Blog City Budget

Restoring City Priorities Along With Spending Cuts

June 21, 2012

Each year at this time, the Mayor and the City Council engage in a “budget dance” over which of the spending cuts proposed in the Mayor’s budget for the fiscal year starting July 1 will be restored. But this year they’re dancing to the wrong tune.

This year’s dance focuses largely on the proposed elimination of certain child care slots and after-school programs that the Mayor says the City can no longer afford. Instead, the focus should be about the City’s overly generous contributions to the health insurance of former City employees and their spouses.

It should be about whether we as a city are prepared to continue funding those overly generous benefits at the expense of child care and after-school programs. It should be specifically about phasing-out the reimbursement of Medicare Part B premiums for some retired municipal workers.

Most New York City employees and retirees under age 65 receive health insurance for themselves and their families without paying the cost of the insurance premium. When retirees turn 65 they enroll in Medicare, which requires them to pay a premium for Part B benefits covering physician services. The monthly standard premium is $100; those with an annual income greater than $85,000 for individuals or $170,000 for married couples pay a larger amount, up to $320 a month. 

The City reimburses retirees and their spouses for the full out-of-pocket cost of Medicare Part B premiums. In effect, the City is paying the federal government for premiums most other retirees pay out of their Social Security checks. Ironically, those with higher incomes receive a bigger subsidy.

Reimbursement of Part B premiums is unheard of among large corporate employers and rare even in the public sector; where the benefit is available, the full premium is not reimbursed.  Most large cities do not offer any reimbursement; one exception, Los Angeles, reimburses only retirees (not spouses) for the standard premium. Retirees from the federal government receive no Part B reimbursement. 

Providing this benefit is costly for New York City taxpayers: $280 million in fiscal year 2013, growing to $380 million by fiscal year 2016. Unlike other health insurance benefits, Part B reimbursement does not need to be negotiated with public employee unions; it is specified in local law and can be changed by the City Council and Mayor.

The City should begin a phase-out of this reimbursement in next year’s budget. Reducing the reimbursement by 50 percent in each of the next two years would save $140 million in fiscal year 2013 and $310 million in 2014.

Opponents will argue that the City should not reduce its benefits just because they are more generous than others. But the real issue is one of priorities.

Do we as a city give higher priority to being overly generous to former City workers and their spouses than we do to providing crucial services to our city’s children? Do we as taxpayers who typically have to contribute to our own health insurance believe that former City workers and their spouses should be protected, at our expense, from doing the same?

It’s time to discuss municipal priorities. As the negotiations continue, it’s time to consider redirecting budget resources toward the needs of our city’s children and away from areas of overspending. It’s time to put our priorities on the table.


By Maria Doulis