New York City government can save billions by better managing fleet and space and negotiating work rules
PEGs were a common feature of city budgeting and management from the budget crisis of the 1970s until eight years ago. During tough tax times, they identified the savings needed. In good times, they have served as a management discipline, forcing agencies to regularly review priorities and improve operational efficiency. The recent lack of attention to efficacy has allowed some of the muscle memory of the PEG process to wither away. February’s preliminary budget will show how agencies are meeting the challenge – what savings are being identified, how much is due to efficiency, and most importantly, how post-Fiscal 2023 recurring spending is being reduced.
But agency PEGs are not the only tool. Opportunities abound to redesign time-consuming processes and leverage technology to reduce costs and improve the quality of centralized city functions without cutting services.
In fiscal year 2021, the city spent $1.3 billion renting space, 72% more than in fiscal year 2014. Not only can hybrid working reduce space requirements of the city, but the city lacks adequate data to effectively manage the space and its conservation efforts, bringing in less than $20 million a year, have been paltry at best.
Additionally, streamlining the city’s long and tedious procurement process to reduce the cost of large contracts by just 1% could save $160 million. Greater centralization of purchasing could save an additional $80 million. Commendably, the administration recently announced it would be trimming the city’s fleet, which grew 14% between fiscal 2014 and fiscal 2018 before making efforts to reverse the growth.
Collective bargaining offers more opportunities to streamline services and reduce costs, which would help protect the jobs of city employees and provide resources to fund wage increases without opening budget gaps.
More than half of the city’s budget, $53.6 billion, funds salaries, health insurance and pensions, among other benefits. When negotiating the next round of contracts, the administration and unions should modernize benefits, eliminate outdated wage differentials, and change contractual work rules that impede effective service delivery.
Health benefits for New York City municipal employees and retirees are far more generous than those provided by New York State and other public and private employers. Almost all city employees (95%) opt for health insurance plans with no premium contributions; large state enterprises require dues of around 20% and New York State employees dues 12% to 31%. Former Mayor Bill de Blasio took steps to reduce hedging costs with significant, if limited, success.
The city could save $675 million a year if city employees shared premium costs slightly below the level of state employees. In addition, consolidating the roughly 75 separate union welfare funds could save $160 million a year through administrative efficiencies and increased purchasing power.
The city and the unions should change some of the provisions of the citywide agreement regarding hours of work, vacation and sick days, overtime and other benefits common to collective bargaining units not uniforms. A thorough review would find opportunities to increase the flexibility of work assignments, extend the work week to 40 hours for all employees (many work 35 hours or 37.5 hours), and change the accrual policies. vacation and sick leave. This is best done as the city considers other increasingly common changes in benefits and working life, possibly including hybrid work, family leave, tuition, and opportunities for training and career paths.
Specific operations can be managed more efficiently by amending outdated provisions in many of the more than 100 collective agreements the city renegotiates every three to four years. The next round of collective bargaining should set a productivity savings target for all bargaining units.
For example, lengthening sewer lanes so that trucks are full when they tip over could save more than $120 million a year; this can only be done in negotiation with the union. Additionally, sanitation workers continue to receive an “efficiency” differential for operating a two-person collection vehicle – the standard operating procedure since the 1980s. This differential would only be appropriate to only continue if tied to further increases in productivity, such as automated single-person collection. Another example is the absentee teacher reserve, which keeps city Department of Education employees on the payroll after their positions are cut; ATR should be time-limited, giving employees appropriate opportunity and incentive to find new positions within the department.
The PEG is just one of the strategies needed to clean up the city fiscally. Now is the time for the city to modernize and streamline core processes and improve services and reduce costs in conjunction with labor. Improving fiscal stability, the quality of services, the ability to protect our most vulnerable, and the city’s competitiveness is the grand slam that New Yorkers need.
Ana Champeny is Deputy Research Director of the Citizen Budget Commission.