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Union Health Ripoff

E.J. McMahon
New York Post
May 12, 2008

Retirees' benefits are the fastest-growing part of overall health-coverage costs for New York state and local government. They're already nearly 40 percent of the state's employee-health budget, and they'll consume more than a third of the roughly $3.5 billion New York City will spend on health benefits this year.

Those annual numbers are just the tip of the iceberg. Thanks to new accounting rules, taxpayers are getting their first glimpse of the eye-popping long-term costs of promising health packages for government retirees that are far more generous than what most private-sector workers can hope for while they're still working.

Early estimates show the unfunded liabilities come to $50 billion for the state government and $58 billion for New York City—and perhaps $75 billion more for the rest of the Empire State's cities, towns, counties, villages and school districts.

Public-employee unions are anxious to lock in these benefits before those big numbers start to sink in—and now they've settled on a new strategy for pulling it off.

The unions' legislative tool is a seemingly innocuous measure of the sort known in Albany as a "study bill"—window dressing for a provision that's designed to hinder future efforts by state and local governments to rein in skyrocketing retiree health costs.

The bill appears greased for quick passage, with a snap vote in the state Senate possible as soon as this week and the Assembly's approval sure to quickly follow. If it becomes law, with or without Gov. Paterson's signature, the result will be yet another obstacle to any effort to reduce New York's crushing tax burden.

It's bad enough that state lawmakers loudly proclaim their determination to cut property taxes even as they do nothing to challenge costly union perks and collective-bargaining leverage on the local level. How can they possibly justify a step that will make the situation worse?

For the answer, start 14 years ago, after a successful lobbying effort by the powerful New York State United Teachers. In 1994—not coincidentally a statewide election year—NYSUT got the Legislature and Gov. Mario Cuomo to enact a temporary moratorium on any "diminution" of health benefits that wasn't first negotiated with unions representing active employees.

That supposedly temporary moratorium has been renewed every year since—tying the hands of school officials anxious to save money on escalating insurance costs. Districts thus can find it difficult to, say, adjust their plan's prescription benefits so they don't overlap the new Medicare Part D plan.

Other unions naturally have tried to follow suit with us-too measures modeled on the school law. The Legislature was happy to oblige—by near-unanimous votes—but former Gov. George Pataki repeatedly vetoed these bills.

His successor, Eliot Spitzer, vetoed the first such bill to hit his desk last year—but added a new twist by suggesting that the issue deserved further study. The union allies who chair the relevant subject-area committees—Sen. Hugh Farley (R-Schenectady) and Assemblyman Peter Abbate (D-Brooklyn)—responded with a bill creating a 22-member Task Force on Retiree Health Insurance Protection.

As its name implies, the whole point of the panel is to "protect" retired union members—not the public. The bill stipulated that at least three task-force members would be designated by unions or retiree groups; throwing management a bone, it also said at least one member should come from local government.

The Senate duly passed this measure on March 12; it was awaiting final action in the Assembly until, last week, it was quietly recalled to the Senate for some crucial amendments. These narrowed the task-force membership to 12—and dropped the requirement for a management rep.

Most significant of all, a new provision imposes the very moratorium the unions have long been seeking.

It's easy to predict the argument Gov. Paterson will hear when the legistion reaches him: "It's just a study bill. The moratorium is only temporary. No big deal."

But the teachers' precedent shows what's really at stake here. Once the moratorium is in place, it'll become as permanent as other pro-union measures such as mandatory binding arbitration for police and firefighters, which has been regularly renewed since 1974 over management objections.

Mindful of Mayor Bloomberg's influence with Senate Majority Leader Joseph Bruno, the bill is worded to exclude New York City retirees. But if all the other unionized government workers in the state get this kind of "protection," city workers will be sure to follow as soon as Bloomberg is out of the picture.

The state AFL-CIO chief has already suggested the bill is necessary to ensure government retirees "don't spend the end of their lives in misery."

In New York, misery is reserved for taxpayers.

E.J. McMahon is director of the Manhattan Institute's Empire Center for New York State Policy.

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