Read the original op-ed here.

New York state has just authorized New York City to offer most civilian employees an incentive to retire early. The city should flatly reject this opportunity. Why should the city spend money to save money—especially when up to one-third of the money would go to people who would retire anyway and the city’s partial hiring freeze already is working to shrink the size of the workforce?

The early retirement incentive would induce employees to retire by increasing their pension benefits either by crediting them with extra years worked or eliminating the pension reduction usually taken when an employee retires before they are 55 years old with 25 years of service.

On average, the retirement incentive would cost the city $110,000 for every person who takes it. That totals $110 million for every 1,000 employees, which would be spread over 4 years.

Importantly, the city would likely give the incentive to employees who would retire anyway. CBC found that about one-third of those electing the state’s 2010 early retirement incentive would have retired without it. Some city employees right now are making the very rational decision to delay retirement in case they will be offered an incentive; others will just move retirement up a year or two. Paying people extra for what they would do anyway makes no fiscal sense.

Also, there is an alternative strategy to reduce the workforce that literally is …. free! Roughly 20,000 people leave city government employment each year. The city can shrink its workforce by selectively refilling vacancies created by departed employees. Managing natural attrition like this causes much less pain than laying off staff and is much less costly than paying them to leave.

The city in fact is doing this well already.

The city’s workforce had grown to 327,110 full-time and full-time equivalents at the end of September 2019, an increase of 33,560 since its most recent low point in June 2012, and 16,092 higher than the June 2008 peak prior to the Great Recession.

Since then, however, the city’s partial hiring freeze—refilling one or two out of every three vacancies—shrunk the workforce by 14,860, to 312,250 in February 2021. Fortunately, the substantial infusion of federal aid provides time to significantly slow down any desired further workforce reductions.

Assuming a reasonable target workforce size is around 310,000, close to what it was in fiscal year 2016, the city could shrink to this over the next two years by strategically hiring to meet service needs and phase in organizational changes that improve quality and productivity. This will go a long way toward addressing the city’s underlying fiscal challenges that again will emerge when one-time federal aid is depleted. Improving the city’s operating efficiency with some modest additional workforce reductions can stabilize the city in the long term while preserving its ability to provide quality needed services.

Admittedly, an early retirement incentive could achieve this 2,250 position reduction more quickly and with better targeting than leveraging attrition. But these small benefits are radically outweighed by the nearly $250 million cost that the city would incur.

Make no mistake, the retirement payoff is not an alternative to layoffs. Not only are layoffs not planned nor needed, in exchange for municipal unions agreeing to let the city delay payments to workers and benefit funds by nine months, the de Blasio administration has guaranteed no layoffs through June 2022, since the city will get at least $5 billion in additional federal aid.

The real threat now is that the fiscal relief of the federal fund infusion gives rise to a city rehiring spree. It is not needed and in the long run would be fiscally destabilizing. The city has a fiscal glide path; it should use it.

The city is poised to recover, an effort helped in the long run by managing city finances and services well. Offering an early retirement incentive—needlessly spending taxpayer money—when the city can achieve the same goals much cheaper would be foolhardy. Manage services, finances, federal money and the government workforce well and the city will be in a much better position in the future to serve New Yorkers and weather any future shocks.