Cuomo’s CSEA deal: a first impression

by E.J. McMahon |  | NY Torch

After sailing unscathed (with steady pay hikes, no less) through a severe recession and fiscal crisis, members of New York’s largest state government union will belatedly make some relatively small, mostly temporary financial sacrifices under the tentative contract announced by Governor Cuomo today.

Key elements of the tentative contract agreement with the Civil Service Employees Association:

  • A five year contract term, instead of the usual four. If Cuomo serves only one term, the next Governor will have to wait a year before negotiating any further changes in working conditions or compensation practices.
  • A three year freeze of base salaries, followed by a 2 percent raise in each of the last two years. Those three years of “zeroes,” as the union guys would put it, were already baked into the state’s financial plan, so they represent no net taxpayer savings.
  • Five “deficit reduction leave” days, equivalent to a temporary 1.9 percent pay cut.
  • Another four-day furlough in fiscal 2012-13, equivalent to a temporary 1.5 percent pay cut, for which employees will be reimbursed for the lost pay the following year.
  • An increase of 2 to 6 percentage points in the employee share of health insurance premium contributions– the equivalent of a few hundred dollars a year, or maybe $10 to $30 a pay period on average for most employees. UPDATE: A reader points out that the 6 percent health insurance premium actually amounts to $1,000 a year for a Grade 10 employee, and in combination with the furlough in 2011-12 alone, that feels to the employee like a 4.2 percent pay cut (albeit with an extra holiday). Point taken and conceded. But the permanent pay cut is still less than the annual base pay increase that CSEA members received each and every year during a severe fiscal crisis and recession.

Payless employee furloughs have been a common temporary savings device in other states but are a new wrinkle in New York; during the early 1990s previous fiscal crises, then governor Mario Cuomo extracted a temporary loan from the union in the form of a payroll lag.   From management’s standpoint, a furlough is far better than a lag,  for which an employee is effectively more than fully reimbursed when he or she leaves state service, usually at a higher salary.

The previous CSEA contract, negotiated by the Spitzer administration, increased base pay by about 14 percent over four years (not including longevity steps or geographic differential pay), including 3 4 percent in the final year, 2010-11. The 2011-12 furlough essentially represents a temporary giveback of a little over half the CSEA’s last raise– the kind of giveback former Governor Paterson sought in vain from the union for two years.

Union members will continue to receive step increases, worth a percentage point or two for recently hired or promoted employees who are still on what is typically a five seven-year journey to the “job rate” in their pay grade.  The state will lay out $146 million for step increases for all unions this year.

On top of those percent pay hikes in the last two years, CSEA members also will get one time cash bonus payments of $775 and $225, respectively, “in recognition of working without a wage increase for three years.”

The deal also saves money by redefining the terms of health insurance to encourage cheaper prescription drug and treatment alternatives, and to give employees a financial incentive to opt out of state insurance coverage if they really don’t need it.  Those are sensible ideas but don’t amount to a real concession by the union.

The largest recurring savings for the state will come from the increase in the employee share of health insurance, which will go from a 90-10 and 75-25 employer-employee split for individual and family coverage, respectively, to 84-16 and 69-31 for the highest paid CSEA members.   If the same deal applied to the entire workforce, the estimated savings of $165 million would cut the taxpayers’ $3.3 billion premium bill by about 5 percent — or less than a single year’s typical premium increase.  CSEA members will still have the ability to retire with cheap or even free health insurance for life, by “purchasing” their premium share with unused sick time.  (UPDATE: A reader takes issue with this description in the first comment below.)

While Cuomo has not hesitated to adopt an adversarial stance towards state unions, he has made it quite clear that he won’t seek Wisconsin– or New Jersey-style structural changes in public-sector collective bargaining terms and conditions, although such changes have broad, bipartisan support from local and school officials.  So, for example, he has not proposed any change in the state Triborough amendment, which requires payment of step pay hikes even after a contract has expired.

Cuomo’s deal a few months ago with the state’s smallest union, Council 82, would have been far better from the tapayers’ standpoint, including a much larger permanent increase in employee health insurance contributions and an end to post-contract longevity increases.  But once the Council 82 membership rejected that deal, there was little hope of replicating it in talks with larger bargaining units.

The governor’s budget assumes $450 million in state workforce savings, which the governor said he would achieve either through contract changes or layoffs.  Almost a full quarter into the fiscal year,  given Cuomo’s unwillingness to seek statutory changes in the collective bargaining framework, this was obviously the best deal he could get.

The CSEA leadership sound happy– and they should be.  Stonewalling Paterson worked out pretty well, all things considered.

Cuomo is calling this a “win-win.” But the win for the state, assuming Cuomo makes the same deal with all the other unions, comes largely in the form of temporary savings.   The win for the union is bigger, because CSEA has not made any lasting permanent concessions beyond that relatively small increase in health insurance contributions.

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- E.J. McMahon is the President at the Empire Center for Public Policy.