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# The Fiscal Significance of Mamdani’s Union Contracts
- URL: https://www.vitalcitynyc.org/union-contracts-mamdani-budget/
- Published: 2026-11-05T14:42:54.000Z
- Updated: 2026-11-05T14:42:54.000Z
- Description: The agreements City Hall inks with organized labor will largely determine the magnitude of future budget gaps.
- Author: Tal Roded
- Tags: Budget, City Government, Labor

This fall, Mayor Zohran Mamdani faces a major test — how he will handle negotiations with public sector unions. He has, on the one hand, [expressed solidarity with organized labor](https://www.nyc.gov/mayors-office/news/2026/09/mayor-mamdani-launches-first-in-the-nation-office-of-worker-powe?ref=vitalcitynyc.org); on the other, he has [pledged to make government more efficient and to make taxpayer dollars go further than before](https://www.nyc.gov/mayors-office/news/2026/05/mayor-mamdani-announces-commission-on-government-efficiency-to-m?ref=vitalcitynyc.org). Those impulses are [in tension](https://www.vitalcitynyc.org/mamdani-nyc-unions-efficiency-reform/) in ways New Yorkers should appreciate. 

New York City government employs [about 290,000 full-time workers](https://www.osc.ny.gov/files/reports/osdc/pdf/fy27-nyc-adopted-plan-report-final.pdf?ref=vitalcitynyc.org), and four unions alone (the United Federation of Teachers, DC 37, the Police Benevolent Association and the Uniformed Firefighters Association) represent over 212,000 of them, nearly three in four City workers. Their salaries, pensions and fringe benefits make up $60 billion of the City's $126 billion budget for this fiscal year. The details of the next City union contracts will be instrumental in determining how much expenses will grow in upcoming years and how large the next budget gap may be. This is where fiscal trouble may loom for the mayor. 

The contract with DC 37, the city’s largest union, [is set to expire on November 6](https://www.osc.ny.gov/files/reports/osdc/pdf/fy27-nyc-adopted-plan-report-final.pdf?ref=vitalcitynyc.org). The terms of that contract will set the precedent for further contract negotiations to come through a time-tested process called pattern bargaining, [“in which the City and one union come to an agreement that serves as a template for everyone else.”](https://www.vitalcitynyc.org/nyc-labor-unions-history-future/) 

With respect to the private sector, Mamdani has positioned himself as a champion of worker rights through actions like creating a new Office of Street Vendor Services and fighting for fair pay for delivery workers. But when it comes to the public sector, he represents management. And [the City budget gap and prior commitments](https://thebiggerapple.manhattan.institute/p/nyc-keeps-passing-laws-it-cant-afford?ref=vitalcitynyc.org) currently have projected expenses outpacing revenues, meaning that the City’s ability to provide large pay raises to its workers is severely limited.

Without a doubt, some raises are inevitable. Recent inflation and private-sector wage growth mean public sector wages have fallen behind the curve. Between Q2 2021 and Q2 2026, [wages in private industry rose 22.9%](https://data.bls.gov/timeseries/CIU2020000000000I?ref=vitalcitynyc.org), or about 4.2% a year. At the State level, five-year contracts with [CSEA](https://spectrumlocalnews.com/nys/central-ny/news/2026/08/06/csea-union-wins-raises--other-benefits-in-5-year-contract-with-new-york-state?ref=vitalcitynyc.org) and [PEF](https://www.pef.org/articles/contract/pef-members-overwhelmingly-ratify-contract/?ref=vitalcitynyc.org) agreed to in August 2026 range between 3 and 4.5% annual raises and come out to a 19.3% pay increase compounded over the contract term. Nobody is calling for pay cuts or zeroes; the question is how much of a boost is fiscally responsible.

### The budget already has gaps with planned 1.25% raises, and unions will be demanding more

Immediately upon beginning his tenure as mayor at the start of this year, [Mamdani raised the alarm over the City’s budget gap and rolled out a plan to cut costs](https://www.nycuriosity.com/p/nycs-budget-gap-is-growing-can-its?ref=vitalcitynyc.org) and balance the budget. While this was partially achieved through agency-wide savings plans, closing the gap also involved a large contribution from the State and [restructuring pension plan payments](https://www.wxxinews.org/new-york-public-news-network/2026-05-26/nyc-pension-costs-will-go-down-then-way-up-under-state-budget-bill?ref=vitalcitynyc.org). As the Fiscal Year 2028 budget approaches, it will begin with [its own $7.3 billion gap](https://comptroller.nyc.gov/reports/comments-on-new-york-citys-fiscal-year-2027-adopted-budget/?ref=vitalcitynyc.org#IV) that must be addressed, and those same tactics may not be available this round.

Currently, the City financial plan [projects 1.25% annual raises for City workers](https://comptroller.nyc.gov/reports/comments-on-new-york-citys-fiscal-year-2027-adopted-budget/?ref=vitalcitynyc.org), while the last collective bargaining round paid 3% annual raises over five years. The gap between projections and likely raises is a feature, not a bug, of budgeting, with the City setting its number in order to begin negotiations with the unions. Precedents from previous agreements and the rising cost of living in New York will likely make 3% the floor for unions in the upcoming negotiations.

For the City to provide its employees larger paychecks, it must find the money somewhere.

[The City Comptroller's Office estimates](https://comptroller.nyc.gov/reports/comments-on-new-york-citys-fiscal-year-2027-adopted-budget/?ref=vitalcitynyc.org) that each additional 1% raise to municipal employee salaries costs the City between $550 million and $600 million. If 3% annual raises are again agreed to in the next DC 37 contract, thereby setting the pattern for all municipal employee pay raises, that would result in roughly an additional $1 billion in year one, $2 billion in year two, $3 billion in year three and $4 billion in year four, above what 1.25% raises would cost. 

These additional costs would be added onto existing budget gaps in coming years, which are [forecasted to be](https://comptroller.nyc.gov/reports/comments-on-new-york-citys-fiscal-year-2027-adopted-budget/?ref=vitalcitynyc.org#IV) around $7.3 billion in FY2028, $7.9 billion in FY2029 and $6.8 billion in FY2030.

For Mamdani to prevent the deficit from spiraling out of control, he will need to both negotiate responsibly in the next round of union contracts and find ways to close those gaps. 

So what can the mayor do during the upcoming contract negotiations to help ease the deficit? 

On the salary increase figure, he will have to hold a hard line to avoid setting a new pattern that blows a hole in the budget. In addition, he should push the unions to agree to reforms that will result in efficiencies for the public workforce. This includes [updating work rules](https://www.vitalcitynyc.org/new-yorks-mamdani-ny-civil-service-system/) and getting their support to work with the State to change civil service rules that have driven up vacancies, as well as [crew-size regulations](https://www.wastedive.com/news/new-york-containerization-teamsters-equipment-truck/691569/?ref=vitalcitynyc.org) that require more workers than needed for public services, resulting in inflated expenditures on City projects. These agreements set the precedent for other unions to negotiate for similar terms, locking agencies into outdated and inefficient labor policies that drive up public expenses to the benefit of a minority of workers.

The City must also work with the State to reform civil service laws to modernize job titles, speed up hiring and allow the City to actually fill vacancies instead of losing out on willing applicants who are left waiting too long for an offer. [The recent Civil Service Modernization Advisory Committee announced by the mayor](https://nysfocus.com/2026/10/05/mamdani-unions-civil-service-government-hiring?ref=vitalcitynyc.org) is an encouraging first step in this direction, with DC 37’s lead (who is vice chair on the committee) [signaling openness](https://nysfocus.com/2026/10/05/mamdani-unions-civil-service-government-hiring?ref=vitalcitynyc.org) to changes being made to offer wait times and outdated job descriptions that add months to the hiring timeline.

Union objections have previously [prevented New York from modernizing its civil service system](https://nysfocus.com/2026/10/05/mamdani-unions-civil-service-government-hiring?ref=vitalcitynyc.org) that currently favors entrenched actors [while protecting the byzantine system](https://publicsectorjobboard.substack.com/p/what-it-will-take-to-deliver-for) for applying to the municipal workforce. 

Another immediate way to fill vacancies faster would be to opt into the NY HELPS program, which would allow for more civil servants to be hired without requiring exams. This program has been utilized by the State since 2023 and has shown tremendous success at quickly filling tens of thousands of public sector jobs. But New York City has not participated, [with both Mayor Adams and Mayor Mamdani declining due to union objections](https://nysfocus.com/2026/07/06/ny-helps-hochul-mamdani-nyc-vacancies?ref=vitalcitynyc.org). The civil service exams are a bottleneck on hiring and finding workers for open positions and must be offered more often, while applied only to roles where such examinations make sense.

Allowing more administrative procedures to be automated could also result in a more efficient bureaucracy and allow workers to spend their time on more productive activities. The resulting improvement in the processing time of business permits, applications and licenses may yield more revenue for the City to the extent it helps the economy expand.

A more efficient, capable bureaucracy would be able to deliver greater returns per employee and bring down costs over time. The City should work with unions to provide pay raises only if they agree to work rule reforms that undo inefficient requirements that drive up costs for the public. This can result in a win-win that increases public worker pay while allowing the City to pursue projects and policies in a more cost-efficient manner.

### Outside of the negotiations, the options are headcount reductions or revenue raisers

While making the City run more efficiently and speeding up public processes will reduce costs, these moves are unlikely to close budget gaps on their own. [Teachers and other school-based educators, plus uniformed departments including police, firefighters, sanitation workers and correction officers add up to 184,081 people, 63% of the City workforce](https://www.osc.ny.gov/files/reports/osdc/pdf/fy27-nyc-adopted-plan-report-final.pdf?ref=vitalcitynyc.org), and cannot be made much more productive using current technology — especially with a law on the books mandating class-size reduction. The scale of the deficit is also too large, and can realistically only be closed in the short-term by reducing overall public headcount, or bringing in more revenue. 

At the personal services cost per employee using the figures above ($60 billion over 292,523 workers, or about $205,000 per person with fringe and pensions), closing the $7.3 billion FY2028 gap through headcount reductions alone would mean cutting about 35,000 positions. If that’s off the table, what can the City do to raise revenue?

Mamdani can ask the State for new or higher taxes, [but if the past is any guide](https://www.thecityreporter.nyc/2026/04/28/kathy-hochul-zohran-mamdani-ptet-tax-budget/?ref=vitalcitynyc.org), he may have limited success. The other way to raise revenue is to grow the tax base, and here, the City has the power to make some changes to encourage economic growth. It can make it easier for residents to start new businesses or expand economic activity by streamlining permits, applications and other processes where the City is the bottleneck. Making it easier to build more housing can increase the population and bring in more tax revenue too.

Reforms should be made to the City rules and processes that are responsible for the worst bottlenecks in business development, housing development and other expansions of economic activity. COGE (Commission on Government Efficiency) ballot proposals include much-needed changes that fast-track some infrastructure projects and permitting processes; the City of Yes and the Charter housing questions have improved the housing mechanism. These are good starts, which the City must pursue more of, particularly in using technology.

Making these processes easier and faster increases City revenue when they result in more new businesses and economic growth, leading to more tax revenue. This also should involve removing restrictions to using AI and other emerging technologies to automate certain processes. [A recent piece by Brittany N. Montgomery](https://www.vitalcitynyc.org/better-government-technologies-strategies-nyc/) showcases the rigid and inefficient constraints bargained for by unions that have reduced technological adoption and unnecessarily increased costs while agencies perform worse at their duties. 

[The LOADinG Act](https://manhattan.institute/article/new-yorks-loading-act-protecting-public-sector-jobs-from-ai?ref=vitalcitynyc.org) bars agencies from transferring existing duties and functions to Artificial Intelligence (AI) tools. [This state law prohibits both State and City agencies from utilizing AI to perform nearly any task currently performed by a civil servant](https://manhattan.institute/article/new-yorks-loading-act-protecting-public-sector-jobs-from-ai?ref=vitalcitynyc.org), even when it would bring productivity improvements or reduce administrative burden for current workers. The City must work with the State to implement smarter laws that regulate and define ethical AI usage, without restricting it where it could be beneficial.

In cases where agencies can use technology to speed up permits and applications, more accurately identify target populations for programs or anticipate future needs, technology adoption could drastically improve City revenues. One example comes from neighboring [Pennsylvania's state-employee generative AI pilot](https://www.pa.gov/agencies/oa/newsroom/shapiro-administration-leads-the-way-in-responsible--ethical-use?ref=vitalcitynyc.org), whose results the Shapiro administration announced in spring 2025 with a reported time saving of 95 minutes per employee per day. [Pennsylvania also launched its PAyback permit guarantee](https://www.city-journal.org/article/pennsylvania-permit-license-applications-payback?ref=vitalcitynyc.org): Agencies publish review deadlines and refund the fee if they miss them. Since 2023, business filing times have fallen from 14 days to one, doctors' licenses from 43 days to five and only five refunds have been paid.

### Conclusion

Given the City’s current looming budget gaps, the mayor should tie pay increases to new contract terms that can deliver public-sector productivity gains and aid growth of the city’s private sector, which foots the bill for the government. Over the long term, finding more permanent strategies for reducing costs or bringing in more revenue will be necessary for the City’s long-term fiscal health. To achieve balanced budgets moving forward, Mayor Mamdani will have to pursue a multi-pronged strategy of bargaining hard with the unions to prevent even larger deficits, finding efficiencies and cutting costs in the short-term, and pursuing reforms that raise revenue and grow the tax base in the long-term.