Archive: August, 2009
According to Philly Clout, City Hall has been buzzing with budget action. In three separate posts, Catherine Lucey writes that the city is trying to preserve cash, City Council was briefed on the pension amendments to HB 1848, and that more budget cuts could be coming.
Check out the posts to get a full update. Tomorrow, Mayor Michael Nutter has scheduled a press conference to "give a update" on the budget. Does anyone want to guess what the bad news will be?
Pennsylvania's budget has been delivered late every year that Ed Rendell has been governor. This year's bill is almost two months behind schedule. Does having a deadline matter? Rendell and Mayor Nutter disagree, and give their views exclusively to Philly.com and It's Our Money.
Daily News columnist John Baer also gives his take to It's Our Money's Ben Waxman on when and how the impasse might finally end.
Link: Budget stakes get raised again in Harrisburg [Daily News]
FOR WEEKS, WE'VE been exhorting the state to hurry up and pass House Bill 1848, which would give much-needed fiscal relief for Philadelphia's troubled city budget. So why are we relieved that House Speaker Keith McCall decided to delay a final vote on the bill for two weeks?
The bill, which originally authorized an increase in the sales tax and deferred contributions to the city pension fund, both necessary moves for the city to balance its budget, morphed - once the Senate got it - into one demanding major reforms to the Philadelphia pension system and public pension programs across the state. Suddenly, the bill that started out as first aid to the city came complete with a live hand grenade.
Actually, there is more than one grenade, though it's tough to figure out just how many in the 50-plus pages of amendments that include a code of conduct for public pension funds, provisions for the state to take over distressed pension funds, and a range of other provisions that analysts are still trying to interpret. (Find a summary of the amendments at www.philly.com/philly/blogs/cityhall/54767297.html).
Public pensions are long overdue for review and reform; underfunded pensions are at the heart of staggering budget problems not only around the state but in cities and states around the country.
But attaching such complicated reforms to what started out as a simple bill to help the city fill big holes in its five-year plan makes no sense - although stuffing bills with complicated amendments is a move familiar enough to those who regularly watch the legislative sausage being made.
The Senate's amendments have not only complicated the city's fiscal stability, but it will go a long way to complicating Mayor Nutter's next round of contract negotiations with city unions. That's because the bill mandates a benefit freeze for everyone currently in the city pension system, which is more than 65,000 people. It also mandates reductions for future hires.
There is still some debate about how this will impact members, but at the very least it will mean no rate increase for any employee, no matter the financial condition of the pension fund. The city must also redesign the plan for new hires and cut costs by 20 percent. The only way to make that happen is to move from a defined benefit plan to something more similar to a 401(k).
If those concessions aren't included in the new contracts, the state will pull the plug on the fiscal relief.
This essentially puts the unions in the position of having to make concessions on pensions or causing misery for the entire city- including layoffs for 3,000 union members.
The Senate's amended bill also forces the House Democrats to choose between backing organized labor or causing major pain for city residents by shutting down libraries, recreation centers and other essential services.
It's disturbing that something as overdue and complicated as pension reform has suddenly been thrown on the fast-track.
In this summer of high stakes, the stakes have been raised again: The city must wait even longer to learn the fate of its budget, and now, thousands of workers around the state must wait to learn the fate of their lives after retirement.
It seems like Philadelphia has been waiting forever for legislation that would help balance the city budget. Now, it seems like we'll have to wait a little longer. Yesterday, Pa. House Speaker Keith McCall told reporters that no vote would be held until September 8th.
That means nearly two weeks will pass between the State Senate's approval of the legislation and the House vote.
Without the bill, which authorizes an increase in the sales tax and deferment of pension payments, Philadelphia will lose nearly $700 million in revenue over the next five years. Time is of the essence, since the city loses $10 million for every month of inaction.
So why the hold up? Below are the factors driving Harrisburg to delay action on Philly's budget legislation.
Process. This is the argument that you hear most often from legislators and staffers. Passing legislation is complicated and delays are simply part of the process. Right now, there is a lot of legislation floating around and there is only so much space on the legislative calendar. Also, in order to vote, the House would have to be called back into session and that is something of a logistical challenge in the last two weeks of August.
Policy. One of the factors driving the delay is that the State Senate significantly amended the original bill. The legislation passed by the State House was straightforward fiscal relief for Philadelphia. Now, the bill contains major reforms for pension systems across the state. The amendments are over 50 pages long and need to be carefully considered before being passed. Legislative analysts from both chambers are busy trying to make sense of the amendments and figure out the implications.
Politics. I think this is really the biggest factor driving the delay. There still is no state budget and House Democrats are eager to figure that out before dealing with Philadelphia's problems. Also, the House Democrats could be trying to use the Philadelphia legislation to put some leverage on Gov. Rendell during the state budget negotiations. Finally, many members of the State House have received campaign contributions from organized labor and may be feeling pressure to vote against the amended bill.
It's hard to know exactly what is happening, but there are some of the reasons that we won't get a vote until the week after next. What do you think is driving the delay?
Earlier this week, House Bill 1828 - the legislation that the city needs to avoid drastic budget cuts - was amended by the state Senate. So it went back to the state House of Representatives, where it needs another vote.
A spokesman for Mayor Nutter said yesterday that leaders in the House assured him that the vote would be Sept. 8.
PhillyClout reports that there will not be a vote in the State House of Representatives on House Bill 1828, which would give financial relief to Philadelphia, until after Labor Day. Check out Philly Clout for the details of the press conference.
According to a story told by former union chief Tom Cronin, the leader of the Fraternal Order of Police once pointed a loaded gun at Mayor Bill Green's chest during a meeting at City Hall. Thanks to the Pennsylvania State Senate, Mayor Michael Nutter now has a weapon of his own for upcoming contract negotiations. The amended bill passed yesterday by the State Senate includes provisions that require major concessions from city unions.
The original bill passed by the State House gave the city straightforward fiscal relief. Philadelphia was given permission to increase the sales tax from 7 to 8 percent and delay contributions to the city pension fund. However, the more conservative State Senate amended the legislation to make relief contingent on major reforms to pension benefits. If the city fails to act, it would lose hundreds of millions of dollars in revenue.
The reforms impact both current and future workers. Pension benefits for employees currently enrolled in the system would be frozen. There are various interpretations of what this means. Some think it could freeze payments at current levels and not take into account future years of service. The Nutter Administration believes it would preserve the status quo and prevent future increase. Either way, it would mean no increases in benefits.
However, future employees take the biggest hit. The legislation passed by the State Senate requires that the city redesign the pension plan for new hires and cut expenses by 20%. The only way to make that happen is to move from a defined benefit plan to something more similar to a 401(k). This would be a huge change and represent a significant reduction in benefits.
So, why would the city unions go for any of this? Under the legislation passed yesterday by the State Senate, the relief portions of the bill-- both sales tax revenue and permission to delay pension payments-- would be yanked if the reforms don't happen. The city would lose $700 million in revenue and be forced to layoff thousands of employees. The union leadership is basically between a rock and a hard place. They can fight the pension changes for future hires, but it would have a devastating impact on current members.
Yesterday, Mayor Nutter repeatedly said that he had not asked for these amendments. That may be true, but it's hard to believe that he's not pretty happy about the result. If this bill passes the House, it will allow him to force big changes to benefits for city employees with major backup from the state. In fact, these changes are even more radical then the proposals made by Nutter's team during the first few rounds of contract negotiations.
Here's the full interview Ben did with Gov. Rendell this morning. It's around 12 minutes long, so be warned that when you start the video in the player below it may take a moment to download.
But we know how passionate you all are about the state budget crisis, so we want to make sure you can see the whole interview.