What the Unions Can Do

Bloomberg Could Save Millions If City Seized Slush Funds

The invisible empire of city-funded, union-run welfare funds costs over $820 million a year, the largest pool of virtually unregulated expenditure in Mike Bloomberg's beleaguered budget. These 104 different funds have nothing to do with vital medical, hospital, or pension plans. Instead they cover supplemental benefits like prescriptions, optical, dental, life insurance, and legal services, and, as an overview audit by City Comptroller William Thompson noted last June, "relatively few city guidelines govern them."

In the crunch that the city faces before the mayor unveils his executive budget on April 15, these funds are very much on the bargaining table. Jim Hanley, the salty 54-year-old labor commissioner who's served five mayors, is quietly talking to union leaders about consolidating this mishmash of funds, so often tarnished by charges of waste and worse, and letting the city administer them, as is the practice in most of the country. The economy-of-scale savings in administrative and contract costs could exceed $150 million and still, with a joint union-management board overseeing the new fund, preserve benefits for city workers.

"The answer is yes," Hanley said when asked if major changes might happen. "We're approaching it with a great deal of caution, but with an eye towards doing something. Some leaders would be happy to see us take over the costly prescription plans, as New York State has done. I am sounding out the more savvy negotiable people." The fact that such a switch was not one of the 21 proposed concessions Hanley gave the unions on January 31 may, ironically, underline its seriousness, since the list, which called for cuts in the city's contributions to the funds, so rankled labor.

Randi Weingarten, whose teacher-union fund provides real health benefits, is open to talking about structural change.
photo: Richard B. Levine
Randi Weingarten, whose teacher-union fund provides real health benefits, is open to talking about structural change.

Randi Weingarten, the teachers union president, who also heads the Municipal Labor Council, sees possibilities: "Sure, some kind of consolidation would be helpful. But the benefit structure from one fund to another is so different. How do you make sure that stays intact?" Norman Seabrook, whose Corrections Officers Benevolent Association (COBA) was the only city union to endorse Bloomberg in 2001, said, "I do think something needs to be done. Drug costs are skyrocketing and the unions are suffering. If we pooled our resources together and reached out to a single vendor, we'd get the best price on the East Coast. What they used to give me for a dollar, we might, together, get for 30 cents. If we don't do something about it, I don't want to be the one to tell my members that we can't cover your children." Kevin Sullivan, who runs the United Fire Officers Association fund, added: "The theory is good and I'd support the theory if the city could provide a benefit as good or better than the benefit the members get now."

A three-month Voice investigation of the funds, which receive per-member city contributions of up to $1928 a year, uncovered abuses so recurring and rampant they cry out for reform:

  • Forty funds provide staff or outside attorneys for a wide variety of personal matters, with taxpayers footing the bill, for example, for thousands of divorces, contested and uncontested, as well as visitation and custody battles. The largest fund, DC 37's, even offers "representation where you are the parent in a child abuse, neglect, or foster care case." The funds also do house closings, meaning the city is paying for its own employees to move to counties as far away as Orange in New York or Middlesex in New Jersey, and for partial-investment properties as large as three-family homes. Seabrook said his fund alone handled 390 divorce cases last year, and has over 400 active real estate matters right now.
  • City workers charged with crimes—off or on duty—are frequently represented at taxpayer expense, with some funds only handling arraignments but others, like COBA's, going all the way through appeal. Seabrook said that COBA made 663 criminal court appearances in 2002. Local 371, which represents welfare and other social workers, limits the service to Class-B felonies and cuts it off after "two Criminal Matters each calendar year," but COBA, the PBA, and others have paid for cases ranging from murder to the bloody assault on Abner Louima. In fact, the $2.3 million paid by the PBA to settle the lawsuit filed against it for participating in the Louima cover-up came from its city-subsidized fund. Incredibly, the same criminal and civil representation is often provided for spouses and dependents.
  • Prescription plans have per-member-family caps as low as $4000 a year and as high as a million, with some funds having no real caps or co-pays at all and even reimbursing the small co-pays members have to spend under the medical plan for visits to doctors.
  • Hundreds of millions in fund contracts are routinely awarded without competitive bidding or performance review, ignoring audits so sporadic that DC 37 went 20 years without one, while the scandal-scarred PBA had its last audit a decade ago. Hanley executes contracts with each fund, but says he has "no oversight function," no power to set or enforce standards in the services they provide. Alone in the pantheon of billions in city contracts, the agreements with these funds, as well as the business the funds do with vendors, sidestep Procurement Policy Board bid and performance guidelines.
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