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NIFA's vote on union contracts could impact Nassau's finances

NIFA Chairman Jon Kaiman, center, during a meeting

NIFA Chairman Jon Kaiman, center, during a meeting of the NIFA board in Uniondale on Dec. 30, 2013. Photo Credit: Newsday / Thomas A. Ferrara

The state board overseeing Nassau's finances faces a major decision, with long-term consequences on county budgets, when it convenes at the end of the month to vote on union agreements that would lift a three-year wage freeze.

Among the biggest questions: Can the county pay for the controversial deals?

The county legislature's independent budget office concluded that County Executive Edward Mangano's plan to cover at least $120 million in costs is "optimistic," and may further handcuff Nassau's ability to balance its budget.

But the parties who negotiated the pacts -- Mangano; Jon Kaiman, chairman of the Nassau Interim Finance Authority; and leaders of four of the county's five unions -- argue they lock in hundreds of millions of dollars in long-term savings through concessions such as a lower salary scale and health care contributions by future employees.

Stakes are high for everyone involved. Nassau's finances have been under state control since January 2011, when NIFA calculated that the county's deficit was nearly seven times greater than the 1 percent gap that triggers an oversight period. The wage freeze was instituted that April.

Mangano, a Republican, has been attempting to lift the freeze since last fall, before he was re-elected to a second term. NIFA hadn't previously facilitated many talks between the administration and unions, but Kaiman, who was appointed by Gov. Andrew M. Cuomo late last year, has touted his ability to bring the parties together to get a deal.

The GOP-controlled county legislature last week approved the four union deals. Lawmakers voted 19-0 for the pact with the Civil Service Employees Association, which generally has the lowest-paid workers. Agreements with the Police Benevolent Association, Detectives Association and Superior Officers Association were approved 13-0, with six of eight Democrats abstaining due to issues with how the deals will be funded.

Now, the ball is in NIFA's court, and Kaiman said board lawyers are conducting final reviews in the hopes that a meeting will be set the week of April 28, and a vote taken.

"The board, collectively and individually, have concerns," Kaiman said of pending language issues in the deals. "I think, though, that we see a lot of the nuances somehow lost to others."

Nearly 8,000 union members -- some of whose salaries have frozen below $30,000 -- are strongly pushing for NIFA's final approval. Fiscal analyses of the agreements estimate they will cost between $120 million and $189 million over four years, assuming savings from employee attrition, and up to $289 million without it.

Backers say the costs of reinstating cost-of-living raises for current employees, amounting to 13.4 percent through 2017, and reinstating "step" increases for length of service, will be covered by the new-hire concessions, as well as by projected increasing sales taxes and mortgage recording fees and new speed cameras outside schools.

Skeptics, including the legislative budget office, some Democrats and a former NIFA member, warn that the revenue Nassau says will cover the agreements' costs are far from a sure thing. Legislation authorizing the cameras has yet to pass in Albany, and estimates of how much money the cameras can raise range widely, from $12 million to $70 million a year.

Further, county Comptroller George Maragos announced on Friday that Nassau's sales tax revenue had declined nearly 15 percent for the first three months of 2014 compared with the same period last year. It was the largest drop since the economic recession that began in 2008.

"Every objective study has found the deals are not cost neutral, and can cost several hundred million dollars over the life of the contract," said George Marlin, a former NIFA member who often clashed with Kaiman. "NIFA has lost objectivity."

But a Cuomo administration official responded in a statement Friday that the deals appear "fair and balanced." The official, who declined to be identified, noted the new-hire health care and pension contributions, and said the pacts will save "the already overburdened Nassau County taxpayers what could be hundreds of millions of dollars in increased taxes."

Following are some of the issues NIFA will have to deal with in deciding whether to approve or reject the pacts:

Under the agreements, future hires for the first time would contribute 15 percent to health care premiums, if they choose the most expensive plan, and to pensions. Lower salaries at most middle "steps" would save $24.6 million through 2017 just in the case of the PBA, officials said.

A report by Maragos on the deals estimated that health care contributions, across all the unions, could save Nassau $7.9 million through 2017.

But NIFA is still awaiting an opinion on the legality of the pension contributions.

Mangano has received a letter from the state comptroller's office supporting the pension requirements for new hires, which legislative budget officials estimated would save $4.4 million. Kaiman has said he didn't consider it a formal opinion, and that he's "trying to get some confidence that the letter will hold up."

The legislative budget report said that the agreements' projected savings -- from the health and pension contributions to the lower salary scales -- could reduce the $378 million cost of the raises by between $88 million to $155 million.

Beyond actual savings, Kaiman said the deals also remove the risk that Nassau could lose in future rounds of a union lawsuit challenging the constitutionality of the wage freeze. However, in the only court ruling on the issue so far, State Supreme Court Justice Arthur M. Diamond upheld NIFA's authority to freeze its workers' wages.

The new agreements would allow unions to continue their suit to reclaim back pay from 2011 and 2012. But they'd give up their 2013 cost-of-living raise and the back pay from 2011 and 2012 would not be used to compound their current and future salaries, even if they win in court

Kaiman said the compounding could cost Nassau $750 million in coming years. He said locking in the deals' wage hikes -- even if they'll cost $130 million -- is worth it for removing a big liability.

"That's what's at risk," he said. "I'm agreeing to something that'll cost us $130 million, rather than risking $750 million, and something that brings some certainty."

Nassau says it will pay for the employee raises with a combination of sales tax revenue and mortgage recording fees that officials believe will beat budget projections -- and with proceeds from new fines and fees from speed cameras in 59 school zones.

But Maragos' report Friday said the $35 million drop in sales tax, compared with the first quarter of 2013, means that collections would have to increase by 6.5 percent for the remainder of this year to reach the county's budgeted total of a 2 percent growth in 2014. Mangano's office didn't respond to Maragos' report

For the cameras, the administration calls its projections of $25 million to $30 million a year "conservative." It said it accounted for the possibility that Nassau will have to share revenue with villages, as a state lawmaker is demanding.

Members of the legislature's Democratic minority said the county's study focused on only nine sites for one day. They cited budget office director Maurice Chalmers' report predicting annual revenue of only $12 million, and noted that the state still hasn't OKd the cameras' use.

"The key revenue source has neither been approved by Albany nor shown to be a credible revenue generator to sufficiently cover the costs," said Minority Leader Kevan Abrahams (D-Freeport).

Maragos said relying on the initiative carried "significant risk," as the state may not approve cameras or the revenue realized may be reduced due to revenue sharing requirements with villages.

But by the time NIFA meets, Kaiman said he hopes to have a better sense of the camera bill's viability, as the State Senate will have returned to Albany on April 23.

"There will be other sources of revenue," he said, "but having those cameras, with money not committed anywhere else, is a bit of a guarantee that a good portion of this [agreement] will get paid."

As a part of the proposed union agreements, NIFA pledges not to impose a new wage freeze through December 2017. While NIFA attorneys are reviewing that language, Kaiman said that it was important to establishing "good faith" negotiations.

"The notion that we can certify this agreement and accept all the concessions they're going to give us -- the three zeros [no raises in 2011, 2012 and 2013], waiving their rights to litigate, changing their salary chart -- and in a few months, if we really feel this isn't going our way, we're just going to reimpose the freeze?" Kaiman said. "That's not good faith. So I've made it clear that to negotiate in good faith we have to abide by the same terms everyone else is."

PBA president James Carver said Friday he believed the language pledging no freezes through 2017 will remain. "Jon and I are on the same page," he said of Kaiman.

But Chalmers in his report cited NIFA legislation allowing it to set a freeze if it's "essential to the adoption or maintenance" of a budget, and questioned the pledge of no wage freezes until 2018.

"Would NIFA's oversight ability be compromised if it makes and keeps this promise?" Chalmers wrote.

Despite the questions that Chalmers posed, county lawmakers raised few issues before their vote. They had heard Acting Police Commissioner Thomas Krumpter, speaking on behalf of the Mangano administration, express the urgency that all of the agreements' backers have.

"This has been going on for three years, and we must move forward," Krumpter said. "This provides a sound foundation moving forward."

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