Municipal government is a labor intensive activity. The City of New York and its related agencies have more than 362,000 full‐time equivalent employees; of the City’s $63 billion annual expense budget, more than 57 percent, or $36 billion, is allocated to employee compensation. Using this money effectively is critical to the City’s fiscal health and efficient service delivery.

Like most workers, municipal employees receive their compensation in a variety of forms. In addition to a salary or wage, they receive fringe benefits such as employer paid social insurance taxes, employer contributions for health insurance premiums and employer contributions to pension funds. Fringe benefits represented nearly $12.7 billion in fiscal year 2009 and are projected to be nearly $13.8 billion in fiscal year 2010. The latter sum is equivalent to about 38 percent of total compensation costs and about 62 percent of salary and wage payments.

One significant, but not well understood, fringe benefit is employer contributions to union welfare funds. These City payments are now $1 billion annually. Yet, as this report indicates, these payments serve neither the City nor its workers well. Equivalent or better benefits could be provided for less money by using different arrangements; reforms could yield a “win‐win” situation in which workers are better served and taxpayers save money.