DN editorial: City's deal with blue-collar workers good for both sides

THE LONG and bitter battle between management and blue-collar employees in Philadelphia government is apparently over. A truce was declared by Mayor Kenney and the city's largest union last week when the sides reached a tentative agreement on a new, four-year contract.

It covers the nearly 8,000 members of the city's blue-collar union, AFSCME District Council 33 and provides pay increases totaling $109 million between now and 2020.

The news came late Friday, absent the protracted public fights, rallies, and inflammatory rhetoric that characterized union contract negotiations during Mayor Nutter's term in office - when many unions went for years without a contract. In contrast, Friday's news seemed to come out of nowhere, raising questions about what the new contracts mean for the city and its taxpayers, and where the money is coming to pay for it all.

The tentative agreement was certainly a victory for the union, which lived through most of the Nutter administration without any pay increases for its members. The average DC33 member, who now makes an average of $38,000 a year, will see his or her salary rise to $42,500 four years down the road. (The new contract calls for 3 percent raises in three of the years, and a 2.5 percent raise in another.)

In exchange, the union agreed to concessions on health care and pensions. While the city did agree to make two $10 million payments to the union's Health and Welfare fund, it did not increase the per-member contribution ($1,194/month) it makes to the fund. That means that if health care costs rise steeply, the union will have to find a way to meet the additional costs on its own.

When it came to pensions, the union agreed to two important changes to the current system. The first, an increase in pension contribution rates, will pump more money into the pension fund, which sorely needs it.

The administration also got the union to agree to a major change in how pensions are determined. The new contract calls for a "stacked system." This means members get the current defined- benefit pension on the first $50,000 of his or her salary, but earnings above that will be covered by a 401(k)-like package, in which the city matches what contribution the employee makes.

This a major step in taming future costs of pensions because it caps the pension fund's liability to the $50,000 amount.

And the city does need to tame pension costs. The fund has a long-term deficit of over $5 billion.

The city has tried for years to stop runaway increases pension and health costs. This contract seems to put a brake on them. It also won't require finding new revenue to pay for it, since some money for increases has been built into the budget.

What Kenney gets is a template of a deal to offer the other city unions: the 6,300 members of the Fraternal Order of Police, the 2,500 firefighters, the 2,250 prison guards and the 3,480 white-collar employees who are members of DC47. All of their contracts are up next year and their members have much higher salaries than DC33 workers.

The big test for the mayor will be to get these unions to buy into the deal accepted by DC33. To put it another way: This battle may be over, but there may be more fights to come.