Delaying contracts: Risky or genius?

In Sunday's Inquirer, there was an important article about contract negotiations between Mayor Nutter and Philly's two non-uniformed municipal unions. The piece points out that labor agreements expired nearly a year ago, which means that 13,000 employees have been working under an extension of the current contract.

It is rare for these municipal labor contracts to go unsettled for so long. And the stakes are particularly high for Nutter, who has long emphasized the need to ensure the city's long-term health by reducing employee-benefits costs, which consume about 25 percent of Philadelphia's $3.9 billion budget.

According to the article, it has been months since the city met with either AFSCME DC 33 or AFSCME DC 47. That could be trouble for Mayor Nutter, since negotiating new contracts is fraught with political landmines and each day without an agreement is a day closer to the primary election.

For our part, we see two other factors connected to the delay that could impact contract negotiations.

The first is the economy. Back in 2008, people were being laid off, facing foreclosure, and losing money in the stock market at an alarming rate. That's still happening to some extent, but there are signs of economic recovery as well. Those signs could strengthen the position of the unions, who would have been under tremendous pressure a few years ago to make big concessions in the midst of a recession from which everyone in the city was suffering. Now, they may be able to make the argument that the economy has improved enough that the city can afford a better contract.

At the same time, there is a growing trend around the country of governments curtailing public sector benefits, especially pensions. California has moved to require higher contributions from employees and reduce benefits. The same thing is happening in New Jersey, where Gov. Chris Christie has taken aim at teacher pensions. Even Pennsylvania is getting involved, reforming pensions for some state employees last week. These changes could be used by city negotiators to make the case that it's time to curtail pension benefits.

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