Comptroller Auditing Troubled Health Benefits Fund for City Workers

The office of City Comptroller Brad Lander is auditing a key fund that pays for city employee's health benefits, THE CITY has learned, as public sector unions and the administration of Mayor Eric Adams remain locked in a dispute over who is responsible for replenishing the cash pot.

For years, the Health Insurance Stabilization Fund has been used to pay for some city workers' health insurance premiums and supplemental benefits, like prescription drugs and dental and vision plans. The fund ran dry last year as a planned cost-saving switch of retiree health coverage to Medicare Advantage was tied up in the state's courts. The fund is paid for by taxpayers and jointly managed by the city and the Municipal Labor Committee (MLC), a consortium of the city's 102 public-sector unions.

The comptroller's office is investigating the use of the stabilization fund to pay for supplemental benefits and more, MLC leaders told their members in a Dec. 16 meeting, according to audio obtained by THE CITY.

Alan Klinger, the group's attorney, told the union leaders in attendance that the comptroller's office has taken the position that "the stabilization fund is a strict trust that could only be used for equalization" of premium rates, an assertion he told the group both the MLC and the city dispute. Klinger explained that equalization is one of many uses that the fund was established to address: "There's no trust indenture that formally restricts that it can only be used for equalization."

Henry Garrido, a co-chair of the MLC and the head of the city's largest public sector union, told MLC members that he believes that Lander's probe is unprecedented and a "political stunt" from the erstwhile Democratic mayoral primary candidate and current Congressional challenger.

"For him to take that position is not only outrageous, but unprecedented," railed Garrido, according to the audio recording. "No other comptroller has ever done that because, so far, since the inception of the stabilization fund, it's been a function of the collective bargaining process."

Spokespersons for City Hall and District Council 37, Garrido's union, did not respond to requests for comment. Klinger did not respond to a message seeking comment.

It is unclear when or why the comptroller's office began its audit of the stabilization fund. A spokesperson did not respond to THE CITY's questions about the probe.

The stabilization fund was created to balance the difference in rates between the city's two most popular premium-free health plans, GHI and HIP, a process known as equalization. The fund grew as the cost of GHI began to exceed the HIP rate, growing from $30 million at its inception in the mid-1980s to more than $500 million by 2011 — a tempting pot of cash for the city and the unions at a time of fiscal uncertainty and rising health costs.

By the end of the 2024 fiscal year, the fund had a reported "disposable balance" of just $1 million, the comptroller's office reported in June. It estimated that covering the stabilization fund will cost taxpayers $612 million alone in the fiscal year that ended in July.

"So basically, you created this fund, it amassed a substantial balance, and the city and the labor unions figured out different ways to use those dollars that provided additional health benefits and provided additional fiscal resources to the city," said Ana Champeny, a budget expert at the Citizens Budget Commission, a fiscally conservative watchdog group. "And this was all well and good up until the point when suddenly GHI cost more than HIP and they ran out of money, and there were no more deposits being made, and the balance got spent down."

With the probe, Lander is inserting himself into a long-simmering conflict between the unions and the administration of Mayor Eric Adams that this spring exploded into public view over which side is responsible for billions of dollars in pledged health care savings that have failed to materialize.

In June, Adams abandoned the switch to move city retirees to Medicare Advantage, which was meant to help make up for the funding shortfall. An additional cost-saving measure to switch the city's active workers to a self-insured plan is slated to go into effect on Jan. 1.

The MLC argued in a lawsuit it filed against the city that it is not responsible for making up the stabilization fund's cash and sought to block efforts by the Adams administration to pursue arbitration.

Lander's term as comptroller expires at the end of the year, which would leave incoming Comptroller-elect Mark Levine to pick up the probe unless Lander wraps up before Dec. 31. Garrido is the co-chair of Levine's transition committee.

In response to a question from an MLC member during the Dec. 16 meeting, Garrido said that the audit is "not part of the discussions" on the transition. A representative for Levine's transition team did not respond to a request for comment.

New York faces a $2.18 billion budget gap for the remainder of the fiscal year ending in July 2026, and a $10 billion deficit for the coming fiscal year, the Comptroller's office announced Thursday.

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