The original op-ed can be found here.

New York’s recovery, economic competitiveness and continuing capacity to support its most vulnerable depends on making sure city services are high quality, efficient and affordable. That is why Mayor Eric Adams was spot-on to instruct agencies to identify 3% budget savings through a Program to Eliminate the Gap.

But PEGs are not the only strategy. Better managing of citywide functions such as fleet and space and working with labor to modernize work rules and benefits could provide more than a billion dollars in efficiency savings without sacrificing services. This way, the city can get the best value for what it spends and reduce the likelihood of future wrenching service cuts when a crisis does not allow time to plan or phase in.

On Jan. 10, the Office of Management and Budget directed agencies to identify savings in the current and future fiscal years by reducing spending on underutilized services and streamlining operations while not cutting direct services, raising fees or laying off staff. Agencies also were instructed to rightsize their budgeted headcount by eliminating some of the city’s 20,000 vacant positions.

PEGs were a routine feature of city budgeting and management from the 1970s fiscal crisis until eight years ago. During bad fiscal times, they identified needed savings. In good times they served as management discipline, forcing agencies to regularly review priorities and improve operational efficiency. The recent lack of focus on efficiency has allowed some PEG process muscle memory to wither. The preliminary budget in February will show how agencies meet the challenge—what savings are identified, how much is because of efficiency, and critically, how is recurring spending after fiscal 2023 reduced.

But agency PEGs are not the only tool. Opportunities abound to redesign time-consuming processes and leverage technology to reduce the cost and improve the quality of centralized city functions without cutting services.

In fiscal 2021, the city spent $1.3 billion to lease space, fully 72% more than in fiscal 2014. Not only may hybrid work reduce city space needs, but the city lacks adequate data to manage space effectively and its savings efforts, yielding less than $20 million annually, have been paltry at best.

Furthermore, streamlining the city’s lengthy and cumbersome procurement process to reduce the cost of large contracts just 1% could save $160 million. Greater centralization of procurement could save an additional $80 million. Commendably, the administration recently announced it would downsize the city’s fleet, which increased 14% from fiscal 2014 to fiscal 2018 before making efforts to reverse the growth.

Labor negotiations offer more opportunities to streamline services and reduce costs, which would help protect city employee jobs and provide resources to fund salary increases without opening budget gaps.

More than half of the city’s budget, $53.6 billion, funds wages, health insurance and pensions, among other fringe benefits. In negotiating the next round of contracts, the administration and unions should modernize employee benefits, eliminate outdated salary differentials, and change contractual work rules that impede efficient service delivery.

New York City municipal employee and retiree health benefits are far more generous than those provided by New York state and other government and private employers. Nearly all city employees (95%) elect health insurance plans with no premium contributions; large state firms require contributions of around 20%, and New York state employees contribute from 12% to 31%. Former Mayor Bill de Blasio took steps to reduce coverage costs with some important, if limited, success.

The city could save $675 million annually if city employees shared premium costs slightly below the level of state employees. Furthermore, consolidating the roughly 75 separate union welfare funds could save $160 million annually through administrative efficiencies and greater purchasing power.

The city and unions should modify some of the Citywide Agreement provisions for work hours, vacation and sick leave, overtime, and other benefits common across nonuniformed collective bargaining units. A thorough review would find opportunities to increase job assignment flexibility, extend the workweek to 40 hours for all employees (many work 35 hours or 37.5 hours), and alter vacation and sick leave accrual policies. Best this is done as the city considers other increasingly common benefit and work-life changes, possibly including hybrid work, family leave, tuition and training opportunities, and career paths.

Specific operations can be more efficiently run by changing antiquated provisions within many of the 100-plus collective bargaining agreements that the city renegotiates every three to four years. The next round of collective bargaining should set a productivity savings target for all bargaining units.

For example, lengthening sanitation routes so that trucks are full when they tip could save more than $120 million annually; this can only be done in negotiation with the union. Also, sanitation workers continue to receive an "efficiency" differential for operating a two-person collection vehicle—the standard operating procedure since the 1980s. This differential would be appropriate to continue only if it were tied to new productivity increases, such as one-person automated collection. Another example is the Absent Teacher Reserve, which keeps city Department of Education employees on the payroll after their positions are eliminated; the ATR should be time-limited, giving employees an appropriate opportunity and incentive to find new positions within the department.

The PEG is only one of the strategies needed to put the city on sound fiscal footing. Now is the time for the city to modernize and streamline central processes and improve services and reduce costs in conjunction with labor. Improving fiscal stability, service quality, the capacity to protect our most vulnerable, and the city’s competitiveness is the grand slam New Yorkers need.