A federal appellate court has upheld a state-imposed freeze on pay increases for Nassau County employees—reaffirming the Legislature’s power to grant similar much-needed budgetary relief to every level of government in New York to help deal with the severe post-pandemic fiscal crisis.

The 2011 pay freeze imposed by the Nassau Interim Fiscal Authority (NIFA) was “reasonable and necessary to achieve the legitimate public goal of rescuing the County’s finances,” and NIFA acted “with a legitimate public purpose,” a three-judge panel of the 2nd Circuit U.S. Court of Appeals held.

This is an installment in a special series of #NYCoronavirus chronicles by Empire Center analysts, focused on New York’s state and local policy response to the coronavirus pandemic.

The county’s public employee unions had sued NIFA to block the freeze, claiming it violated the contracts clause of the U.S. Constitution. But the federal judges—appointees of Presidents Clinton, Obama and Trump, respectively—called the pay freeze “eminently reasonable.”

“NIFA reasonably concluded,” the judges wrote, “that the broader public interest would be served by obtaining savings from a wage freeze instead of through what appeared to be the County’s only other remaining options: draconic additional cuts to the County’s labor force or unpaid furloughs.”

The court also gave a good explanation of how, as they put it, a government entity “may not contract away its power to govern in the public interest”:

A government contract that induces a sword company to produce plowshares cannot be abrogated by an otherwise valid statute simply because the government later discovers that a knife company can make cheaper plowshares. On the other hand, a clause in that contract that says the state will forego war cannot keep the government from declaring war when the national security demands it.

Their ruling noted that Nassau County residents benefit from NIFA’s pay freeze powers “because layoffs and furloughs would lead to a decrease in services, while a wage freeze would not.”

This latest decision, handed down in May, builds on a 2006 federal appeals decision that upheld a 2004 pay freeze by the City of Buffalo’s control board, the Buffalo Fiscal Stability Authority. 

As E.J. McMahon explained at the onset of the COVID crisis, the state Legislature could save at least $1.9 billion in just the first year by freezing public-sector pay. The Nassau County ruling is a timely reminder that the Legislature can enact a freeze that withstands federal legal challenges provided it shows the move is “reasonable and necessary” to close its own $10 billion budget gap and to restore the fiscal health of its political subdivisions and public authorities.

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