Mayor inflated exempt staff in 2008

Continuing a trend begun by his predecessors, Mayor Nutter has increased spending citywide on employees who answer directly to him, an Inquirer analysis of payroll records has found.

Even following a series of January cuts in salaries and personnel, 988 non-civil service employees remain in city government. Cumulatively, they are paid $65.9 million: that represents a 9 percent increase over what was paid in Mayor John F. Street's final year in office, and a 21 percent jump over the costs in Street's first year on the job, in 2000.

Put another way: Nutter's payroll has grown at more than twice the rate of the city's unionized payroll, which increased by 3.8 percent last year.

Dubbed "exempt" workers, because they are not covered by civil service regulations or represented by unions, these employees serve at the mayor's pleasure. Their ranks include senior mayoral aides - such as deputy mayors and his chief of staff - but also managers, lawyers and specialists that work in departments across city government.

The exempt employee budget accounts for just a fraction - 6 percent - of the city's total payroll, so slashing spending on non-civil service will do little to close Philadelphia's second $1 billion five-year budget deficit.

But that has not stopped union leaders and average residents from criticizing the size and salaries of Nutter's staff.

"The increase in exempt employees is a very serious problem, especially at a time when we are cutting direct services to the public," said Cathy Scott, president of AFSCME District Council 47, which represents 3,300 unionized white collar city workers.

The administration, Scott said, ought to look within its own ranks for cuts.

Nutter is unapologetic. He notes that Street and Mayor Edward G. Rendell also increased city spending on exempt employees, relative to their predecessors. And Nutter estimated that more than 90 percent of his exempt employees are holdovers from the Street administration.

Further, Nutter argued, hiring exempt employees gives him the flexibility to better manage city government.

"This is about having the ability to put your team together and manage an operation in a way that makes sense," Nutter said in an interview last week. "These people work directly for me. I have very high and demanding standards, and if people don't perform they can be terminated."

Although there are some highly paid exceptions, for the most part Nutter is not compensating exempt workers lavishly. Across city government, exempt workers will earn an average of $67,000 this year, compared with an inflation-adjusted $63,000 in 2007, $66,000 in 2000, and $63,000 in 1999.

The Mayor's Office is another story. There, exempt employees were paid an average of $74,000. And the $5.84 million Nutter spent on Mayor's Office salaries in 2008 is a 47 percent increase over Street's final year in office. That figure does not include an additional $600,000 that Nutter spent on six employees in the newly created Mayor's Office of Transportation.

In the interview, Nutter pointed out that mayors typically spend more on staff early in their terms, and less in the later years, as aides leave and the administration winds down. But even by that yardstick, Nutter is significantly outspending his predecessors.

Street's inflation-adjusted Mayor's Office budget his first year was $4.9 million, or 18 percent less than Nutter spent in 2008. Rendell spent $2.9 million when he took office in 1992, or 50 percent less than Nutter.

As the city's budget crisis emerged, Nutter did take immediate steps to reduce spending in the Mayor's Office.

Nutter cut his own pay and those of his cabinet by 5 to 10 percent. He ordered exempt employees citywide earning over $50,000 to take a week of unpaid leave this year. Thirty-seven exempt employees were laid off.

Those steps, most of which took effect on Jan. 1, trimmed the exempt employee payroll 1.8 percent, from $67.1 million in 2008 to $65.9 million in 2009.

"That was a smart first move," said Zack Stalberg, president of the Committee of Seventy, the nonpartisan government reform watchdog. "But the public is going to be looking to see more of that."

Particularly, Stalberg said, when Nutter is calling for cuts of 10 percent, 20 percent and 30 percent in city service departments.

Last spring, Stalberg backed Nutter's bid to change the City Charter so that department heads could appoint up to 10 exempt deputies, instead of the old limit of two. Voters approved the measure by a 61-39 ratio.

Like Nutter, Stalberg argued that the mayor could manage more effectively if he had the freedom to hire more lieutenants, instead of relying solely on veteran civil service workers.

That was then, Stalberg said.

Now, "every corporation in America is flattening its management staff," Stalberg said.

"The mayor will have a much harder time getting people to buy into his spending cuts if they feel he's expanded his own office too much."

It is not clear, though, that Nutter intends to reduce spending on exempt employees much further.

"I certainly hope not to have to do much more with pay," Nutter said. "You really do start to impact your ability to hold on to some of the talented people that you have. These folks are highly talented and in demand."

Each mayor structures city government differently. Some post deputies within departments, while others have stacked them in the Mayor's Office or the Managing Director's Office.

That can make it difficult to compare one mayor's personnel budget to another, unless all departments are analyzed.

For instance, although it was Rendell who oversaw the city's steepest increase in the use of exempt employees (from 565 in 1999 to 826 in 1999), he did not expand the Mayor's Office itself. Rather, Rendell placed many senior aides in the Managing Director's Office, which grew from 26 exempt employees his first year in office to 79 by the time he left.

Street made extensive use of the Managing Director's Office as well, but he also filled the Mayor's Office with exempt employees; 71, compared with the 47 serving there before he took office.

Nutter, in addition to further strengthening the Mayor's Office, has made extensive use of exempt workers in the new Division of Technology.

Residents and union leaders have had particularly sharp criticism for the salaries of Nutter's most senior aides, particularly his four deputy mayors.

In the interview, Nutter said they were worth "every penny."

The mayor pointed out that some of his senior aides, such as Deputy Mayor of Planning and Economic Development Andrew Altman, took large pay cuts when they entered city employment. His salary of $169,000 might be generous by municipal standards, but it is tiny compared with the $688,000 he earned as a real estate consultant in 2007.

Regardless, it is clear Nutter has compensated his most experienced staffers more generously than his predecessors. For instance, the 20 highest-paid employees in the Mayor's Office earned an average of $128,000 last year. Street's top 20 aides averaged an inflation-adjusted $120,000 in 2000, but only $106,000 in 2007.