The Independent Budget Office has crunched the numbers on the UFT's Paid Parental Leave and DC37's more expansive Paid Family Leave. Thank you budget expert Harris Lirtzman for sending this report to me.
The IBO conclusion: DC 37's Paid Family Leave should be cost neutral for the city while the city should net a $9.5 million surplus from the UFT deal. That surplus will be paid for by UFT members.
This is taken right from the IBO summary:
IBO estimates that under the deal with the United Federation of Teachers cost and savings will not be equal. We project that in the first year deferral of raises will save the city more than $45 million while the de Blasio Administration estimates the delay will save about $36 million.
We agree with the estimates by the Mayor’s office that pension and other fringe benefit savings tied to the agreement will save the city about $15 million annually.
While the de Blasio Administration projects the cost of parental leave for teachers’ union members will be about $51 million a year, we estimate the annual cost will be about $46 million.
As a result of our differing savings and cost projections, IBO estimates the city will garner over $9 million more in savings than necessary to pay for the teachers’ parental leave and the union’s welfare fund will accrue a surplus of more than $5 million.
The cost to the city for parental leave is fixed under the terms with the teachers’ union, and effectively zero for the deal with District Council 37.
How does the IBO reach their conclusion?
This is from their detailed analysis:
IBO estimates that the UFT’s parental leave benefit will require $45.6 million to be paid out each year by the UFT Welfare Fund, a figure that includes the cost of managing the program. With the city providing $50.8 million to the UFT, we project that the welfare fund will have $5.2 million left over after the first year, surplus funds that can only be used for parental leave. The UFT’s members paid for this benefit by delaying a pay increase for two and a half months and by structuring the PPL benefit in a way that reduces the city’s pension obligation. The de Blasio Administration estimates that delaying the pay increase will save the city $36.0 million and values the pension savings at $14.8 million—combined savings equal to the $50.8 million the city provided the UFT.
Based on the pattern of wage increases set by the new DC 37 contract, however, IBO projects that delaying the pay increase will save the city $45.5 million, which—together with the pension and other fringe benefit savings—means that the city will save a total of $60.3 million. (Note: do not confuse the $45.5 million IBO estimates the city saves from delaying the pay increase with the $45.6 million we estimate will be paid out in benefits.) After subtracting the city’s $50.8 million payment to the welfare fund, the city would retain a surplus of $9.5 million.
To put it simply, IBO is estimating the savings based on the raise that DC37 was about to agree to with the city in June that UFT members will now have to wait another 2.5 months to receive because of the extension of our current contract.
Am I to understand that UFT President Michael Mulgrew had no idea what the DC37 settlement would be when he was negotiating Paid Parental Leave?
Let's go to the IBO conclusion:
The de Blasio Administration and UFT have stated publicly that paid parental leave would cost $50.8 million in benefits and administrative expenses, funded through UFT members’ concessions on wages and fringe benefits. Based on our estimates, IBO projects that this new policy will not be cost-neutral. We project that the city will accumulate $9.5 million of savings annually while the UFT will accrue a surplus of $5.2 million a year in its welfare fund.
Meanwhile the union membership, through a deferral of their contract, will have given up $45.5 million in wage and fringe benefits.
UFT members deferred a raise to get Paid Parental Leave but part of that deferral won't be needed to pay parents. Therefore, each member will be donating an estimated average of about what I would say is around 95 bucks to the city coffers as part of the deal. Thank you Michael Mulgrew.
Bottom line from IBO analysis: city wins, UFT membership loses. So what else is new?
This loss, while not huge, was easily avoidable by just using an updated set of numbers.