The Streets Were Paved with Gold (50 page)

“If we count increments and overtime and differentials and promotions, most city employees will have kept ahead of the cost of living over the last three years,” the Control Board’s Sidney Schwartz told me in December 1977. According to an Economic Development Council study, the 33,000 transit workers—who unlike other workers did not defer any of their pay or benefits—averaged a 16.6 percent hike in their compensation over the three years. According to a 1978 unpublished City Comptroller’s study of the W-2 forms of 171,398 city employees on the payroll from January 1975 through December 1977, the average worker’s pay jumped 9.8 percent—from $16,600 in 1975 to $18,276 in 1977. But this figure is somewhat understated, as the Comptroller’s Office concedes. It does not include the bulk of the workers’ COLA I and II payments; or the overtime and other benefits received from January to June 1978.

After a Koch-ordered study, the Budget Bureau certified that labor costs over the three years had indeed dropped by less than 1 percent. But there were complex reasons for this, including increased Social Security, pension, and fringe benefit costs beyond the city’s control; the axing of mostly lower-paid workers; and the city’s policy of supplementing the pay of many CETA workers. True, actual payroll costs declined by an estimated 9 percent. Yet in a March 1, 1978, response to Senator Proxmire, Koch declared, “Roughly 10 of the 20 percent decrease in the work force was offset by increased payments to city employees approved by the Emergency Financial Control Board.” A confidential memorandum, prepared by a Koch ad hoc task force from the Bureau of the Budget, the Office of Labor Relations and Deputy Mayor David Brown’s office, startlingly revealed: “Even during one of the most austere periods in the City’s history, municipal workers were able to keep relative pace with the general rate of inflation.” They found, for instance, that a senior clerk received an
annual
increase of 5.5 percent over the three years. This contrasted with an
average
annual increase of 6.2 percent in the pre-“crisis” period.

New York was thus left with a smaller, better-paid work force. Unlike labor leader Sidney Hillman, who during the Depression urged his brothers and sisters to share equally in the sacrifice, early in the “crisis” municipal labor leaders vetoed proposals to avoid layoffs of some of their members by asking that
all
share in the sacrifice of fringe and other benefits. Because of the state law mandating that layoffs be based strictly on seniority—which, it is worth
recalling, no leading union or city official protested—a disproportionate number of blacks, Hispanics, women and young workers suffered. Rather than alienate current members, union leaders also agreed to slash by 10 percent the salaries of those few workers hired after June 1976. In addition, instead of four weeks’ paid vacation, these junior workers would receive only three; they would be ineligible for COLA II payments, and would be required to contribute a greater percentage of their salaries toward their pensions.

Seniority provisions affected workers in another way. While 25,000 Indians were getting laid off, their chiefs, who enjoy seniority, became a privileged, untouchable class. Between May 1975 and February 1977, according to a Budget Bureau survey of those laid off, the percentage of city managers actually increased. In that period, employees earning less than $10,000 were reduced by 36.9 percent; those earning between $10,000 and $15,000, by 41 percent; those earning from $15,000 to $20,000 by 4 percent. Yet those earning from $20,000 to $25,000 climbed 8.1 percent; those between $25,000 and $30,000 soared 17.6 percent; and those making more than $30,000 went up 1.4 percent. The staffing of the City of New York sometimes resembles that of the Mexican army.

So managers did not “sacrifice.” The pay of city workers was not frozen. And the cost-of-living adjustments were not funded, as claimed by labor leader Barry Feinstein, “by increased worker productivity.” Nor was there “no cost to the city,” as claimed by Gotbaum, because COLA II payments were funded by “productivity.” In what Steve Berger, former Executive Director of the Control Board, called “the first great loophole,” in 1976 the Board required that only 50 percent of these cost-of-living adjustments be funded through “increased productivity.” Hoisting the white flag, they declared it permissible to fund the remaining 50 percent from budget cuts or increased state or federal aid. Thus New York, in its very own peculiar way, came to define reduced services (attrition) as improved “productivity.” And, ignoring a rather sizable budget gap, the city came to earmark any budget cuts or increased state and federal aid to increased worker compensation. Admittedly, it is often difficult to measure productivity, and workers were correct to charge the city and the Control Board with inexcusable delays in making payments to workers who met their productivity goals. But in June 1978 the Koch administration and the Control Board quit trying to define productivity and agreed to surrender the requirement altogether to expedite the remaining $567 COLA II payment
that would have been due most workers. They also agreed that future payments would be called “bonuses” and would not require matching “productivity,” “other savings” or “other revenues.” The real problem with productivity seemed to be political, not definitional.

Labor leaders were not the only ones misleading the public. Governor Carey told the Congress in early 1978 that the city had reduced its work force by 66,000 over the three years. To arrive at this total, he counted 5,000 court workers who had been transferred to Albany’s payroll when the state assumed the cost of the courts, a bookkeeping change. City officials certified that the work force was slashed by 61,000, claiming 25,000 layoffs and another 36,000 through attrition. A careful check reveals this total is also false.

“These are 61,000 real bodies,” Budget Director James Brigham told me on March 20, 1978. But, he admitted, these numbers were “very rough” since the calculations “were done by hand” and they were “guessing” the exact number laid off vs. attrited.

“Does the 61,000 total include the more than 9,000 laid-off employees Beame rehired?” I asked.

“Yes, it does.”

“Does it include the 8,094 laid-off mayoral agency employees rehired on federal CETA lines?”

“It does.”

“Are you sure?”

He called back to say these CETA employees were not counted. Nor were the 10,000 rehired Board of Education employees, nor the 19,306 additional CETA employees working for the city as of June 30, 1978. Nor the other city employees supported by federal funds—like those financed by the Law Enforcement Assistance Administration or the Commerce Department—for which Brigham says the city has no numbers. Assuming there are another 1,000 of these, the total number of city workers supported by the federal government in mid-1978 exceeded the 25,000 laid off. Even if Brigham’s claim is correct that laid-off workers who have been rehired and other new hirees should not be counted, at best the city work force had been reduced by about 25,000, as opposed to the 66,000 or 61,000 proclaimed. This should not suggest there have been no layoffs, no suffering. Many city workers who were rehired went months without a job.

But the city’s CETA trick does suggest how little has changed.
Once again, City Hall was making short-term decisions with long-term consequences. Having braved the trauma of laying off 25,000 workers one year, the city turned around and hired an equal number back the next. CETA employees now comprise about 10 percent of the work force. Instead of planning for a long-term scaling down of its service delivery system, City Hall merely found a new device to pay for it. Thus the city set itself another trap. Since the Carter administration has already announced plans to cut back CETA employment, and Congress in October 1978 restricted employment to no more than eighteen months, City Hall and workers will likely be forced to undergo the trauma of layoffs once again. No matter. “My real future worry,” Barry Feinstein told me in March 1978, “is that the CETA program will lapse. The city has to make plans to pick up the slack by
expanding
the tax levy budget.”

The use of CETA lines helps demonstrate why city labor costs have not gone down, and how the poor once again took it on the chin. Under federal law, these jobs are supposed to be earmarked for the poor. But New York, like other cities, pilfered these funds to rehire laid-off workers. To discourage this, the federal government placed a cap of $10,000 on what it would pay a CETA worker. That didn’t stop City Hall. To make up the difference between this $10,000 and a worker’s former salary, New York decided to subsidize the difference—$35.5 million worth in fiscal 1978.

Perhaps the real lack of change was in perceptions. The principal actors in the fiscal drama seemed to suffer a collective reality gap. They often spoke the right lines, sometimes risked the boos of an audience, but more often than not they were oblivious to the cold reality of the massive budget deficit. For Abe Beame, it was business-as-usual. He treated his final budget numbers as if they were Vietcong body counts, except that he deflated the totals. Instead of a long night, he proclaimed “light at the end of the tunnel.” So he eased up. The mayor who had asked city workers to sacrifice used the occasion of his final days in office to make two commissioner appointments to the seldom-show Board of Water Supply. This is the same board Comptroller Goldin claimed could have been abolished, saving taxpayers $2.6 million. These lifetime posts, requiring attendance at one weekly meeting and offering a chauffeured limousine, secretary and $25,000 salary for the chairman and $20,000 for the two other commissioners, permit full-time outside employment. Beame awarded the chairmanship to his deputy
mayor, Stanley Friedman. To deflect anticipated criticism, he gave a commissionership to Simeon Golar, a black former judge. (In mid-1978, spurred by Mayor Koch, the legislature voted to terminate the Board.) Also in his final hours in office, Beame appointed fifteen judges, many being political cronies who failed to win Bar Association approval. When I asked him about these appointments at a Channel 13 lunch one day, Beame reacted as if he didn’t understand the question. With doleful eyes he looked at me. Hadn’t Lindsay appointed his friends? he asked. Hadn’t Wagner? Didn’t Carey? Why should he be singled out and picked on?

Nor did the fiscal emergency sink in with others at City Hall. Ignoring the so-called fiscal crisis, top executives of the outgoing Beame administration submitted claims of over $5 million for accumulated overtime, sick days and vacation days not taken. The City Council waited until after the November 1977 elections and then passed legislation raising their part-time salaries from $20,000 to $30,000. After a loud public outcry, the legislation was shelved. No matter. In June 1978, the Council voted themselves an $11,000 increase in each member’s expense account. Mayor Koch, who joined the original outcry, approved this later increase, saying in a prepared statement, “I chose not to veto the increase for the Council because I was assured by the Council leadership that the additional funds for the Council members represented vouchered expenses and not ‘lulus.’ ” In truth, the Mayor’s support was the price he paid for Council approval of his 1979 budget. Koch also paid a price for the budget approval of the Board of Estimate. The borough presidents of Brooklyn, Queens, the Bronx and Manhattan walked off with $210,000 extra in staff for each of their offices; Staten Island, being smaller, received $190,000. “So the upshot is that everybody got more,” observed Senator Proxmire, the Wisconsin Democrat who often seemed to be speaking for city taxpayers, “except, perhaps, the more than seven million private citizens of the City of New York.”

New York’s economically uncompetitive position didn’t sink in with Ray Corbett, President of the state AFL-CIO. In May 1978, he called on the state to unilaterally raise the minimum wage from $2.30 to $3.35 by 1981 (mission accomplished). It didn’t seem to sink in with Victor Gotbaum, who, like other principals, looked at a temporary cash “surplus” for fiscal 1978 and declared, “There is no deficit.” Gotbaum was trying to win a wage hike for his members, and as long as New York could induce the federal government
to help finance a $1 billion deficit over four years, he would worry about next year, next year.

It didn’t seem to sink in with Governor Carey. When he was not running for reelection, the Governor was gutsy. But 1978 was an election year. Though he had no legal or legislative authority to do so, nor might he be around by then, Carey coaxed Mayor Koch’s support of the controversial Westway project—a $1.1 billion highway and economic development project along the West Side of Manhattan—by pledging to retain the 50¢ subway fare through 1982. Carey, like Governors Rockefeller and Wilson before him, also reduced state taxes in an election year, paying for these, according to Steve Weisman of the
Times
, “by the shuffling of cash between fiscal years, a practice that politicians tend to deplore except when it serves their purposes.” The Governor, whose first speech to the legislature in 1975 cautioned that “the days of wine and roses are over,” now urged citizens to imbibe some election-year champagne. In addition to a $755 million tax cut and a subsidized transit fare, Carey promised $398 million of new state aid to localities, including more than $200 million to help New York City balance its budget, a $177 million increase in spending for state operations, additional middle-income housing subsidies, elimination of the one-year probation for public employees who break the state law and strike, as well as a cornucopia of other goodies. Each community Carey visited during the campaign seemed to win a government grant. It was like an early Christmas. Buffalo’s Sheehan Memorial Emergency Hospital got $22,000 for a burn center; Oswego got $480,000 for its railroad; neighborhood groups, $5 million for preservation work. Intent on proving he was fiscally responsible, Carey’s Republican opponent, Perry Duryea, at first called Carey “irresponsible” for pledging to retain the 50¢ city subway fare through 1982. Then, when he was roundly condemned for being “anti-city,” Duryea matched Carey’s pledge. The state, as it had done in years past, was setting an example for the city, proving that budgets were political documents—not a set of limits imposed by how much revenue you had, but rather by what those in power wished to spend to remain in power.