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Bad Contract, Bad Vibes

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 You may have missed the news about the new contract awarded to Philadelphia's fire fighters by an arbitrator last week.  The ruling came down Friday and didn't hit the papers until Saturday. To summarize, it sucks.

Not if you are a fire fighter, of course. It sucks only for Philadelphia taxpayers.

In this arbitration, the Nutter administration failed to get most of the concessions it sought from the fire union. On top of that, logo-philadelphia-fire-department.jpgmembers got a nine percent pay increase, to be meted out over the next three years.  The administration, which says it will appeal the arbitration ruling to the courts, estimates the cost at $146 million over the next five years.

The city didn't even win the right to furlough - temporarily lay off - fire fighters, a concession it got in the police contract arbitration.

As lousy as the new contract is for those of us who actually pay the bill, it is (relatively speaking) small change.  There are 22,300 city employees, of which about only 2,100 are fire fighters.

 

What's bad about the ruling is the effect it will have on contract negotiations currently underway between the city and its blue- and-white collar unions.  Odds are that when (and no one knows when when will happen) the city gets a settlement with those other, larger unions, it is likely to include (a) a pay increase, (b) minor concessions on pensions for new hires, (c) little or no changes in existing work rules, and - here is the question mark -- (d) some change in the cost or method of delivery of health benefits that may or may not achieve savings.

In other words, it's pretty much business as usual.  And the city can no longer afford business as usual.

Health and pensions costs have risen exponentially over the last 10 years and these agreements assure they will continue their upward flight.  In 2000, pension and health benefits cost the city $381 million. Today, the cost is $850 million.  Five years from now, they could total $1.3 billion - and could go higher if the pension fund, as some predict, needs to be fed more city money so it can continue making payments to retirees.

Since there hasn't been a commensurate increase in tax revenues, the city has come up with the increased money needed for fringe benefits mostly by taking it from other city operations - it has trimmed the workforce, it has reduced services.

Michael Nutter came into office knowing that had to change. And the only way to make it change was to lower his personnel costs, through concessions sought in arbitration (for uniformed employees) and in contract talks with the city's white- and blue-collar employees.

The mayor has gotten concessions, but no where near enough to change the trajectory of city spending on personnel.  He also has reduced the workforce, mostly through attrition, but - once again - not enough to affect the basics in a big way.

Whenever I write about this issue, I usually get angry comments accusing me of being anti-cop, or anti-fire fighter, or anti-city employee.  I am not. They do good and valuable work.  But, alas, I am cursed. I am cursed with the ability to look at numbers in a budget and understand their meaning.

And what the numbers tell me is that the city is shifting from an entity that exists to deliver services to its citizens to an entity that exists to pay pension and health benefits to its employees. 

Here are the two starkest numbers: Today, it costs $103,571 a year to pay salary and benefits to the average city employee.  Meanwhile, the average family in Philadelphia has an annual income of $36,222. And many of them, I can tell you, do not have any pension and may have minimal or no health benefits. 

Because Nutter was unable to change the trajectory of personnel costs in a significant way, the rest of his time as mayor will be defined by the following: continued increases in personnel costs; continued decline in city money spent on services, less money for neighborhood-based services, such as parks, rec centers and libraries; and less money for the city's central bureaucracy. Each of these sections of government will most likely continue to lose workers through attrition or layoffs.

The alternative would be to start cutting police and fire personnel - something the administration has been loath to do (that's why it sought the gentler alternative of furloughs).  A 10-percent reduction in the uniformed workforce would save close to $100 million a year. That is unlikely to happen, given the voters' demands for public safety.

Another alternative would be to increase taxes.  Anyone who favors that options please raise your hand.

It comes down to a series of unpalatable alternatives.  As I said, it sucks.

 

-- TF 

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