Our three word assessment of today’s just-released finding from the police arbitration board: This is big.
It’s big for the cops: Because it will change the way their health plan is administered, and will now require them to contribute more to both health and pensions, but also gives them raises – 3% for the next two years (with a contract reopener in the third year to determine what the salaries will be). It mandates that the police union administer its own self-insurance program, which means that all doctors and dentists bills are paid directly by the union instead of an outside health insurance plan; the city will get an accounting each year of how much money was actually spent.
The pension plan has also changed, so new hires will have a choice between contributing more of their pay into a defined benefit plan or less into a hybrid plan. It does allow the city to furlough them (up to 30 days a year) but it also allows police with five or more years of service to live outside the city.
It’s big for the city: While there are up-front expenses that the city will have to contend with – primarily related to the raises awarded to police over a two-year period – the city gains big time in the recasting of the health care and pension benefits. While the numbers are still being crunched, it’s clear that the switch from the current health plan to self-insurance, and the switch to a hybrid pension plan will save the city money in the long run and help it gain control over the problem of out of control pensions and health care benefits.
It’s big for the city’s other unions: The police arbitration awards are considered the “ceiling” for other contract awards; in other words, no one is going to do better than the police. This award could, for the municipal unions, provide an early glimpse what their contracts might start looking like. Of course, there’s no arbitration for city unions, so the “discussion” over these details could be longer and louder than this one has been.
It’s big for cities around the country. States and cities both are struggling to cope with pension and benefit costs that keep spiraling upwards. The default mode has been to push off grappling with structural changes for as long as possible. For example, only the District of Columbia has a defined contribution pension plan for non-uniformed workers and San Diego has a hybrid plan. This award will make Philadelphia a trailblazer in restructuring pensions and health care.
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