The Bloomberg Administration: A Review, Part I

With the Mayoral election nearly upon us, it is time to review what the Bloomberg Administration has done, and what (based on limited information) a Thompson administration might do. (Forget the campaign literature and promises: it’s misleading nonsense). The review is in three parts because the Mayoralty is in reality three jobs. Management, since the Mayor is the CEO of a $60 billion multi-function enterprise, the City of New York. Policy, because in combination with the City Council, State Legislature, Governor, and other local officials, the Mayor of New York City helps to determine the priorities and values of state and local government in New York. And Leadership, because the Mayor is a leader (one of many leaders in both the public and private sectors) of 8 million New Yorkers, with an ability to influence how they live and what they believe, above and beyond the role of local government to compel people to do or not do things. This post is on management.

Throughout this review, you will read about many, many examples of ways in which Mayor Bloomberg has been a great mayor of New York City, including some only those with experience in government are in a position to appreciate. But you will also hear about two disastrous, unjust, self serving, future-wrecking deals – deals with consequences that may be sufficiently severe to undo or exceed, over time, any and all of the good things Mayor Bloomberg has done. (The Mayor has done other, similar things, but has been able to reverse them at least in part; these are far worse and probably cannot be reversed). In recent decades, based on the decisions and non-decisions our elected officials have made, I’ve generally been able to follow a simple rule when voting: don’t vote for any NYC Democrats at the local level, don’t vote for any Republicans at the national level, and don’t vote for an incumbents of either party in the State of New York. The question I’ll have to answer by November 3 is whether to depart from that rule.

The quality of management is evidenced by the quality and extent of public services, relative to their cost. In New York City, and indeed anywhere in New York State, no one can make a case based on the cost side. The people and businesses of New York, year after year, decade after decade, are required to pay the highest state and local taxes, as a share of their incomes, in the United States, save (sometimes) places like Alaska and Wyoming, where most of the revenues come from energy production taxes not people or businesses. If we have unmet needs or inferior public services in New York, no one has the right to say the people of New York are to blame, because they haven’t paid enough.

Yet that is the excuse often given by the state’s public employees and contractors, represented by its public employee unions and organizations like the Greater New York Hospital Association, Local 1199, the construction unions, and the Building Industry Association of New York. They are monopoly, and are able to use the coercive power of government to force people to pay for services may or may not be fairly priced. And their members are absolutely ruthless in return, seeking the best deal when they voluntarily spend their own money, on imports, on businesses that provide more for less by denying their workers pension and health benefits, on residence outside New York City where taxes are lower and public services are better, followed by retirement to Florida.

They have a choice. The rest of us do not. They have power in Albany, where law after law is passed giving them more, and allowing them to provide less in return. The rest of us have none. And they use some of their wealth on propaganda to convince people they are something other than what they are, even claiming to represent the interests of sick people, school children, transit riders, etc. – which is like Exxon claiming to represent the interest of gasoline buyers rather than sellers. Even if a majority, a substantial majority, or even 90 percent of those they purport to represent are decent and well meaning people who try to do right by others on the job, we should not expect them to be other than what they are for reasons I explained back in 2006.

There is, therefore, a moral dimension to management as well as a technical one, but lets look at the technical issues first.

The Bloomberg Administration is to be praised for having an understanding of productivity – which is how much actual work someone gets done in a given period of time. Other politicians with an interest in the subject have falsely believed that forcing public employees to goldbrick for longer hours is productivity, that cutting their pay is productivity, or that cutting their benefits is productivity. All may or may not be justified, based on what public sector workers and contractors are getting and what they are demanding of the rest of us in return. But productivity is something else, and that is what they produce.

And most public employees are in a position to produce a great deal or little or nothing, depending not only on their abilities – which the morbid civil service system purports to measure – but also their attitudes, which both the unions and public management generally work to destroy. Imagine five levels of attitude – “on a mission,” proud professional, just a job, “not my job,” and “beat the system.” Working in government tends to knock people down one level a decade, and those coming in tend not to be on the highest rung to start with.

The Bloomberg Administration has been willing to raise pay – the one form of compensation that affects attitude in the short run, up front cash – in order to increase productivity. And, in the face of fierce opposition backed by our state legislature, which always believes we suckers have it too good, it has attempted to measure productivity directly. Low cash pay does nothing but inflate the cost and diminish the quality of public services. This is something that many of those who call for it, such as the Citizens’ Budget Commission, seem not to understand.

The Bloomberg Administration has also demonstrated an understanding that a sense of entitlement tends to take hold in organizations over time, whether those organizations are public agencies, private contractors, or non-profits. A new agency or government program is often characterized by idealism, but over time the motivated founders are gradually replaced by “just a job” careerists followed by those out to beat the system. Once a culture of entitlement has taken hold, it can be almost impossible to turn around, as those in an organization think about what they are getting as “rights” and what they are giving in return as unfair annoyances. That government funded agencies and contractors force people to give them money up front in taxes, rather than having to convince people to give it to them voluntarily, makes this inevitable.

The Bloomberg Administration has responded with a series of shake-ups, with work taken away from public employees and given to private contractors, and work taken away from private contractors and turned over to public employees. Each such shake-up has risks, short-term costs, and short-term disruption. But in each case the result has been the replacement of one set of workers and managers that thought the rest or us had it too good, by another that believed it had to do better.

Our other “elected” officials don’t really care about the need for such shake-ups at all. What they do care about is campaign contributions and political support, which generally come from the producer interests. Those who get money from would-be private contractors call for more privatization; those who get money from public employee unions call for work to be done in house. But the rest of us have been ripped off by unions and contractors alike. The Bloomberg Administration has shown the ability to shift from one to the other in search of a better deal.

Some have noted the Mayor’s loyalty to his public sector managers, some of whom have become lightning rods for criticism, or have implemented changes that have turned out to be fiascos. Based on my knowledge of public service, I approve. Traditionally one is never criticized for what they don’t do in government, only for what they do. The safe route for the “just a job” crowd, therefore, is a non-decision to do nothing, and a gradual slide down the easy path of institutional decline. Entropy.

The Bloomberg Administration in contrast has pushed its managers to make changes, including those that impose costs and disruption in the short run but provide benefits in the long run. In some cases mistakes have resulted, but that is inevitable, and not a valid reason for criticism, as long as the mistakes are reversed. Public sector management is not a career I was willing to seek myself, and not one that I would wish on my worst enemy. Empowering managers to do things, and holding them accountable for their non-decisions not to do things, has been a refreshing change.

This is particularly the case with regard to information technology. Little is more expensive, disruptive, and likely to fail than the purchase by a government agency of a new information system. The “lowest bidder” method of selecting a contractor almost inevitably leads to paying less (but still a great deal) for nothing; other methods attract vendors who are better at working the government for outsized profits than delivering something that works. Even in the private sector information technology projects often fail; even when they succeed they are expensive and disruptive in the short run. But the payoff in long term savings and service quality can be huge.

To our pandering pols, short-term costs and disruption for future advantages is an irresistible opportunity. Few remember who it was that got their name in the newspaper opposing the replacement of the subway token by the Metrocard, thus making it a free shot. More recently, the Department of Education has been driving everyone crazy, screwing everything up, and spending lots of money to implement a new information system. A system with bugs. A system everyone is having to learn to use at once. Major modifications have been made in response to the system’s failings. DC37 has made a public issue of the cost of the computer consultants hired. And my child has been marked absent repeatedly for classes she I fact has attended, due to system implementation problems. But if the DOE gets over this hurdle, and its employees cooperate to make it work, then getting rid of it will eventually be as popular as getting rid of the Metrocard or 311.

So the Mayor has done a great job? No.

One of the worst aspects of public service is the constant push by the public employee unions to increase the amount of money going to those who do not work, and reduce the amount of money for those who do, resulting in higher taxes, worse services, and bad attitudes. The Holy Trinity is sick leave (when you aren’t sick), overtime to do work that could have been done in one’s normal work day, and rich pensions after short careers. All to be paid for by lower cash pay for those with new seniority, particularly new hires. That low starting pay combined with early retirement means for the most part public service only attracts those who, from their first day on the job, look forward to not working. That low pay means many public employees feel fully justified in doing less, and resentful of those they are working for. The rich pensions are considered an entitlement, not something to be grateful for, or something that one owes those less well off in exchange for. Can anyone point to one statement by any union leader that even hints at such gratitude?

The unions have succeeded in pushing through a series of “screw the newbie, flee to Florida” contracts. One recent strike against the rest of us was having the state legislature pass, without a single “no” vote, and Governor Pataki sign a massive retroactive pension enhancement that public employees neither worked nor bargained for in 2000. For from feeling grateful and doing a better job in return, many of the beneficiaries were already retired. Based on an assumption of a historically unattainable rate of return from the peak of a financial bubble, our so-called leaders told us that it wouldn’t cost anything. Ever since the cost of pensions has been soaring, taxes have been higher, and public services have been cut.

This is the situation that Mayor Bloomberg inherited. Rather than directly confront the unfairness of the 2000 deal relative to the situation of most New Yorkers, who have no pension at all, and demand that those who benefitted give something back, Bloomberg cut the easy deal and gave the unions what they wanted, what they always want. In exchange for a raise for those about to retire, further increasing their pensions, Bloomberg agreed to cut the starting pay for most city employees (those represented by DC37) by 15 percent, and police officers and firefighters by 40 percent, to $25,000. Property and sales tax rates are also higher than they were when Bloomberg was elected, and yet there are fewer public employees on the job.

This deal to cut starting pay relative to finishing pay undid the result of a 12-year fight by former Mayor Koch to improve the quality of public services. I was working for NYCT at the time, and told the local DC37 rep that if there was any justice in the world, not only would future city workers screwed by the deal eventually vote to decertify DC37 and thereby cause everyone working for the union to lose their job, but also if the quality of workers who could be attracted fell off due to lower starting pay, every single function now done by a DC37 worker should be contracted out, costing everyone they represent their job as well.

When the damage became clear – when the city was no longer able to attract qualified police officers – Bloomberg blamed an arbitrator’s decision. But there was no arbitrator involved in the DC37 and fire contracts. And, no surprise, when the Bloomberg Administration sought to increase starting pay in the next contract, the police and fire unions demanded that it be kept low, and that the pay of those eligible to retire be given the majority of the money available for raises instead, purportedly to give them an incentive to stay on the job. Perhaps taking Bloomberg for a sucker who would not realize that all this would do is inflate the size of their pensions when they retired anyway. Bloomberg did get his starting pay cuts reversed, but only partially, and only after several years. So for a couple of decades New York City taxpayers will end up paying $250,000 in wages and benefits for the best firefighters and police officers $25,000 can buy.

Bloomberg arrived in the middle of that “screw the newbie, flee to Florida” cycle. What is worse, far worse, is that in the past two years he has created one all his own, one likely to devastate the public schools for decades. I’ve probably written enough posts objecting to the early 2008 deal to allow existing teachers to retire at age 55 after working for just 25 years, to be paid for by cutting the cash take home pay of future teachers by (so far) 5 percent and gutting the schools themselves (over the next two years). In response to my objections, one commenter said that he admitted the symbolism of that deal is terrible. But I’m not concerned with the symbolism, but rather the effect. Why? Pataki, Bruno and Silver might lie and say they didn’t remember the effect on public services of all the pension deals passed in the Lindsay era of the 1960s, and the subsequent cuts in pay and benefits for future government workers. But could Bloomberg really claim not to remember his first term?

If anyone should have known better, it is Mayor Bloomberg. Can you imagine him signing a deal at Bloomberg LLC to allow his existing employees to walk out the door with a pension seven years earlier, and pay for it by slashing the pay of the workers the company will need to hire in the future to provide a quality product at a fair price? Never. He clearly acts differently with his fortune than with our future. Why did he do it?

Let me quote this overview of a previous cycle for background. “After teachers strikes in 1967 and 1968, and a bruising battle over the decentralization law a reviled mayor negotiated Tier 1 … a 25/55 (years/age) pension plan. Politics makes strange bedfellows (and strange bedfellows make for funny politics … but that’s a topic for another blog). Lindsay wanted to run for president and didn’t want the UFT, with many retirees in a key state, Florida, campaigning against him: the result was Tier 1. As Dave Wittes, the ‘father’ of Tier 1 walked out of the signing ceremony in Governor Rockefeller’s office he leaned over and whispered to my wife, ‘They have no idea .. this is going to cost them a fortune.’”

I have no idea if this poster knows what he is talking about, or who he is, but I do know three things. First, the quality of public schools in the 1970s, 1980s, and 1990s, in which the majority of the city’s children did not even receive an education, was by its standards a “win” for the UFT. That is what it is seeking to replicate. Second, Mayor Bloomberg wanted to run for President. And third, Mayor Bloomberg has restored Tier I for teachers, but has not really started cutting the amount of money from the schools that will be needed to pay for it. Meanwhile, the meter keeps running.

That is the Mayor’s record. What about Bill Thompson?

He was the Comptroller, in charge of the pension funds, when this deal was cut. Did he object? Did he say anything? No. If he had objected, he would have my vote without question, but he didn't object then, and he isn't objecting now.  Neither does he object to the idea that younger generations should be sacrificed to pay for what his generation has taken.  What he did do is listen to the sharks of Wall Street, who told him that the city could get a high enough return to provide even more pension benefits for his union friends, if he would just shift some of the pension money into hedge funds that charge higher fees at the city’s expense. As a result we have been robbed, to an extent now only partially known. As I said when I read about this – kiss our assets goodbye.

And there is no doubt that, faced with a budget crisis, a Mayor Thompon would be equally grateful for the help, and trusting of the motives, of his union friends. For a few work rule changes that restore workers’ dignity, they’ll be willing to accept a pension incentive to allow expensive senior workers to retire even earlier, and lower pay and benefits for new hires. Just like the deals former Mayor Dinkins signed to give teachers the right not to have principals see what they were and were not doing, and cutting the time they were required to work. Down at the local elementary school, one teacher decided to stop teaching math because he didn’t feel like it, a parent told me. Dinkins later fired those who negotiated those deals, once it became clear the effect on public services, but it was too late.

Thompson seems like a nice guy, and has said some thoughtful things, but those he will be dealing with are neither nice nor thoughtful. I’d expect him to be robbed on our behalf, reducing the quality of public services and increasing taxes even further. When taxes reach the point that jobs begin to flee, it is public services alone that will bear the brunt, not the political class, who will give back nothing.

This is what I would expect of Bill Thompson, or anyone like Bill Thompson, or anyone supported by the same interests as Bill Thompson. That’s why I never vote for NYC Democrats. But I expected better from Mayor Bloomberg. Rather than an A, I’ll give him a C+, which might become a D once all the effects of 25/55 manifest themselves.