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Testimony From Howard Glaser

Testimony From Howard Glaser

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Published by: jspector on Mar 02, 2011
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Testimony on the 2011-12 Executive BudgetBefore the Joint Legislative Public Hearing on 2011-2012 Executive Budget Topic:WorkforceHoward GlaserDirector of State OperationsMarch 2, 2011
Chairman DeFrancisco, Chairman Farrell, and members of the Committees. My name is HowardGlaser, Director of State Operations. I appreciate the opportunity to appear before you and tooffer testimony on Governor Cuomo's Executive Budget for 2011-12 with respect to matterspertaining to the State workforce. I am joined today by Gary Johnson, Director of the Governor’sOffice of Employee Relations, and Patricia Hite of the Department of Civil Service.I am also joined this morning by two experts who the Governor is announcing today will helplead the administration’s effort to work with our labor partners on achieving workforce savings.Many of you know Joe Bress, one of the State’s most distinguished public servants. Joe hasserved as Director of the Governor’s Office of Employee Relations, and Chair and ExecutiveDirector of the NYS Ethics Commission. After leaving New York State, Joe served for the past15 years as Vice President for Labor Relations at Amtrak. We are gratified that he has agreed tocome out of retirement to take on one more challenge here in NY.Todd Snyder is a Senior Managing Director at Rothschild, and co-head of Rothschildsrestructuring and reorganization group. He is among the nation’s leading reorganization expertsand in that context has industry leading experience negotiating labor related restructuringagreements. He advised the Bush and Obama administrations on the restructuring of the autoindustry, and he has represented United Airlines and dozens of other companies their workouts.Given that, as Governor Cuomo pointed out in his budget presentation, New York State is“functionally bankrupt”, Todd’s expertise will bring a valuable perspective to the restructuring of our state’s labor agreements.Let me state at the outset that Governor Cuomo and this administration have the utmost respectand appreciation for the over 180,000 executive branch employees who serve the people of thisstate day in and day out. From correction officers to motor vehicle clerks to food inspectors andeverything in between, our state employees are key to the delivery of vital services to NewYorkers. And it is in that spirit that we approach the challenges of the 2011-12 budget.One of the fundamental principles of the Governor’s budget is to redesign and reinvent our stategovernment with the goal of improving services while producing cost savings. We are seekingbetter performance, not simply looking to fill a budget gap. We believe that our workforce andtheir representatives can be and will be an important source of ideas and solutions to thechallenges that we face.And those challenges are significant -- there is no path to fiscal stability that does not take intoaccount the resources we expend on the workforce. Labor costs are a significant portion of statespending, comprising almost 20% of general funds expenditures, or about $12.5 billion annually.And these costs have been rising rapidly. The average compensation and benefits for stateemployees has increased 14% during the past three years even while private sector wages in NewYork State dropped 8.8% from 2008 to 2009 alone. The average compensation (for wages only)
for state employees today is $67,200.00. That far outstrips the average New York income of $46,957. The “all-in” compensation for state employees --including benefits-- today stands at$99,745.Over the past decade we have seen generous across the board increases: iin wages --up 38%--, inhealth insurance benefits -up 100%-, and in pension benefits--up 382%. As with much in thestate’s spending habits, this growth is simply unsustainable.At these levels, there can be no serious attempt to solve the state’s $10 billion deficit withoutaddressing workforce spending. Nonetheless, recognizing the critical role of the workforce, weare working hard to wield a scalpel, not an ax, on labor costs. The Executive Budget reflects that,with early agreement by employee representatives, we can hold workforce cost reductions to$450 million. This amounts to about 5% of the $10 billion deficit, even though workforce costsamount to 20% of the general fund budget. And the $450 million itself amounts to only aboutone-third of the projected reduction in of $1.4 billion in state operations. A significant reductionin state operations is expected to come from $485 million in non-personal services reductions incontractors and consultants to supplies and other efficiencies, not in workforce savings. In fact,today, we are taking a major step in the reduction of the costs of contracting. I am pleased toannounce that today Governor Cuomo is issuing an Executive Order which will reduce the costof personal services contracts used by New York State agencies by 10%. Under the Order,agencies will be permitted to renew consultant contracts only if the contractor agrees to thereduction. This action reflects the Governor’s philosophy that we must reduce costs and increaseperformance in every area of state operations.We are confident that working together with the State’s labor representatives, the targeted $450million in workforce savings can be achieved without resorting to layoffs. I want to emphasizethat our approach is one of constructive engagement with the workforce in determining how toachieve these savings. We have already begun discussions with the public employee unions todiscuss the areas of cost reductions.The Administration believes there are many options to effect the necessary savings on arecurring basis without resorting to the estimated 9800 layoffs that would be necessary toachieve $450 million in savings if our efforts at constructive engagement fail.Let me give you just a few illustrations of how realigning New York’s approach to workforcecosts can avert layoffs.New York State employees contribute a smaller share towards their health benefit coverage thanpublic employees in other large states such as Massachusetts, Colorado, California andMichigan. State employees contribute significantly less than Federal government employees for health benefit coverage. If NYS were to adopt changes to bring health care contributions in linewith these levels, that action, in and of itself, could avert over 7500 layoffs.The health care plans we offer our employees cost too much and deliver too little. And theseplans often diverge from the structure of non-public health plans. For example, in New York, astate employee who is a smoker pays the same premium as a non-smoker, essentially subsidizingbehavior that is unhealthy for the employee and costly to the state. If New York makes sensibledesign changes within the health plans, such as addressing co-pays and deductibles andincentivizing healthy choices, we could avert over 5500 layoffs.And although the state budget anticipates a zero percent increase in base wages, many stateemployees would in fact see increases over their base salary through longevity and “step”

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