Spitzer Faces a Test Over Labor Costs

Whether Governor Spitzer succeeds in lowering the nation's heaviest tax burden will largely depend on his willingness to overhaul New York's public sector labor laws and risk a confrontation with unions, according to a new study.

New York's high public employee costs, which contribute to heavy state and local taxes, are a consequence of 1960s-era labor statutes that were intended to guard the state from crippling strikes but helped trigger an explosive growth in the state and local government workforce and payroll, the Manhattan Institute study says.

Written by a veteran labor lawyer and conservative budget analyst, the study sheds light on New York's Taylor Law, which is a top concern for local governments and businesses but has been generally avoided by Mr. Spitzer.

In his first year as governor, Mr. Spitzer has vetoed several bills that sought to further limit the bargaining power of public employers by locking up the health benefits of retired public employees.

He has yet to take a position on some of the most contentious elements of the Taylor Law, such as compulsory arbitration for police and firefighters and guaranteed pay increases for employees whose contracts have expired.

The results of those policies and others are contracts that fail to consider the ability of localities to pay for them, critics say.

Defending the Taylor Law, labor leaders argue that the statutes provide economic security to a largely middle-class population at a time of growing income disparity. They say New York's tax problem could be resolved by shifting the burden to the wealthiest residents.

The backbone of Mr. Spitzer's economic agenda has been a push to steer hundreds of millions of public dollars toward a lengthy list of targeted projects that are supposed to trigger growth in depressed areas in the state.

Critics of New York's public sector labor laws argue that the infusion of money won't benefit the economy unless it's accompanied by a plan to reduce personnel costs. Such a move would risk Mr. Spitzer's relationship with the labor community, a vibrant force in New York politics.

"There is no question that this would be a real shot in the arm to the recovery of upstate New York," the director of the Empire Center for New York State Policy, E.J. McMahon, said. "It's a time to choose. You can choose tax relief for the most heavily taxed counties in the United States or you can choose not to ruffle the feathers of the unions."

The Empire Center is part of the Manhattan Institute.

Mr. McMahon is a co-author of the report with Terry O'Neil, a lawyer at the firm Bond, Schoeneck & King who has represented school districts and municipalities in labor disputes.

The Taylor Law is named after a University of Pennsylvania professor who headed a committee appointed by Governor Rockefeller for the purposes of crafting legislation to protect the public against the disruption caused by strikes.

Spurred by an increasing number of labor strikes by teachers, transit employees, welfare workers, and others in the 1950s and 1960s, the new statutes were intended to replace labor statutes that imposed stiff penalties upon striking employees but were seen as unenforceable.
The statutes that emerged provided the legal basis for unions to collectively bargain contracts with counties, cities, towns, villages, school districts, and public authorities.

Following a national trend, New York starting in the early 1980s saw a sharp decline in major labor stoppages.

"But New Yorkers have paid a steep price for labor peace," the report states. "Over the past 40 years, the number of state and local government jobs has grown at more than twice the rate of private-sector employment in New York, and the average pay of state and local government workers is higher than that of private-sector workers in most regions of New York. "

While 36% of government employees are unionized nationwide, nearly 70% of New York's public-sector workers are members of unions, the study said.

Government employees are paid higher average salaries than private-sector workers in most of the state, with exception of New York City and the Southern Tier region.

In New York, public employees have more paid time off, more widespread access to retirement and health benefits, and significantly greater job security than private employees.

Instead of rolling the benefits back, the success of public sector employees ought to be something that is preserved, labor leaders say.

"It's the favored whipping boy of the right," the executive director of the labor-backed Working Families Party, Daniel Cantor, said. "But there's no denying a decent civil servant job is an important step to the middle class for hundreds of thousands of subway workers, health care workers, and teachers."

Said Mr. Cantor: "The only way to make taxes fair in New York is to shift the burden back to those who can afford to pay," referring to people who earn more than $250,000 a year.