Deferrals to gain modest savings

Written by Charlie Johnson

Thursday, 02 September 2010 13:32

Around 11 percent of 2010 concessions will be permanent

The blow of deferred 2010 spending could still be dizzying for Harrison starting in 2012, but permanent savings from two pieces of the union concession package should help the town, at least to some extent, maintain fiscal balance going forward.

The vast majority of the $1 million the Town of Harrison asked its union employees to give up in 2010 to avoid layoffs was never designed to provide long-term savings for the town.
Most of the 2010 concession options offered to union members were intended only to help the town stay on track in 2010, while town officials hope that conditions will have improved by the time the deferred payments are required in 2012, 2013 and 2014.

However, two elements of the negotiations will be providing the town with a combined permanent savings of over 11 percent of the concessions offered for 2010.
Each union member was given a dollar figure that he or she had to give up for 2010 from his or her salary and benefits. Several options were provided to achieve this obligation, including deferrals of clothing allowances and step increases until 2012 and unpaid leave, essentially a permanent monetary concession in exchange for extra time off.

According to Harrison Comptroller Maureen MacKenzie, the town will see $47,161.54 in savings that it does not have to pay back as a result of employees who opted to make some or all of their obligatory concession by taking unpaid leave in 2010.

Of 266 Harrison employees, 15 opted to make their contributions entirely through the unpaid vacation, while 10 others combined unpaid leave with a partial deferral of other compensation.

MacKenzie wanted to be clear that the leave being taken by workers would not result in additional costs to the town. “They had to make sure for scheduling that it didn’t conflict with other people’s days off and that the department could run without incurring overtime,” she said.

A second area where permanent savings were achieved was in the town’s annual payment to the Teamsters Welfare Fund. In negotiations, the union agreed to absolve the town of 75 percent of its 2010 obligation to the fund, which pays union members’ dental and vision benefits in lieu of a specifically town-sponsored insurance plan.

The decision of the local union to lift most of the town’s 2010 obligation to the fund essentially lowered the amount of deferred pay required from each of its members. The union, according to MacKenzie, was still able to provide the dental and optical benefits to its members for 2010. The portion of the town’s usual contribution not paid in 2010 was $64,837.50, which was included in the $1 million savings to the 2010 budget, and which, like the unpaid vacation savings, will not have to be repaid in 2012, 2013 and 2014.

The two permanent savings categories together total nearly $112,000 of the million dollars that the town will not have to pay back.

Although on paper, permanent savings are still a small portion of the deferral package, Harrison Councilman Joseph Cannella (R) said that the agreement reached with the unions precluded a larger financial hit to the town.

He argues that the police and fire unions, which have the right to go to arbitration in the event of a contract dispute, might have gained significant concessions in the process, leading to added financial stresses for the town going into the upcoming years.

“The fact that police and fire did not go to arbitration was a very material gesture on the part of the unions,” said Cannella.

He also noted that the precedent has been for the town to operate on a reciprocity principle – giving the same increases across the board to all its unions. Had the town decided to honor this tradition after police and fire went to arbitration, Cannella argues, the financial hit could have been huge.

As the deferral package was a necessary means to keep the 2010 budget afloat, the 2011 budget, which is not aided by a similar savings package, faces a significant hole.

However, town officials are confident that new negotiations will lead to lowered insurance costs for Harrison.

“We are working with POMCO [the administrator of the self-insurance plan that covers the Town of Harrison] and the unions to work on lowering our costs,” said Harrison Mayor Joan Walsh (D).

As the town continues to look to cut spending, the permanent savings from 2010 will be a factor, if not a game-changer, in the 2011 budget process which is already underway.

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