More Budget Pain Is In Store For Mamdani

NEW YORK — As a candidate and then as mayor, Zohran Mamdani has portrayed himself as a much-needed salve for New York City’s working class. Now, that stance threatens to cost him at a time when the city’s pocketbook is skint.

Mamdani has gone out of his way over the last several months to boost hourly staffers and striking union workers, even holding a bowling event in Brooklyn to celebrate a major labor contract. Inevitably he will have another role to play: head of the city’s management structure at a time of great fiscal difficulty.

The democratic socialist has alarmed bond rating agencies by relying on reserves and property tax increases to precariously balance his $127 billion spending plan. But even those measures won’t cover the looming cost of pay raises for the city’s unionized workforce — an outlay that has received scant attention but stands to strain an already tight budget.

Just months into his first term, Mamdani has taken positions that cede leverage in those negotiations before talks even begin: Last year while campaigning, the mayor pushed for a $30-an-hour minimum wage — more than what many city workers make. As mayor, he championed striking nurses who won a pay hike higher than what city unions typically receive. And he has also promised wholesale reform of government service delivery. To the extent that requires concessions from labor, he’ll have to negotiate for them.

Factor in high post-pandemic inflation that sapped the purchasing power of municipal workers (along with everybody else) and what’s shaping up as a strong year for organized labor, and it all spells more fiscal frustration for a mayor who ran on making New Yorkers’ lives more affordable through expanded government programming — only to find, once in office, that the city had for years been spending more than it took in.

“This is setting up to be classic labor negotiations, where workers bring legitimate claims to the table but at the same time the city’s budget is very tight,” said Bob Linn, a former head of the city’s Office of Labor Relations who is still retained as a city consultant. “So it will be a balancing act where the eventual agreement will need to meet the important interests of the workers, the objectives of the new administration to solve a series of critical city needs and, at the same time, be fair to the public.”

Mamdani’s task will begin this summer, months before a contract with the city’s largest public sector union expires in November. That negotiation will then kick off the bargaining process with roughly 100 labor organizations that negotiate individually with the city.

While each union has its own work rules and specialized needs, the city employs a process known as pattern bargaining to avoid repetitive haggling over compensation: Whatever raise is negotiated with the first union in the cycle — typically a sizeable outfit like DC 37, which represents 90,000 city workers — that pay hike is applied to the rest, with a separate track for uniformed agencies.

The timing, though, makes it impossible for Mamdani to reflect the cost of these negotiations in his upcoming spending plan. He is required by law to pass the budget months before horse trading begins. The cost will then be added to the city’s ledger once the pattern is established, likely some time in the upcoming fiscal year barring extensive delays.

To partially offset the expected hit without weakening its bargaining position, the city has put aside enough money to cover a 1.25 percent annual pay hike. Actual increases will undoubtedly be higher.

Historically, raises have tended to land between 2 percent and 3 percent. And because of the sheer size of the city’s roughly 300,000 person workforce, even modest increases translate to big bucks.

Each percentage point pay raise typically adds between $500 million to $600 million to the ledger, a sum that compounds with each year thereafter. In practical terms, that means Mamdani’s already-tight spending plan is likely short hundreds of millions of dollars. And given his posture toward organized labor so far, he has opened himself up to pressure for higher payouts — and a potential backlash if he can’t deliver on workers’ expectations.

At the beginning of the year, members of the New York State Nurses Association went on strike, demanding more pay from a collection of dug-in hospitals. As the work stoppage wore on, the healthcare workers received a boost in star power from Mamdani, who spoke to cheering crowds alongside Sen. Bernie Sanders about the need to boost nurse compensation.

Last month, Mamdani hosted an event at Gutter Bar, a Brooklyn bowling alley, to celebrate the resulting contract that included a 4 percent raise — leaving open the question of whether his own workers can expect a sizable pay bump.

“There is your base,” said a former deputy mayor with expertise in the bargaining process. “Now municipal labor can come in and say: Look, they got four percent.”

During his campaign, Mamdani also floated a proposal to raise the city’s minimum wage from $17 an hour to $30 an hour by 2030. Many city workers make only slightly more than the current minimum — and that discrepancy is sure to come up in talks with the city, according to one person plugged into labor negotiations, who was granted anonymity to discuss strategy.

In a typical budget year, enough wiggle room exists in the city’s finances to pay for contract negotiations without setting off alarm bells.

This year, as POLITICO has reported, the mayor is facing a dour fiscal situation caused in large part by deceptive budgeting practices from his predecessor, former Mayor Eric Adams.

Faced with that reality, Mamdani has greatly increased the city’s financial risk by drawing down reserves — spurring three bond rating agencies to downgrade their economic outlook for New York City — and proposing a property tax increase in an effort to avoid service cuts. That’s left him with a far thinner cash cushion to absorb the kind of outlay contract negotiations will require, especially since the Council has ruled out the proposed property tax increase, and the mayor himself doesn’t seem to be serious about pursuing it.

“The Mamdani Administration is working hard to close the deficit we inherited and will continue to be transparent with the public about the city’s fiscal reality,” mayoral spokesperson Olivia Lapeyrolerie said in a statement. “As always, we will approach the next round of contract negotiations with a focus on reaching agreements that are fair and reasonable to our employees and the taxpayers.”

Henry Garrido, head of DC 37, framed the negotiations with the city as incredibly complex.

Raising the minimum wage for the lowest-paid city workers, for example, would kick off a domino effect of pay hikes for higher-ranking staffers. And because city workers don’t pay premiums for healthcare coverage, their total compensation is higher than wages alone would suggest. That means city workers wouldn’t necessarily demand the same raises earned by nurses or hourly workers in the private sector, or even unions bargaining with the state. And it’s not even clear what his members want. DC 37 plans to survey its ranks about their priorities before talks begin. 

Garrido noted that municipal unions have already sought to come up with savings programs — citing changes to how they negotiate with healthcare providers as one example — that can offset the cost of pay increases. He believes there is ample opportunity to rethink how services are delivered once his union sits down with the administration.

“There is a lot this mayor could do around bargaining to be able to ease up the pressure,” Garrido said, recalling that he had encouraged Mamdani to talk about broad reforms to government on the campaign trail. “We have not done a real comprehensive review of the workforce in over four decades.”

Ana Champeny, vice president for research at the Citizens Budget Commission, said those savings measures are essential for the administration to pursue. Back in the days of former Mayor Ed Koch, she said, the city used collective bargaining to reduce the number of sanitation workers on a truck from three to two, a measure that ended up saving the city loads of money.

“Any raises above what is in the labor reserve should be funded with productivity,” she said. “We need to run government more efficiently. That should definitely be a part of this conversation.”

Regardless, labor is poised for a strong year.

New York Gov. Kathy Hochul, who is facing reelection, has allied herself with unions pushing for pension changes and has signaled an openness — however vague — to making concessions favorable to labor.

And Transport Workers Union Local 100 is hoping to score up to a 5 percent raise should Long Island Railroad workers win a similar increase with the state.

“Honestly, everybody should just wait for us to fight it out with Hochul and see where we are when the dust clears,” said John Samuelsen, international president of the Transport Workers Union. “That’s the smartest thing they could do.”