Police and firefighter unions in New York have reaped a bonanza from the state law allowing them to insist on binding arbitration of their contract impasses. And taxpayers have paid a heavy price for it — especially on Long Island and in the lower Hudson Valley, where police and professional firefighters typically earn six-figure salaries before retiring in middle age on plush pensions.

First enacted as a temporary measure in 1974, the arbitration law is next due to expire at the end of June, which puts Gov. Andrew M. Cuomo in a commanding position to insist on sweeping changes as a condition for signing any extension. Unfortunately, Cuomo is on the verge of blowing it, big time. Instead of the sweeping overhaul New York really needs, the governor is proposing only a limited tweak to the arbitration statute.

To put the matter in perspective, consider the pay trends tracked by the state pension funds covering public employees outside New York City. As of fiscal 2011, the average salary for police and firefighters was $99,357 — up 71 percent, after adjusting for inflation, since 1974. During the same period, inflation-adjusted average salaries rose 22 percent for teachers, whose 2011 average pay came to $72,947; and 26 percent for other employees of the state and its local governments, whose 2011 pay averaged $47,534.

Over the years, pay awards by arbitration panels often have been well above inflation, even during economic downturns. Local officials like Suffolk County Executive Steve Bellone have been willing to negotiate costly and lengthy contract extensions just to avoid having something even worse imposed on them by arbitrators.

Unaffordable pay hikes are only part of the arbitration problem. The process also tends to perpetuate costly and inefficient work rules such as minimum manning requirements, shift differentials, guaranteed overtime, plentiful vacation and leave time, and large severance payouts.

In the wake of the recession, county and municipal officials throughout the state have been clamoring for arbitration reform. Cuomo’s response would be a step in the right direction — but only a small one. He would impose a 2 percent cap on total compensation increases in local police and fire arbitration awards, but it would apply only to employers that are already “fiscally distressed,” defined as a combination of low budgetary reserves and high taxes. It would also exclude salary “step” and longevity increments, which can be significant.

An example of how to much more effectively leverage an expiring labor statute was provided by Cuomo’s predecessor in the governor’s office. In 2009, Gov. David A. Paterson shocked Albany by vetoing a previously routine extension of a long-established but temporary pension “tier” for police and firefighters. Although the bill had been approved by a combined vote of 194-6, the Legislature never attempted a veto override. As a result, new hires were placed in less expensive pension plans — with large savings for New York City, in particular.

Cuomo himself used similar leverage to his own advantage in 2011, when he linked an extension of the temporary New York City rent regulation law to the enactment of his 2 percent property tax cap. He took the same approach to legislative reapportionment last year, agreeing to a partisan gerrymander for Assembly Democrats and Senate Republicans only after they had agreed to pass his proposed pension changes.

With that precedent in mind, the governor needs to head back to the drawing board on arbitration reform. As a condition for any further temporary extension of the law, he should insist that a cap on arbitration awards will apply statewide, and that step and longevity increases will be subject to the cap. But he should also allow for pay hikes above 2 percent when unions agree to offset the cost with productivity improvements.

This would give employers the tools needed to restructure unsustainable contracts, producing reasonable and affordable results while still leaving New York cops and firefighters among the best paid in the nation.

About the Author

E.J. McMahon

Edmund J. McMahon is Empire Center's founder and a senior fellow.

Read more by E.J. McMahon

You may also like

Want to Save the Planet? Where’s Your Union Card?

New York state officials this week took their most serious step yet to limit the state’s greenhouse-gas emissions. But they also showed they are more serious about taking care of one of the Read More

Nassau should post labor contracts on its website so taxpayers aren’t left in the dark

Nassau County taxpayers face what could be a $109 million bill. When will they be allowed to see the details? Read More

Big Labor’s next target: Grad schools

Christakis remarked on the website that graduate students, now moving to unionize at the school, are not ordinary worker. Read More

And Now the Union Would Like a Word in Private

The onboarding process has become a key battleground for the country’s government unions. Read More

State senators to get a harsh reality check as their own workers unionize

Labor leaders were giddy when a group of state Senate employees last month announced their intent to unionize. Read More

Albany’s latest gift to the teachers union will shackle NYC schools — and their budgets

The Legislature last week put a new spin on the debate over “mayoral control” of New York City’s schools by shackling the Big Apple with a costly class-size mandate. Read More

Hochul’s first budget rewards unions at taxpayers’ expense — and sets the state on the road to insolvency

New Yorkers are aghast that the Buffalo Bills stadium deal, which will fill the pockets of a wealthy NFL team owner with their tax dollars, is in the state budget the Legislature just adopted. Read More

Pray Hochul won’t cave to union calls for a big pension giveaway — at NY taxpayer expense

While Tier 6 wasn’t the “bold and transformational” breakthrough touted by then-Gov. Andrew Cuomo in 2012, it was a solid net positive for taxpayers Read More