Municipal government is the largest employer in New York City, employing almost 300,000 people to provide the services on which businesses, residents and visitors rely. This is an expensive enterprise: personnel costs, including salaries, health insurance and pensions, make up more than half of the City of New York’s $72 billion budget.

The overwhelming majority of the public workforce is unionized, and the unions negotiate multi‐year contracts with the city that provide salary increases and specify terms of employment.  As of July 2012, all labor contracts have expired; some expired as long ago as 2009.

It has not been uncommon in the city’s history for municipal labor contracts to be expired for longer than a year; there is little pressure to reach a new agreement as soon as the old one expires. Under state law, the terms and conditions of an expired contract continue to apply until a new contract is agreed upon: work rules remain in effect and any bonuses or payments based on seniority or performance continue to be provided. In addition, when new agreements are reached, newly negotiated raises are provided retroactive to the effective date in the contract.

This time, the stakes for settling the contracts are exceptionally high. Mayor Bloomberg proposed a three‐year wage freeze in labor negotiations; while no union accepted these terms, the reserves set aside to pay for modest raises were eliminated from the city budget. This means the City could be forced to pay for any raises for past years from its current operating budget, in one lump‐sum.

It is unlikely that any of the contracts will be renegotiated during the remaining months of Mayor Bloomberg’s term in office. The next mayor will bear the responsibility for resolving them– and taxpayers will bear the costs, which could reach billions of dollars.