Mike Spano was elected mayor of Yonkers last fall with the strong support of municipal labor unions. Now the state's third largest city is on the brink of fiscal disaster -- and Spano must persuade his labor friends to make significant contract concessions.
If he fails, Yonkers residents will likely face a combination of higher taxes and reduced public services to permanently close an annual budget gap estimated by an independent advisory commission at $89 million in fiscal 2013, ballooning to $210 million by 2016.
Like many fiscally troubled local governments across New York State, Yonkers had established a pattern of unsustainably generous collective bargaining deals, then dug itself into a deeper hole by relying on short-term budget-balancing gimmicks -- including repeatedly issuing bonds to pay court-ordered property tax certiorari refunds.
Ironically, just a year ago as an assemblyman, Spano introduced legislation that would have opened yet another avenue for fiscal abuse by authorizing the Yonkers school district to issue bonds to cover a portion of rising teacher pension costs. Inspired by this bad idea, the Legislature ultimately approved an even worse one — allowing similar pension bonding by school districts statewide. Fortunately, the bill was vetoed by Gov. Andrew M. Cuomo.
Spano has now sworn off such gimmickry, hoping to reverse what he calls "the descent to near-junk status" of the city's credit rating. To his credit, he has ordered the preparation of a four-year financial plan, a step toward greater transparency and predictability.
But he has a long way to go. His first budget would save about $13 million by cutting 112 positions from the city payroll, and also calls for $11 million in property tax hikes and a $5 million increase in water rates. The city's school system will need to come up with another $20 million or so in savings. The rest of next year's projected gap would have to be closed through more one-shot revenues, including still more bonding out of certiorari payments.
Police unions counter that the city actually needs more officers -- but there's no way Yonkers can afford them under its current compensation structure. Including overtime, the city's 1,100 police and firefighters were paid an average of $118,000 as of 2011, including 18 who made more than $200,000, according to data posted at SeeThroughNY.net, the government transparency website run by my organzation, the Empire Center. In the last decade, 141 Yonkers police officers and firefighters have retired with pensions of more than $100,000.
But curbing police, fire and other municipal services costs is barely half of Spano's battle. More than half of the $938 million Yonkers budget is controlled by the city school board, with most of the money flowing to members of the historically militant Yonkers Federation of Teachers.
Between 2007 and 2011, the teachers union was feasting in a four-year contract that raised base salaries by nearly 19 percent -- excluding annual "step" increases that typically added another 3 percent a year. The median teacher salary is now roughly $100,000, and Yonkers teachers contribute only minimally to their Cadillac health plans. Last year, the union refused to consider a pay freeze that might have saved the jobs of hundreds of employees ultimately laid off by the district.
If Spano can't negotiate meaningful changes to labor costs, he could end up asking the state to create a temporary financial oversight agency with the authority to impose hard wage freezes and to force the restructuring of other elements of the budget. But this would need to produce better results than the state-imposed control periods following Yonkers' two previous brushes with bankruptcy, in the mid 1970s and 1980s. All Yonkers now has to show for those experiences is the state's only local income tax outside New York City -- which undermines prospects for the kind of economic renaissance Spano needs to promote.
Since the state itself is not flush with cash, Cuomo and the Legislature will find it easy to say "no" to the kind of bailout that would only perpetuate Yonkers' problems in the long run. But Albany also needs to say "yes" to state mandate reforms giving Spano and leaders of other distressed local governments the managerial tools they need to carve out their own paths to recovery.