Mamdani Takes Health Fund Audit 'Seriously' as Insolvency Reverberates

Mayor-elect Zohran Mamdani said on Tuesday he takes "seriously" an audit that determined a key fund that pays insurance premiums for city workers, retirees and their dependents is insolvent.

He also sought to reassure city workers concerned about what the bombshell findings by Comptroller Brad Lander may mean for their health care. Lander's probe, released Tuesday, found that the Health Insurance Stabilization Fund has amassed upwards of $3.1 billion in unpaid liabilities as a result of what his auditors described as years of misuse by City Hall and the Municipal Labor Committee, which represents public-sector unions. The city and the MLC jointly manage the fund, which is paid for by taxpayers.

Lander — whose last day in office is Wednesday — recommended dissolving the fund. Both the city Office of Labor Relations under Mayor Eric Adams and the unions say they have used the funds for intended purposes.

It will be up to Mamdani, who takes office Thursday, to make up for the multi-billion-dollar shortfall.

"To city workers I will say, each and every day, that this will be an administration that takes your concerns seriously and looks to do more than that, it looks to actually deliver on them," he told THE CITY at an unrelated press conference at Elmhurst Hospital where he announced two new appointments and the nomination of Steven Banks, the city's former social services commissioner, for corporation counsel.

"And the report, as well as any other analysis, is something that we are going to take seriously as we assume office in a few days," added Mamdani.

Lander was the first comptroller to ever audit the fund in its 40-year history. Fiscal watchdogs applauded the move, saying it was a long time coming.

Ana Champeny, a budget expert with the fiscally conservative Citizens Budget Commission, noted that the group first asked the Comptroller's Office to audit the fund nearly 15 years ago, when the office was led by John Liu and unions, the administration of Mayor Mike Bloomberg and the City Council were discussing tapping the Health Insurance Stabilization Fund to pay for benefits unrelated to its purpose of helping pay insurance premiums.

The group requested answers to questions such as: Who has custody over the stabilization fund, what is the current account balance, how are the funds invested and what is the performance record of those investments?

It is unclear if Liu's office ever responded. He is now a state senator and could not be immediately reached for comment.

As the stabilization fund ran dry, the city began to pay for premiums and supplemental benefits through its general fund adding up to what it says is more than $4 billion — and tried to force the fund to pay up, according to correspondence between the city's labor negotiators and the MLC. The dispute exploded into public view in April, when the MLC sued the city in an attempt to block arbitration.

"It's a house of cards that has fallen apart," Champeny said of the stabilization fund, and lauded Lander's probe.

"I think they have uncovered some real challenges with how the city has been funding health benefits that need to be public, that need to be transparent, and fundamentally need to be resolved in a more sustainable way going forward," she said.

The audit also describes a controversial proposed move to a lower-cost Medicare Advantage plan for city retirees as being a direct response to projections of the fund's looming insolvency — a conclusion the city and the unions do not dispute. Mayor Eric Adams abandoned that switch after massive pushback from retirees advocates that included a lengthy legal battle.

Retiree advocates and rank-and-file union members who for years have spoken up in opposition to their union leadership on the Medicare Advantage switch and warned of the looming crisis described the comptroller's findings as validating.

NYC Organization of Public Service Retirees president Marianne Pizzitola said in a statement on Tuesday: "To Comptroller Lander and his team, job well done."

Her group has been a thorn in the side of the MLC, which she said sought to rescue the fund at the expense of retired civil servants who would have received inferior care under the lower-cost Medicare program.

"He affirmed everything we've been saying. And when you think back to everything that we've been through, fundraising to continue to fight, to keep litigating," said Pizzitola. "We were ridiculed. And the entire time, we were right."

The United Federation of Teachers, a powerful MLC member that signed onto the health deal but renounced the planned Medicare Advantage switch, dismissed the audit's conclusion that the fund was limited to only help pay for health insurance premiums, under a three-decade-old agreement.

"We don't agree with that finding. It was a collectively bargained fund and it has always been used for health care," said Alison Gendar, a UFT spokesperson.

She instead pointed to health industry economics as the problem that needs addressing. "Price gouging in the health care industry continues to threaten premium-free health care for city workers. Only by curbing this greedy practice can we protect municipal employees from paying premiums," said Gendar.

Daniel Alicea, a United Federation of Teachers member and a longtime critic of the MLC, said he was disturbed by the auditors' finding that multiple mayors and the unions agreed to transfer billions in lump sum payments from the fund to the unions' individual, independently managed welfare funds.

"Here are taxpayer dollars going to welfare funds that actually act less transparently than the MLC or OLR," he said referring to the mayor's Office of Labor Relations. "And so we are seeing, for example, billions of dollars now sitting in reserve, and members don't have good reporting on it."

Henry Garrido, the co-chair of the MLC, and spokespeople for Mayor Eric Adams did not respond to THE CITY's requests for comments on the audit. The MLC and OLR submitted detailed responses to auditors, which are included in the comptroller's report.

Champeny said that the audit gives the incoming Mamdani administration "some very clear findings and recommendations" to follow through on.

"I would urge them to really go back to the drawing board and try to think about what is the right way to do this, so that we provide competitive, high-quality benefits to city employees at a cost that taxpayers can afford," said Champeny.

Dean Fuleihan, Mamdani's pick for first deputy mayor, was City Hall's budget director in 2014 when then-mayor Bill de Blasio brokered deals with the city's unions that required dipping into the fund to help pay for city employees' raises.

At the time, Fuleihan and labor relations commissioner Bob Linn — who is now on Mamdani's transition committee — touted the use of $1 billion from the stabilization fund as key to what they called a "unique collective bargaining agreement."

They concluded in their Daily News op-ed: "This isn't just good news for the city and its workforce; it's good news for New York City taxpayers and for the long-term fiscal health of our city."

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