The magnitudes are different in Boston, but the similarities with the problems in Chatham are striking.

Backed by a unanimous vote of the Chatham Board of Selectmen, Chairman Sean Summers, taking a cautious look ahead at the sinking economy and the black predictions for fiscal years 2010 and 2011, proposed that town and school employees accept a voluntary freeze in compensation for 2010. Such a move would go a long way to avoiding layoffs if in fact the bad times continued and deepened.

Mayor Menino of Boston made the same plea to his employees The non-unionized and some small unions agreed to do as the mayor asked, but the large, powerful unions such as police fire and schools so far have said no. Chatham is in the same situation; the fire union has said no and the school and police unions didn't even bother to reply. The non-union workers did agree if layoffs could be avoided.

Sam Tyler, who has served as the Boston watchdog for decades now, explains why this sensible move is the best hope of avoiding layoffs. Read it and think of Chatham.

Unions should agree to city wage freeze

By Samuel R. Tyler, President, Boston Municipal Research Bureau
Boston Globe
March 4, 2009

FACED WITH the certainty of significant local aid cuts starting in July as well as the decrease of selected city revenues, Boston Mayor Thomas Menino called upon the unions to help save jobs and protect services by agreeing to a wage and step-increase freeze in fiscal 2010. Full compliance of this request would save approximately $55 million in increased expenditures.

Five small unions have agreed to the freeze, but the larger unions want a pledge of no layoffs or would rather push for new revenue sources. School unions hesitate, thinking that federal stimulus funds for school operations will preclude the need for substantial layoffs. The mayor cannot promise no layoffs given the magnitude of the budget gap in fiscal 2010, the uncertainty of new local revenues, and the nature and restrictions of the stimulus funds.

This year's city budget totals $2.4 billion, and 70 percent of the budget is tied to employee expenses. Boston officials originally estimated a budget gap of $140 million for fiscal 2010 based on increased spending and limited revenue growth. Savings from the city's hiring freeze and lower health insurance premiums along with prudent use of stimulus funds would still produce a gap of over $100 million that would require the layoff of hundreds of employees.

Even with an expected increase in property tax revenue of $61 million next year, revenue growth will be limited by state aid cuts and reductions in city revenues closely tied to the economy, such as interest on investments, motor vehicle excise, and building permits.

The biggest spending increase next year is $55 million in collective bargaining costs for salaries and step increases. Salaries for employees are to increase next year by 2.5 percent or 3.5 percent depending on the union contract. Employees not at the maximum step in their salary schedule will receive a step increase that generally adds 4 percent in addition to the contract salary increase.

Controlling spending in other budget accounts is more difficult to achieve in the short term. Spending for health insurance, pensions, debt service, and state assessments primarily for MBTA services and charter school tuitions is expected to grow by over $60 million in fiscal 2010.

A few union leaders have suggested that they will support new municipal revenue sources in lieu of a wage freeze. Yet the governor's local aid budget for next year already assumes $150 million in funds from a new 1 percent meals tax and 1 percent hotel room occupancy excise, of which Boston would receive $27 million. However, the Legislature's consideration of a gas tax to address state transportation needs could influence its willingness to also approve a statewide meals or occupancy increase.

Public-sector budgets are labor intensive, and when spending needs to be cut quickly, reducing the workforce is the first option by necessity. That was the case during the last downturn in fiscal years 2003 and 2004 when Boston's state aid was cut by 8 percent and the city reduced its employee level by almost 9 percent or 1,515 positions.

What will make this round of employee cuts difficult is that 88 percent of the 1,209 employees added to the city payroll since 2004 were in the school, police, and fire departments. The city's largest departments are too big to not play a central role in reducing workforce levels.

Cutting spending next year also will be more difficult because a few tools used last time will not be available. For example, an early-retirement incentive in 2002 enabled Boston to reduce its workforce by 476 positions but it added $62 million to the city's pension liability, which cannot be repeated.

City reserves will be used next year but they must be applied judiciously since Boston will face equally serious budget challenges in fiscal 2011. One-time federal stimulus funds for school and police operations should be targeted to provide long-term benefits in areas like technology and not to artificially prop up employee levels only to be cut in two to three years when the stimulus funding stops.

The city should continue to pursue service efficiencies and consolidations to generate savings over time, and the state should provide municipalities with new tools to support this effort. Even so, employee reductions will be the city's primary means of reducing spending, which is why the unions should do their part to save hundreds of jobs by agreeing to a wage and step-increase freeze starting in July.

In Chatham all public employees are scheduled to get raises higher than those in Boston. As in Boston, full-time public employees already get more in compensation than what half or more of the local population lives on.