The Citywide Savings Program: OMB is Leading and Agencies Should Follow
In recognition of economic and intergovernmental risks, the New York City Fiscal Year 2018 Executive Budget, released in April, includes a Citywide Savings Program (CSP) that totals $1.5 billion and $1.3 billion in fiscal years 2017 and 2018, respectively.1 To generate savings, City agencies have been aggressively re-estimating expenses and shifting city expenses to other funding sources to achieve $1.3 billion and $680 million in savings in fiscal years 2017 and 2018, respectively. Additionally, the City has been actively managing its debt service for savings of $295 million in fiscal year 2017 and $421 million in fiscal year 2018.
A smaller amount comes from increasing the efficiency of agency operations ($24 million and $126 million in fiscal years 2017 and 2018, respectively); in fact, there are several agencies that do not participate in the CSP at all.2 The Office of Management and Budget (OMB) created a Savings Unit that has taken the lead in identifying initiatives to improve operations and to provide recurring and growing savings; City agencies should similarly review their operations to enhance productivity and reduce expenses.
Citywide Savings Initiatives
OMB’s Savings Unit has identified 11 worthwhile initiatives that will save $31 million in fiscal year 2018 and grow to $124 million by fiscal year 2021.3 The initiatives target areas where there have been long-standing inefficiencies, including overuse of overtime, paper-based systems, and unnecessary resource segmentation across agencies.
Table 1: Citywide Savings Initiatives in the FY2018 CSP
(dollars in millions)
|Enhanced Space Management||$0||$10||$15||$20||$45|
|Skilled Trades Overtime||$10||$10||$10||$10||$40|
|Civilian Overtime Waivers Cap||$4||$8||$8||$8||$28|
|Centralized Skilled Trades Pool||$0||$0||$5||$10||$15|
|Paper Check Reform||$1||$2||$3||$4||$10|
Source: New York City Office of Management and Budget, Citywide Savings Program (April 26, 2017).
Better Management of Overtime
CBC has frequently sounded the alarm on runaway overtime costs.4 As part of the budget process, “caps” have been or will be placed on overtime earned by uniformed personnel.5 As part of the CSP, OMB will work with agencies to exercise stricter review of waivers for civilian overtime, and overtime for “skilled trades,” including positions such as master electrician, master plumber, and welder, will be capped at 12 percent of straight-time hours and at 50 percent of an employee’s base salary.6 To tackle the issue in the long run, a Centralized Skilled Trades Pool will be established within the Department of Citywide Administrative Services to more nimbly deploy personnel to address temporary maintenance backlogs, alleviating the need for overtime for these agencies’ in-house workers. These initiatives will save $14 million to start, with savings growing to $28 million annually once the pool is established fully.
The Procurement Reform initiative will move paperwork to an online system in order to accelerate contract processing for savings that double from $20 million to $40 million by fiscal year 2021. This is expected to reduce existing vendors’ overhead costs and consequently their pricing, and also to increase competition from new vendors who are able to enter the market when the administrative burden is reduced. In addition, the two space management initiatives will save $23 million by fiscal year 2021 by utilizing a shared data system for all city-owned and leased space to improve future decision-making about space requests. Lastly, the Paper Check Reform will reduce expenses by $1 million in fiscal year 2018 by ending interagency payments using paper checks and encouraging city personnel to use direct deposit.
The City has a fleet of more than 29,000 vehicles.7 Increasing car-sharing within and between agencies will reduce the size of the fleet and use of rental vehicles. Additionally, large vehicles will be replaced with sedans when possible, and salvaged vehicles will be auctioned. This initiative will prune $10 million in fiscal year 2018.
Efficiency Savings from Agency Initiatives
Agencies’ participation in the savings program remains voluntary. Of 43 agencies participating, 19– including large agencies such as the Fire Department, Department of Correction, and Administration for Children’s Services—contributed no efficiency savings. In the 10 largest participating agencies, efficiency savings averaged 0.1 percent of city-funded expenditures.8
Examples of worthwhile agency efficiencies include procurement process reforms at the Office of Emergency Management, technology upgrades at the Taxi and Limousine Commission, energy efficiency initiatives at the Department of Environmental Protection, and shift scheduling changes to reduce overtime costs at the Department of Transportation.
The Department of Education (DOE) offered the greatest efficiency savings: $59 million in fiscal year 2018 growing to $72 million in fiscal year 2021. Significant sources of DOE efficiency savings include placing teachers from the Absent Teacher Reserve into permanent positions, insourcing positions currently filled by consultants, and consolidating schools, for savings of $11 million, $7 million, and $4 million, respectively, in fiscal year 2018. But the agency has a $24 billion operating budget, and these savings constitute just 0.2 percent of its total budget and 0.5 percent of city-funded expenditures.
The DOE case illustrates small increases in efficiency at large agencies can have a large effect on total savings. And, if all agencies pursued and achieved efficiencies worth just 1 percent of their city-funded expenditures, they would generate $378 million in savings in fiscal year 2018—tripling the size of the current efficiency program.9
With budget risks from the federal government and a slowing economy, the city should continue to put substantial effort into reducing expenses. To maximize the long-term benefit of the savings plan, efficiency savings are essential. While 95 percent of efficiency initiatives in the plan provide recurring savings past the first or second year, just 54 percent of non-efficiency initiatives do.
OMB’s Savings Unit has set a strong example of seeking efficiency savings across the board and individual agencies should follow suit. Agency participation in Mayor de Blasio’s Citywide Savings Programs has so far been voluntary, but many agencies, especially those with substantial city funds budgets, are developing few or no efficiency savings. Such limited participation may call for reinstating savings requirements for agencies.
- The Citywide Savings Program includes initiatives announced as part of the November 2017 Financial Plan, the Preliminary Financial Plan for Fiscal Year 2018, and the Executive Financial Plan for Fiscal Year 2018. See: City of New York, Office of Management and Budget, Citywide Savings Program (accessed May 20, 2017), http://www1.nyc.gov/site/omb/publications/budget-reports.page?report=Citywide%20Savings%20Prog.
- OMB’s calculation of efficiency savings is $159 million in fiscal year 2017 and $264 million in fiscal year 2018. The main source of difference from CBC’s numbers is that OMB includes reimbursement initiatives in its total. While active efforts to increase reimbursement rates or maximize available state or federal funds are important for city taxpayers, they do not reduce the overall cost of programs, and CBC does not consider them to be efficiency initiatives.
- The Citywide Savings Initiatives will begin implementation in fiscal year 2018 and do not offer any savings in fiscal year 2017.
- Examples include: Ana Champeny, Average Pay at the 15 Largest New York City Agencies, 2016 (Citizens Budget Commission, April 24, 2017), https://cbcny.org/research/average-pay-15-largest-new-york-city-agencies-2016; Maria Doulis, "Three Questions About 1,000 New Police Officers," Citizens Budget Commission Blog (June 18, 2014), https://cbcny.org/research/three-questions-about-1000-new-police-officers; Citizens Budget Commission, Options To Reduce Expenditures (December 2013), https://cbcny.org/research/options-reduce-expenditures; and Murray Weiss, “Bloomberg Administration Paid Record $1.5B Overtime in 2013,” DNAInfo (March 5, 2014) https://www.dnainfo.com/new-york/20140305/civic-center/bloomberg-administration-paid-record-15b-overtime-2013.
- The police, fire, and corrections departments’ overtime budgets have been increased to reflect actual usage levels, and the departments will be expected to keep overtime spending within budget. The police department cap began in fiscal year 2016; the others begin in fiscal year 2018.
- Omits skilled trades employees working in fixed posts.
- New York City Mayor’s Office of Operations, Preliminary Mayor’s Management Report (February 2017), p. 328.
- These 10 agencies are: the Department of Education, Department of Social Services, Police Department, Fire Department, Department of Sanitation, Department of Correction, Department of Environmental Protection, Administration for Children’s Services, Department of Homeless Services, and City University of New York.
- One percent is in line with average annual productivity growth in the U.S. between 2007 and 2016. See Shawn Sprague, “Below trend: the U.S. productivity slowdown since the Great Recession,” Beyond the Numbers, vol. 6, no. 2 (January 2017), www.bls.gov/opub/btn/volume-6/below-trend-the-us-productivity-slowdown-since-the-great-recession.htm.