State Super Control Board Taking Over Struggling New York Local Governments?

In recent news it has been stated that New York Gov. Cuomo and Comptroller Thomas DiNapoli are looking to propose legislation that would create a state super control board.  The board that would take over the finances of struggling local governments on the verge of bankruptcy, including cities, towns, villages, and counties.

Of course public labor unions oppose such legislation because it would allow the state to violate union contracts, which represent one of the largest local government expenditures.

Such control boards are not uncommon in New York and have been set in place at the local level.  The governments of Troy, Buffalo, Yonkers, and Nassau County have been under finance control boards because they were on the verge of an economic crisis.  It was reported that currently 300 local governments ran deficits and more than 100 local governments do not have enough to pay the bills.

The proposed legislation was described as not “…completely replac[ing] the locally elected official.  But it would provide them with the political ‘cover’ many privately say they need to stand up to the powerful unions, which have consistently resisted spending cuts.”

Conflicting reports show that Comptroller DiNapoli has not been in discussions with Gov. Cuomo and he believes it is premature for the installation of such a board.   In a press conference DiNapoli emphasized that the idea needs to be examined in more detail.

Pension Reform in New York Expected to Save $80 Billion Over 30 years

Pension reform is a hot topic all over the country.  State and local governments are realizing that during this fiscal crisis they cannot keep pace with the current contribution scheme that was enacted when the economy was strong.  For example, Cuomo stated that in New York in 2002 pension payments from local governments was $1.4 billion, this was increased  to $12.2 billion in 2012.  This increase of 650% has come at a time of fiscal stress causing local governments to increase their taxes and layoff public employees.  Further exacerbating the situation is the recently enacted property tax cap, which places a percentage limit to yearly increases on the tax levy that a local government may asses.  High pension contributions, and limits placed on local governments’ ability to collect property taxes has created an unsustainable framework.

To ease the pension pressure that local governments are facing and in an effort to cut government costs New York has just passed legislation reforming their pension system.  The bill would increase public employee contribution rates for new employees in a progressive manner:

$0-$45,000 will contribute 3%

$45,000 – 55,000 will contribute 3.5%

$55,000 – $75,000 will contribute 4.5%

$75,000 – 100,000 will contribute 5.75%

$100,000 + will contribute 6%

The bill also includes provisions that increase the age of retirement from 62 to 63, readjust the pension multiplier, creates vesting after 10 years of services, protects local governments from state pension sweetners, creates a voluntary and portable defined contribution option, completes adjustments for SUNY and CUNY TIAA-CREF Plans, and limits pension benefits for high paid employees that earn above the governors salary ($179,000).

Comments on the new bill can be found here.

Article discussing the bill can be found here.

States Consider Removing Civil Service Protections for Employees

In light of the current fiscal realities states are faced with, government employees from around the nation have found themselves the object of increasing scorn from both the public and their own employers.  Most notably, Wisconsin became a battleground for labor issues beginning in 2010, as Governor Scott Walker pushed legislation which included provisions which cut benefits for government employees, including reductions in civil service protections.

Originally, civil service laws were enacted to remove patronage from government employment. The job protection measures included in civil service laws were meant to ensure that government employment is based on merit rather than political affiliation.  Theoretically, by insulating government employees from political influence, they could perform their jobs more efficiently and effectively—ultimately benefiting the public, who would enjoy an efficient government run by effective public servants.

However, a few states are now revisiting the idea of stripping civil service protections from government employment. In Arizona, Governor Jan Brewer recently proposed legislation which would require most new government employees to be hired under “at-will” contracts—meaning that these employees can be terminated at any time, and for any reason, as long as it’s not illegal. (It’s important to note that all states except Montana presume that employment is at will).  More significantly, the proposed legislation would offer a 5% pay increase to any government employee who voluntarily elects to become at-will. The Governor estimates that if this bill passes, more than 80% of the government workforce would be at-will within the next four years. The bill’s sponsor, Representative Justin Olson, touts that the bill “will implement common sense reforms,” while “bring[ing] Arizona’s state personnel system in-line with the most effective practices of the private sector.”

Arizona is not the first state to switch to civil service protection. Georgia switched to a largely at-will system in 1996, as did Indiana  more recently.

Other states are beginning to consider removing civil service protections as well. In Tennessee, Governor Bill Haslam proposed legislation which would remove most civil service protections. In Colorado, Governor John Hickenloop called for bringing “the state’s antiquated personnel system into the 21st century.”

Click here for a more in-depth overview of this issue.

Reforming Collective Bargaining and Public Labor Laws

Collective bargaining for public sector workers represents a large part of state and local expenditures.  Some states are looking to reform their collective bargaining laws because most states and municipalities are finding it harder and harder to collectively bargain with their public sector workforce in the current economic climate.  Last year, Gov. Cuomo of New York was able to negotiate concessions with the state’s public workforce avoiding massive layoffs.  However, most states are looking to reform their collective bargaining laws as opposed to negotiating with the unions.

Wisconsin

The most prominent news story and collective bargaining reform bill was passed in Wisconsin.  Less than a year ago Gov. Walker signed the Budget Repair Bill that limited the public worker’s right to collectively bargain and would potentially save 30 million dollars in state and local budgets for this year.  As reported by the Wisconsin Bar Association the bill limits collective bargaining to the subject of base wages, limits base wage increases to a percentage, prohibits collective bargaining on matters not permitted by the Wisconsin Municipal Employment Relations Act, limits contracts to one year terms, allows unions to only collect their dues directly from the employee not through salary deductions by the employer, allows employees to stay in the union without the payment of dues, and denies employees of the University of Wisconsin System, UW Hospitals and Clinics Authority, and certain home/child care providers the right to collectively bargain.

Indiana

Indiana was one of the first states to ban collective bargaining through an executive order in 2005 which was codified into law by the budget bill passed in April 2011.  Indiana has recently taken it one step further singing into law a right-to-work bill.  This bill prohibits employers from mandating union membership for employment, which will weaken the strength of the unions.  Indiana is the twenty-second state to enact a right-to-work statute.

Ohio

Adding to the list of states who are seeking to reform collective bargaining laws is the State of Ohio which passed Senate Bill 5 eliminating the rights of union members to bargain collectively.  However, unions were able to gather enough support to trigger a referendum vote which defeated the collective bargaining reform legislation.

Arizona

Arizona is now attempting to join the club of public workforce reform.  The Arizona Senate Committee voted to introduce a bill that would ban collective bargaining with public employee unions.  This bill will be watched closely as it travels through the approval process and makes its way to the Governor. 

Collective bargaining is an area that state governments are focusing on when trying to reform.  Most of these initiatives were passed in the face of large public sector layoffs as a way to save money and avoid laying off the workers.