Retired city workers are understandably upset about the city’s decision to change their health insurance plan, which will result in less flexibility starting in September. However, this change should not come as a surprise. The city had to make adjustments to save costs. Fortunately, the retirees are still benefiting from the new plan, which was registered by Mayor Eric Adams with healthcare provider Aetna. The city expects to save $600 million annually due to a higher federal subsidy and stricter rules for specialty visits. While the retirees may not be pleased with this change, they cannot blame Mayor Adams. The responsibility lies with their union leadership, as the Municipal Labor Committee agreed to switch plans with then-Mayor Bill de Blasio two years ago. The teachers union played a major role in this decision, recognizing the need for cost-cutting measures to fund raises for current workers.
Prior to registering the new retiree healthcare plan, the city and the United Federation of Teachers announced substantial raises for teachers. Over the course of five years, teachers will receive a 17% increase in salary, along with a one-time $3,000 bonus and additional annual bonuses. Starting salaries for first-year teachers will also see a significant increase. These raises are necessary to keep up with high inflation rates. However, the teachers’ contract highlights a larger issue. Mayor Adams has negotiated deals with most of the city’s labor unions, including the police, that result in substantial pay increases without additional work or performance accountability. These agreements come at a high cost, with the city adding $16 billion to its budget over five years. The projected deficit for the next summer has also escalated to $4.2 billion, with the potential for an additional billion if migrant costs continue to rise.
These deficits were manageable in the past when the city’s commercial-property tax base was thriving and Wall Street was booming. However, the current economic climate, with layoffs and vacant office spaces, leaves little room for tax increases. Governor Kathy Hochul has already implemented tax hikes on New York City businesses for the Metropolitan Transportation Authority and plans to introduce a congestion-pricing program next year. This makes it challenging to generate additional revenue.
While current city-government employees may not be concerned about retiree healthcare, they should consider the ease with which the city downgraded the plan. Unlike pensions, retiree healthcare is not guaranteed by the state constitution. The city has not invested significant funds to fulfill these promises, resulting in a $90 billion gap between what has been pledged and what has been saved for future healthcare costs. The only protection retirees have is a city law, which can be easily amended in times of budget crises. Union members should pay attention to the choices made by their leaders, as it directly impacts their own futures.
In conclusion, the changes to retiree healthcare in the city are necessary to save costs. While retirees may be upset, the responsibility lies with their union leadership. Mayor Adams has made significant deals with labor unions, resulting in substantial raises for current workers. However, these agreements come at a high cost and contribute to the projected deficits faced by the city. Current workers should be mindful of the potential impact on their own retirements and the lack of guarantees for retiree healthcare. Overall, the new Medicare plan is not as unfavorable when considering the lack of employer-funded healthcare for private-sector retirees. It is crucial for union members to be aware of the choices their leaders make and the potential consequences for their own futures.
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