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.