Friday, November 20, 2009

In Which I Mock the Media Bleeding-Hearts: NYC Budgeting

The New York Times has a rather breathless front-page story today  telling us, "Even as Mayor Michael R. Bloomberg says that he is trying to avert laying off city workers, his aides have quietly encouraged such job cuts through an internal budget maneuver...But the administration, which prides itself on transparency, has not disclosed the maneuver to the public, or to the municipal unions that may be affected as the city scrambles to cut costs."

An internal budget maneuver! That sounds sinister. And what is this insidious, opaque maneuver, a "marked [emphasis added] departure from tradition?" It is to start showing fringe benefits as well as salaries in departments' personnel budgets. As the Times correctly notes, this gives agency managers a greater incentive to use personnel cuts to reach savings targets, because each employee looks more costly than before.

Yes, but... isn't that how much employees actually do cost? Ah, but "the agencies are not responsible for those [fringe-benefit] costs, which are paid from a central budget at City Hall."

Surely we shouldn't hold managers responsible for costs that are out of their control. Wait a minute, though... we're already holding them responsible for wages and salaries! Are those under managers' control? Not in any way that I can see. In a workforce that is both unionized and under civil service rules, managers have essentially no control over how much anyone gets paid. If they need to reduce wage and salary costs, the only way to do it is by reducing numbers through layoffs or attrition, just as with fringe benefits.

The only difference is that "tradition" says fringe benefits are shown in the central City Hall budget while wages and salaries are shown in agency budgets. But really, there's no reason we couldn't also pay wages and salaries from a central budget. That would really cut down on the incentive for layoffs, because personnel would then show up in agency budgets as having no costs at all. They'd be free to the agency-- but not to the City.

So should we lay people off or not? When you have to cut budgets drastically, all the options are bad. Adding someone to the unemployment rolls in the current job market is going to inflict a lot of pain, pain that we might not want to inflict.  But for God's sake, let's make that decision using meaningful numbers, rather than misleading  ones. Good job, Mayor Bloomberg.

Addendum: It's true that this change makes personnel look more expensive relative to other things. But if you're the head of an agency where most of the cost is for personnel (in the New York City police department, for example, wages and salaries are fifteen times as large as agency Other Than Personal Services costs) you will now need to cut fewer positions than before to reach a given target, because you get more credit for each position cut. Honesty makes the best policy.

1 comment:

  1. Hmm. Interesting food for thought.