revisit that issue at some point with the PBA. My guess we are not going to start our labor discussions with the PBA right now. We will work with some of other unions in the municipal labor movement and hopefully come back to the PBA when they get a little bit more rational.

Sanitation is a place where there actually has been a lot of productivity in the past. It's an agency when you look at picking up the garbage portion of it, it is fairly well run. The number of productivity improvements have been done to it over the last decade or so -- the three man to two man truck, the tonnage goals where there are bonuses and incremental [garbled] workers based on meeting tonnage targets, that sometimes gets mixed up with recycling and things like that but on average it actually works. The biggest cost that's going on in sanitation right now that's out of control of course has to do with export. It's not a productivity issue per se, it's the price that out of state landfills are paying to take our garbage. There are efficiencies that we are talking to Sanitation about in terms of how we truck that stuff out for export and are there more efficient ways to do it, and all of those things are going on, but the actual picking up of garbage is not done all that inefficiently.

The Fire Department. The Fire Department is a place where every efficiency that has been done, I think, in the last 20, 30 years is a total failure. And it has more to do with the culture of the fire department and the way they work than anything else. In response to past failures, the prior administration decided well since we can't get these guys to be more productive in fighting fires, since they only fight fires 5 percent of the time, they're changing around doing nothing the other 95 percent of the time, let's find other things for them to do. And came up with the idea of trying to merge emergency services with the fire department.

So far that has been a dismal failure in terms of actually producing results of efficiencies that are saving anybody money, has marginal improvements on some of the response times that's going on the Fire Department in emergency services, but it is an area that's ripe for finding productivity savings. I think, though, what it is going to take is a major change in the culture of the fire department, and in terms of the politics of NYC because what it's going to do is necessitate a change of how we site fire engine companies and fire ladder companies, and that means the politics of fire closings.

We have a budget out there that proposed eliminating eight companies.

And it caused an uproar, was the biggest issue in the City Council. We punted on it at the end of the day. While we all agree we're still gong to do it, we are going to set up a blue ribbon panel to sort of figure out which ones we do, to figure out we do the right thing here, but the truth is it was also a political punt from the perspective of the politics of the moment not yet being ready to make to make those tough decisions. We're going to make a lot of those tough decisions to get any real savings out of the Fire Department.

To me that's where the money is. You still have to do it. I know I sounded like everything has not worked so far. I did that sort of put a reality on a little of this. It's still something we have to go out and do and we have to improve the way we do it. But I think people are unrealistic in their assumptions if they think either the white papers of the CBC or white papers of the labor movement are going to solve our problems and turn 600 mill in magic savings that's going to make it easier to balance our budget this year.