EDITORIAL: Labor is Cuomo's first big test

Call it Job No. 1: union relations. As his transition kicks into high gear this week, Andrew Cuomo has no more pressing agenda item than figuring out how to work with public employee unions to cut costs.

On the new governor's plate are many critical challenges, from ethics reform to economic growth. But the labor issue may be the most daunting of all.

It will take intelligence, political skill, toughness and strategic ingratitude for Cuomo to get the unions to make real concessions. Labor was significant in his campaign for attorney general in 2006 and this year. But the state's cost structure - including pensions, health benefits and salaries - is no longer sustainable.

So conflict with the unions seems inevitable. In his first budget, he'll have to close what now looks like a $9-billion deficit. And his staff will have to start bargaining with the unions for new contracts to replace those that expire this year, for a wide range of employees, such as maintenance workers, Division of Motor Vehicles clerks and addiction treatment specialists.

It's not just the unions representing state workers who are likely to dig in their heels. Cuomo wants to impose a cap on local property taxes, which will squeeze school districts facing constantly escalating wage, pension and health care costs. So he'll have to find ways to alleviate that pressure, such as freezing school employee wages, capping health care costs and asking workers to pay more toward their health insurance. That will not sit well with teacher unions, as the new governor in New Jersey, Chris Christie, is already learning.

The other major imperative is reducing the gargantuan costs of Medicaid. But cutting it will pit him against private health care unions, hospitals and other service providers who depend on Medicaid reimbursement.

As this struggle nears, Cuomo has sent out signals both hard and soft about how he intends to approach it.

Aware that union commercials may blast him for proposed cuts, he says he's ready to use his campaign funds to counter those ads. It shows he's thinking strategically, but we hope it doesn't come to that.

Cuomo has also been conciliatory. On Labor Day, he offered praise citing the "vision and statesmanship of public employee unions, which played a crucial role in saving the city" during the 1970s financial crisis. And he called for a similar response now. "For labor to thrive, the state must thrive," he said. "We are all in this together."

To that end, he's been sending out copies of a new book about Gov. Hugh L. Carey and that crisis, "The Man Who Saved New York City," hoping to get today's union leaders to emulate those of that era. But both the reaction to the book from union leaders, and their readiness to go along easily, are not promising.

Cuomo also has to overcome lingering distrust from another piece of history: At the end of the 1982 gubernatorial campaign, which Cuomo directed for his father, Mario, the elder Cuomo said, "my greatest strength will be my ingratitude." And in his first budget, he called for 8,000 layoffs.

The layoffs didn't happen, but the state's largest public employee union, the Civil Service Employees Association, with 70,000 executive branch workers, remembers it - and did not endorse Andrew Cuomo this year. The Public Employees Federation, with 59,000 members, liked Cuomo's position on cutting waste and controlling public authorities, and endorsed him.

Cuomo hopes his union support, given with clear knowledge of his fiscal-control plans, signals a disposition to dialogue. But he needs to use the next few weeks to measure that.

So he should work with the unions now, to gauge how willing they are to accept the size of the crisis, and to expose them to the math. If they see the numbers close up, they may be more likely to respond, as they should.

In the process, he should treat state workers, his employees, with respect. It's not that they're overpaid: The blue-collar CSEA says the average salary of its state workers is $40,000 a year. But their salary increases in recent years have kept well ahead of low inflation, while private sector salaries have stagnated. Those increases, plus gold-plated health care benefits and risk-free pensions - all far more generous than in the private sector - are a burden to taxpayers. And a few sensational cases of pension padding and other abuses have unfortunately damaged the reputation of all state workers.

Cuomo must find the right mix of reducing state government, which will require modernization of civil service rules that govern downsizing, and getting concessions and more productivity from the workers who remain. They should make greater contributions to health care costs. And, though controlling future pension costs won't have an impact on this budget, it's no less vital for the state's health.

In this enterprise, he might want to to seek Comptroller Thomas DiNapoli's help. DiNapoli owes nothing to Cuomo, who did not endorse him. But labor helped DiNapoli win, and unions trust him. So do legislators, who'll be pivotal in this process. If DiNapoli can help persuade unions and lawmakers that the golden goose is dead, that would be a major step.

Cuomo won because the voters saw him as strong leader willing to take on difficult and complex challenges. How well he does Job No. 1 will determine the success of his governorship. He can't wait until Jan. 1 to start. The time is right now. hN