Budgetary Impact and Accounting Treatment of Costs of New York City Labor Settlement

The budgetary impact of a contract negotiated by New York City with a coalition of municipal unions was analyzed. City officials estimated the cost of the contract for the 2-year period covered at $1.088 billion. The estimate was reasonable, but additional costs may be incurred for deferred wages to employees and if some unions receive a larger settlement. Concerns were expressed about the uncertainty of some elements in the funding of the contract settlement. Also, the planned use by the city of the 1978 surplus as a funding source is not in accordance with generally accepted accounting principles. Two significant matters of concern were: (1) the contract may have a significant budgetary impact on the city after June 1980 since the salary levels on which wage increases will be applied will be much higher at the end of the period than they were at the beginning of the contract; and (2) the city softened its position on fringe benefits (or givebacks) and conceded to return some of the givebacks which were reduced in previous negotiations.