New York City’s municipal workers have been leaving their jobs at a faster rate than they can be replaced, according to a report released by state Comptroller Thomas DiNapoli.
This staffing shortage could have widespread economic and social implications as it impacts on important city services and programs, the report released Monday shows.
Over the past two years, the city’s full-time workforce fell by 19,113, or 6.4%, the biggest drop in staffing since the Great Recession of 2008. While the city hired over 40,000 employees in the last fiscal year, more than 21,000 job vacancies remain.
“The pandemic caused a significant decline to the city’s workforce and it is particularly troubling that turnover continues to outpace hiring,” DiNapoli said.
The report said the high vacancy rate was driven by the city’s reduction in hiring in fiscal 2021 as well as a sharp rise in workers leaving their jobs during the pandemic.
The workforce decrease during the COVID-19 pandemic was found to be uneven across the 37 largest city agencies, with 11 departments seeing declines of more than 13%.
The largest drop was in the Department of Corrections, which lost 23.6% of its employees from June 2020 to August. DiNapoli’s report noted that while staff reductions at Corrections were planned, the pace was greater than expected.
These declines were followed by losses of 22.2% at the Department of Investigation and 20.5% at the Taxi & Limousine Commission. The Police Department saw a 6.7% drop, the Department of Social Services declined 13.7% and the Administration for Children’s Services decreased 15.6%.
This is not an uncommon occurrence, said Howard Cure, director of municipal bond research at Evercore Wealth Management LLC.
“It is common that under a strong economy with low unemployment rates, government agencies would experience an above average level of attrition,” Cure told The Bond Buyer. “There seems to be a number of ‘white collar’ administrative jobs, lawyers, accountants and auditors, that have experienced high attrition during a time when the city will compete with the private sector and other government agencies for employees.”
The city’s current financial plan looks to fill 24,969 positions by fiscal 2023, but the report called the goal “ambitious” given current attrition numbers.
In October, more than half of the city’s major agencies had external job postings of at least 20%, while other major agencies did not show any significant efforts to hire, the report said.
Divisions within Social Services, Education, Parks and Recreation, Homeless Services, and Mental Health and Hygiene had the highest rates of open positions.
“This means services for child support, early childhood education, park facility maintenance and help for the homeless and individuals facing mental health challenges could be disrupted unless more efficient means of providing those services are found,” the report said.
“There are also a large number of job postings for social service agencies including child services, homelessness services and health services,” Cure noted. “What has the impact been on the effectiveness in providing these critical services with these labor shortages? Also, I am not sure the level of seniority in regards to people leaving their positions, either for retirement or other jobs. What is the impact on providing services if more experienced employees are leaving?”
Cure noted that work-from-home may play a part in the current situation.
“The city had taken a relatively hard line in requiring employees to work in the office. Has the city lost employees to the private sector and other governmental agencies (state and federal) due to this lack of work flexibility?” he asked.
“Budget gaps loom and while the city needs to find efficiencies, it also must prioritize a clear understanding of staffing challenges at its agencies and be transparent about their potential impact on services,” DiNapoli said.
The city is one of the biggest issuers of municipal bonds in the nation. In the fourth quarter of fiscal 2022, it had about $38.8 billion of general obligation bonds outstanding. That doesn’t include various agency debt, such as the TFA or the Municipal Water Finance Authority, which have $44 billion and $32 billion outstanding, respectively.
The city’s GOs are rated Aa2 by Moody’s Investors Service, AA by S&P Global Ratings, AA-minus by Fitch Ratings and AA-plus by Kroll Bond Rating Agency. Fitch assigns a positive outlook to the city while Moody’s S&P and Kroll assign stable outlooks.
The city will soon release the first quarter update to its fiscal 2023 financial plan, or the November modification as it’s generally known.
Ana Champeny, vice president for research at the Citizens Budget Commission, said this year’s release will hold more importance than usual.
“While normally a technical update focused on reflecting actual trends to date, this modification is likely to be more substantial and informative due to Mayor Eric Adams’ call for a Program to Eliminate the Gap (PEG), a rocky economy with high inflation and danger of recession, and budget risks leading both city and state comptrollers and CBC to warn that future gaps could approach $10 billion,” Champeny said in a Monday report.
Three main things that should be taken into account when the revision is released — what happens to the revenue forecasts; how large are and what comprises the PEG savings; and how big are the budget gaps, Champeny said.
In addition to reflecting tax collections to date, which have been largely on plan, the Office of Management and Budget may make revisions to its revenue forecasts.
OMB doesn’t usually update the economic forecast in a November modification, but the CBC said that continuing to rely on an economic forecast from April, given current economic conditions, is increasingly risky.
In September, Adams instructed city agencies to identify efficiency savings of 3% in fiscal 2023, increasing to 4.75% annually in fiscal 2024 and beyond, to be included in the November financial plan.
OMB gave agencies specific dollar targets and the city expects to achieve savings of $1 billion in fiscal 2023 and $1.6 billion annually starting in fiscal 2024, Champeny said. The plan will detail these savings and whether the goals have been met.
In June, the city reported budget gaps of $4.2 billion in fiscal 2024, $3.7 billion in fiscal 2025, and $4.0 billion in fiscal 2026. However, these gaps did not reflect many budgetary risks, which may decrease revenues while increasing expenses.
Pension fund investment losses in fiscal 2022 will require the city to increase contributions by $861 million in fiscal year 2024, $2.0 billion in fiscal 2025 and $3.0 billion in fiscal 2026.
The gaps also don’t reflect city and federal fiscal cliffs — recurring programs that aren’t in the baseline and don’t have funding in future years. These programs could total $1.1 billion in fiscal 2024, rising to $2.5 billion in fiscal 2026.
“Additional significant risks come from a possible recession that could reduce tax revenues below forecasts and collectively bargained raises that could exceed the funds currently set aside, which would support 1.25% raises annually,” Champeny said.
City contracts are increasingly up for renewal, Cure said, asking will these labor shortages in certain departments pressure the city to provide more generous pay and benefit packages?
“Since labor is such an overwhelming cost to running the city, you have to look at how the city is positioned from a budget perspective,” he said. “While there are increasing monies in the Rainy Day fund, there are a number of unknowns that could have a negative impact on finances over the next few years and make it more difficult to deal with labor shortages.
“This includes, declines in the financial services industry due to market conditions and potential declines in bonuses affecting income and sales tax receipts as well as pension liabilities, property tax reassessments, particularly in the commercial/office building space where employees have still not returned in anything close to full force, general inflation levels and its impact capital costs,” Cure said.