Another Good Idea to Save the City Money
Yesterday, Mayor Bloomberg, Comptroller Liu and a number of city labor leaders announced an agreement that is intended to “depoliticize,” “professionalize” and “streamline” the way pension funds invest. This consolidation is meant to reduce the complexity, inconsistency and inefficiency of administering five different pension funds. This makes sense. Now, imagine for a moment that there were 81 different funds, each going about their business offering similar services and collectively spending $1 billion dollars of city funds a year. Unfortunately this is the reality of the New York City union welfare funds, which could also use some depoliticizing, professionalizing and streamlining.
Last July, the CBC released a report titled "Better Benefits From Our Billion Bucks: The Case for Reforming Municipal Union Welfare Funds.” In it we described the 81 different union welfare funds that provide supplemental benefits such as optical, dental and prescription drug benefits to New York City employees and retirees. Fifty-eight unions representing NYC workers have at least one fund and some have one for active employees and another for retirees. In our report we showed that the majority of funds offered similar benefits that could be made less costly if combined; then, economies of scale from servicing all city employees and retirees could be brought to bear. Historically, many of these funds have been run inefficiently and have been characterized by high administrative costs, operating deficits and in some cases insolvency.
Our report found that by consolidating the funds, administering them as part of the city’s employee health insurance program, and providing any additional non-health benefits though one centralized cafeteria plan, the city could save $150 million annually. Yesterday City officials and labor leaders came together because of a good idea that would save the city money and help assure the security of their members pensions. Why not do the same for employee health benefit funds?